I start this review of Nigerian economy and policy at this critical time by highlighting the difference between strategy and tactics. Strategy encompasses a long-term, comprehensive, “strategic” aspiration or direction for the firm or nation, and decisions and actions directed thereat while tactics are short-term, isolated actions taken as components of the “strategy”. While strategy, right strategy is critical, tactics matter, especially in relation to implementation-a viable strategy may be enhanced or subverted by poor tactics! My hypothesis is that while the evident strategic aspiration of current policy towards a market-driven economic policy is desirable or even compelling, some tactical implementation approaches may be questionable or at least debatable.

The first major policy announcement under President Bola Tinubu happened right on inauguration day, and by the president himself-the fuel subsidy is gone! I have supported deregulation of the downstream petroleum sector in Nigeria for more than two decades. I supported the policy when President Jonathan attempted its implementation in 2012; and I support President Tinubu’s current effort to institutionalize a fully market-driven downstream petroleum sector as legally mandated by the Petroleum Industry Act. Unlike politicians, whose attitude towards the policy oscillates based on political considerations, my attitude towards the issue is consistent and policy-based. Deregulation is important because the alternative was fiscally unsustainable and was bankrupting the nation, stifling development of the downstream oil sector and its value chain, including the jobs inherent therein, while leveraging our scarce resources to support development of other country markets from which we imported refined petroleum products. Moreover, the former system was diverting huge national resources to a corrupt subsidy scam (which significantly benefitted neighbouring countries) at the expense of education, healthcare, infrastructure and other national priorities.

My position on Tinubu’s approach to “subsidy removal” (which is what “Nigerian Public Discourse” (apologies to BRF!) reduces the subject of downstream petroleum deregulation to!) is contrarian-while I was initially uncomfortable with the inauguration-day announcement, having believed it was necessary to have a cabinet and labour, security and communication teams in place before such announcement was made, I have subsequently been persuaded that if the announcement had not been made that day, it may never have been made. Moreover, I think that by-and-large, the policy has been fairly established and current difficulties have been due not to downstream deregulation itself, but for the exchange rate volatility, which is a consequence of another policy embarked upon by the government-floating of the Naira.

I think much of the current regime’s economic policy conundrum is due to the exchange rate flotation policy, which may now need to be re-evaluated and reconsidered. I suspect that many of the assumptions underpinning the decision to float the Naira have been undermined by the pillaging of the Central Bank and its reserves under Buhari and former governor, Godwin Emefiele that have come to light since JP Morgan made the famous announcement that Nigeria’s net reserves were no more than approximately $3billion! We have recently heard that the Governor and his agents took $6.2million from the bank in cash, based on forged approvals from then President Buhari and Secretary to the Government of the Federation, Boss Mustapha. It has also come to light that apart from the CBN under Emefiele, which spent Nigeria’s reserves upfront on fuel subsidies, corrupt accumulation, enrichment of cronies and evidently also on political causes, NNPC also had sold Nigeria’s oil upfront! In effect, it seems clear especially as the exchange rate now reaches N1,600/$, that Nigeria’s macroeconomic, fiscal and monetary fundamentals may not support a free float of the Naira at this current time, and we may have to reconsider our options.

It is appropriate before considering those options to highlight factors which are complicating our economic scenarios and making economic policy making more difficult-insecurity is affecting food production and distribution, contributing to elevated inflation, and eroding confidence in the government as kidnapping spreads nationwide, and banditry and murders in the Middle-Belt reach genocidal levels; the new Tinubu government has rightly or wrongly, allowed the perception of continued profligate and wasteful spending by government and the National Assembly to persist and solidify very quickly; and the government has faced ceaseless political warfare from its defeated opponents in last year’s presidential elections, and many of their supporters! Many Nigerians simply want the government to fail!!! Faced with the daily barrage of criticisms on conventional and social media, and from formal and informal opposition, the government’s political, strategic and communication response has been weak and distracted, with government focused on spoils of its recently-won office. In the circumstances, a consensus is forming against the government’s economic policies as high inflation and a rapidly-depreciating exchange rate increase poverty and hunger in the land.

This context is not ideal for economic policy making as you can’t carry out difficult and painful economic reforms successfully in such an adverse context.

So, what are our options to address what I have identified as our fundamental economic challenge-exchange rate volatility brought about by the decision to float the Naira in what is now clearly an unsupportive environment? It is the depreciating currency that has restored the fuel subsidy, which the government sought to eliminate; it is the exchange rate that is at the root of high and rising inflation; it is the exchange rate that motivates the desire to export food across the borders, or to hoard rather than sell domestically. The exchange rate has not reached a stable equilibrium due to the factors discussed above, and is proceeding in unsustainable directions!

An obvious option is to discontinue the free float of the Naira and revert to a managed float around say N850/$ or N1,000/$. This option will of course present its own risks-we will lack the capacity to supply the market at this rate and a large variance will re-emerge with the “black market”. The question of allocation mechanism will also re-emerge with the attendant likelihood that corruption will return to the CBN as administrative mechanisms rather than price are used to allocate scarce dollars. The option to stay policy as it is until equilibrium is also evidently problematic-where is equilibrium? N1,600/$, N2,000/$ or N2,500/$ or worse? Can government sustain current policy implementation with socio-political and industrial crises? It is evident as I’ve written earlier that there may be those whose underlying agenda is regime change-there are clear risks of social disorder or even those who might like to see a military coup? There could be a third option of sustaining the current policy direction but with stronger implementation. For instance, I do not believe CBN has been sufficiently proactive in its policy making, and its communication approaches have been deficient.

One question that arises is why has foreign support been very slow to manifest? Why have our foreign partners been reticent in coming up with tangible support for Nigeria at this difficult time? Why are expected large inflows promised by regime officials not being executed? Regime insiders may critically examine these questions and reconsider our foreign engagement strategy accordingly. The other policy error in my view, is that government has allowed the state governments, who have received substantially larger allocations as a result of fuel subsidy removal and Naira flotation, escape responsibility for investing in their people and states to assuage the pains of current policies. Citizens must hold the state governors to account for their enhanced allocations. I also wonder whether the government has ruled out sabotage-political, security and economic, as a contributor to our current difficulties.

A final matter I would like to discuss is how have Nigerians generally reacted to the difficult economic conditions. From my observation, responses have varied from lamentation, mockery, political criticism and cynicism. I doubt that we have seen much suggestions about alternative, viable courses of action or measures to optimize current policy. More importantly, I don’t see many Nigerians asking how they could take advantage of the high exchange rates or better put, what are the opportunities presented by the exchange rates scenario? This largely absent mindset, which I call “Opportunity Thinking” sadly is the one approach that can change Nigeria’s foreign currency earning capacity and make a positive contribution to the situation. There is an assumption that it is CBN’s job (or NNPC or “government) to provide us foreign exchange fostered by five decades of oil boom mindsets, but it is the responsibility of firms, organisations and individuals in Nigeria to earn foreign currency from the global market.

In conclusion, government will have to examine its options along the lines discussed above based on a full appreciation of the considerations, some of which are transparent only to regime insiders. Measures to optimize the possible outcomes such as by improving oil production, reducing oil theft, enhancing strategic communication, improving security and cracking down heavily on banditry, kidnapping and genocidal murders, improving fiscal revenue and continued engagement with foreign partners and diaspora for inward FX flows, should be implemented.