Will Bola Tinubu’s Debt Relief Policies Sink the Economy?

As the day winds to a close, Janet Omole sits on a wooden bench under the stall where she sells smoked fish and pepper in Basiri, a bustling market district of Ado-Ekiti, Nigeria. Wisps of smoke seep out from beneath her grill, where a fire keeps the flies away from the fish. Close by, small bowls containing tomato and pepper sit in rows.

These are all telltale signs that Omole’s business is going through a hard time.

“Usually by this time of the day, most of my fish and pepper would be almost sold out. But for four weeks now, the market has become unbearably slow, and things have become more expensive, so customers don’t come, and when they do, they buy so little,” said the 39-year-old, whose dwindling patronage has reduced her profits, making it nearly impossible to support her family of six.

The four weeks of unbearably slow markets followed Nigerian President Bola Tinubu’s May 29 announcement that he would end the country’s fuel subsidy regime, a decision that led the price of gasoline to soar from 190 to 550 naira per liter (a change from about $0.24 to $0.69), causing daily consumption to drop by 18.5 million liters (about 4.9 million gallons). In Nigeria, more than 22 million gasoline generators power 26 percent of households and 30 percent of small businesses. Fuel price hikes caused the price of common goods to soar, grinding businesses such as Omole’s to a halt.

Despite being Africa’s largest oil producer, Nigeria has no functional refinery, so it can’t just produce more fuel to bring down the high cost of gas. The country’s four major oil refineries were shut down because bad maintenance rendered them inoperable, forcing producers to send crude abroad—to Belgium and the Netherlands—to be refined before shipping it back; a newly commissioned refinery near Lagos will begin operating soon but may not have a major impact on prices.

The fuel subsidy was introduced in 1973 to keep gas cheap for Nigerian citizens. Since then, the government has been covering part of the cost of gasoline so people could buy it at a lower price. But the system came with baked-in vulnerabilities. Last year, Nigeria lost $10 million to fuel subsidy scams lining the national oil company’s pockets. Tinubu framed his decision as benefiting the poor, earning him a sigh of relief from the International Monetary Fund (IMF) and the World Bank, which have been pushing to end the policy for decades.

In addition to scrapping the subsidy policy, Tinubu’s government rolled out a currency reform to stop the naira’s rate from being fixed by the country’s central bank and pegged to the U.S. dollar, giving way to rates determined by supply and demand, a policy known as “floating.” Tinubu’s move to kill both birds with one stone constitutes his attempt to rebuild the country’s economy, a key campaign promise. The effects of these decisions could, in theory, help Nigeria on a macroeconomic level by reducing its national debt—at the price of harming regular Nigerians.

Since the government floated the currency, the naira has plummeted to record lows against the dollar. The fixed rate, which used to be 450 naira per dollar, rose as high as 800 naira per dollar. Floating the naira immediately drove up the prices of imported goods and services, devastating small businesses and low-income households due to Nigeria’s import-dependent economy. Companies that distribute electricity have increased tariffs by 40 percent in an effort to make up for the naira’s loss of value.

Nigerians could theoretically work around this by selling naira at black-market rates, but the difference between the official float rate and the black market is not as wide as it used to be. Before the change, official rates were pegged at 450 naira per dollar, and black-market rates could be 700 naira. As of this writing, the black-market rate is at 823.3, while the floating rate is 792.2 naira across all sectors.

Now is the best time to pursue a change in currency policy, said Mma Ekeruche, a senior research fellow at the Center for the Study of the Economies of Africa. “It is unsustainable for the government to maintain an artificial exchange rate. It encourages arbitrage, leads to scarcity of forex, decline in foreign reserves, and drives away investors,” she said, adding that a market-determined naira will attract more foreign investors.

But ordinary Nigerians battling inflation, unemployment, and the waves of Russia-Ukraine war, which reduced grain imports and increased the price of bread, are yet to see the impact of this trickle-down reasoning. Indeed, 63 percent of Nigerians already live in multidimensional poverty, and experts say more people may slide down the economic ladder if the government does not reverse course.

Instead, Tinubu is adding a fiscal policy that is further harming the country’s poor. Market women such as Omole, who drive Nigeria’s informal economy, will have to pay a newly instituted value-added tax to the Federal Inland Revenue Service as the government tries to broaden its revenues.

Imposing a new tax on the informal economy is ill-timed, according to Stanley Achonu, the Nigeria country director at the ONE Campaign, an international organization working to end extreme poverty.

