Nigeria has achieved significant macroeconomic stability following the removal of fuel subsidy and the liberalisation of the foreign exchange market, but the gains have come at the cost of declining living standards, rising poverty and inequality, Economist, Professor Bongo Adi has said.
Adi, a professor of economics, made the assessment in an interview while reviewing the economic policies implemented by the Federal Government over the past three years, especially regarding the fuel subsidy removal.
Daily Trust reports that the debate over fuel subsidy removal and the deregulation of the downstream sector of the petroleum industry has resurfaced ahead of the 2027 elections.
The Africa Democratic Congress (ADC) presidential candidate, Atiku Abubakar, has vowed to return fuel subsidy if elected in the next election, clarifying however that it would not be a wholesale return of the old subsidy model.
But in an interview on Arise TV on Monday, Adi of the Lagos Business School, said while the twin policies of President Bola Ahmed Tinubu-led administration were appropriate when introduced and have delivered some of their intended objectives, the government must now reassess their impact on the broader economy and the welfare of citizens.
“I think it’s time for us to reassess the policy direction. So these policies were quite appropriate, if you ask me, at the point in time when they were installed,” he said.
He explained that there was considerable consensus among economists and policymakers at the time that fuel subsidy had to be removed and that the foreign exchange market required greater price discovery.
“Those were done, they were carefully implemented, and they have yielded the anticipated results, which is macroeconomic stabilisation,” Adi said.
However, he argued that the government must now consider the cost of achieving that stability, particularly its effects on household incomes and living conditions.
“Now that we have got there, we now begin to look at it, so at the cost of what? So we achieved macroeconomic stability at the cost of a declining living standard situation, rising poverty at multidimensional levels, and also rising inequality. And beyond that also, we’ve seen rising de-industrialisation,” he said.
The economist said Nigeria’s current economic growth rate was insufficient to rapidly improve living standards, noting that an average growth rate of about four per cent would require many years before citizens experienced a significant increase in income.
Using the “rule of 70”, he explained that an economy growing at four per cent annually would take about 15 years for incomes to double.
“If this economy were to grow at 4%, as it is, it will take 15 good years, if you use the rule of 70, for incomes to double. Per capital income presently is somewhere around $1000, it means that we will wait for another 15 years for our income to go to $2000,” he said.
Adi contrasted Nigeria’s income position with Ghana, noting that Ghana’s per capita income was already significantly higher, while Nigeria’s income level had fallen from levels recorded during the years of fuel subsidy.
“Ghana is already at $2.5. And we were over $2,000 in the years we paid subsidy,” he said.
The economist also raised concerns about the high level of inequality in the country, warning that excessive concentration of wealth could result in the underutilisation of assets and weaken economic growth.
Adi also called for a more flexible approach to policy making, saying the government should be prepared to change course when evidence shows that existing policies are not delivering the desired outcomes.
He advocated a problem-driven, iterative approach in which policymakers continuously evaluate the effectiveness of their decisions and make adjustments where necessary.
According to him, governance should ultimately be about achieving “the largest good for the largest number of people.”
While acknowledging improvements in Nigeria’s external reserves and other macroeconomic indicators, Adi maintained that the government must now focus on translating those gains into improved welfare, stronger domestic production and reduced inequality.
He therefore urged policymakers to reassess the current policy direction and adopt measures capable of restoring confidence at the microeconomic level while sustaining the gains recorded in macroeconomic stability.
COURTESY: Daily Trust