“Nigerians predominantly engage in the informal sector and are still grappling with the repercussions and hardships resulting from the subsidy removal. Introducing any supplementary tax would further burden the citizens,” he said.

So why is Tinubu pursuing these measures, and could they come at a political cost?

This year, as Tinubu toes the path that he opposed 11 years ago, he faces no protest because Nigerians are in a comparatively precarious economic situation. Experts blame the latest elections, which were fraught with irregularities and whose results are presently being contested at presidential tribunals, for the lack of protests. Opposition figures who criticized Tinubu’s U-turn may be hoping that the court will annul his victory before they resort to mobilizing against him.

Nigerians may also lack the spark of 2012 because they are just exhausted. A contested election is only one of the hardships the country has had to endure in the past few years; inflation has also been rampant. According to Ikemesit Effiong, the head of research at SBM Intelligence, a Lagos-based geopolitical risk advisory firm, the latest policy did not come as a shock.

“There have been a lot of moves signaling, for months, that there would be a policy shift. There have been more conversations for more than a year about the fuel subsidy and the FX regime, and that sort of primed Nigerians,” he said.

But the harmful effect that these policies have on millions of Nigerians has pushed some to say Tinubu’s election mantra of “renewed hope” has translated into renewed troubles. The economic situation has pushed low-income families such as Omole’s to skip meals and forgo essentials. Her husband, a motorcycle taxi driver, used to support the family, but the increase in fuel prices has handicapped his contributions, which pushed Omole to open the fish stall in Basiri.

“I come to my stall every day because I just cannot sit at home at a time like this. I and the kids manage whatever food we are able to get. How we have been eating is a total miracle—that is the only way I can explain it,” Omole said.

In Ilorin, Olamilekan Abdulsalam, a tricycle taxi driver, is barely able to feed his family because his income has dropped significantly since the new policies were announced. These days, he eats more garri, cassava-derived flakes soaked in water and eaten with groundnuts and sugar.

“I used to buy food in bulk not too long ago. But now, I only buy in measured quantities. Everything has become more expensive, and you start to wonder if the government don’t want us to eat anymore,” the 35-year-old said.

The country’s minimum wage of 30,000 naira per month has not increased since 2019, despite the sharp increases in cost of living. Experts say a government intervention is urgently needed to relieve pressure on low-income households that may otherwise crumble under the weight of Tinubu’s subsidy, currency, and tax policies.

“You are also looking at a situation where if people cannot provide for their family at an adequate level, then they will resort to criminal and illegal means in order to supplement income. So there is a national security and crime dimension to this economic situation,” Effiong said.

Rather than roll back the policies that caused the harm in the first place, some experts think Tinubu should add a new poverty relief policy to ameliorate their effects. Achonu, of the ONE Campaign, said the government should consider reducing the cost of governance by cutting salaries and slashing bureaucratic offices to demonstrate to citizens that they are aware of the fiscal crunch, and must strengthen and broaden social safety net programs to provide immediate support to vulnerable Nigerians.

This could include targeted cash transfers, food assistance programs, and subsidized health care to mitigate the impact of rising prices on essential goods and services. But the country’s precarious fiscal health and pressure from international organizations such as the IMF and World Bank make it near impossible to roll back the policies aimed at debt relief.

Nigeria’s debt keeps escalating, harming the very sectors that directly sustain low-income households, which rely heavily on government support in areas such as health and education. Failure to prioritize their needs exacerbates poverty and inequality, Achonu explained.

“President Tinubu and his economic team should promote fiscal discipline, boosting revenue generation from nonoil sectors, enhancing transparency and accountability in public finances, and implementing targeted policies to support vulnerable populations and stimulate small business growth—while working with other African countries to reach common positions on the global financial architecture,” he said.

On June 12, Tinubu asked Nigerians to painfully persevere and sacrifice a little more for the survival of the country. “For your trust and belief in us, I assure you that your sacrifice shall not be in vain. The government I lead will repay you through massive investment in transportation infrastructure, education, regular power supply, healthcare and other public utilities that will improve the quality of lives,” he promised.

Back at her stall, Omole is praying for divine intervention. Although she has a deep distrust of the government, she hopes it will act to lighten her hardships.

“I come to my stall every day because I just cannot sit at home. Everything is too expensive. I don’t even go out anymore due to the price taxis now charge,” she said. “I have people to support, including my old parents, who I can’t help at the moment. It is only the one who has eaten who can start looking out for others.”