Re: Nigeria’s economy may be back from the brink — by Kola Ayeye

Please permit me to state that I ernestly wish this government spectacular success. Every of my commentary is from a fervent desire for success, as this is for the benefit of all. Nonetheless I think government has made major mis-steps with the economy as well as politics.

On the economy, the big-spend economic posture of 2023-2025 was ill-advised. Respectfully, the imperative for 2023-2025 was much lower expenditure to achieve a surplus so as to reduce government debt irresponsibly bequeathed by late President Buhari and his CBN Governor. This would have laid the foundation for sustainable and efficient private secor led trabsformation. Instead we have more than tripled budget size with a 2026 deficit of N23.85, 70% of projected revenue of N34.3 trillion. For every N1 of revenue, we project to borrow N70, definitely concerning and unsustainable.

On the political front, the call of statesmanship, infinitely higher than the call of politics, would have informed serious efforts to ensure that opposition is not asphixated. The asphixation of opposition may be the unwitting asphixation of democracy.

Nonetheless all patriots must continue to pray and wish the government and our nation exceptional success.

In response to a May 2025 positive commentary by the Financial Times, I wrote a commentary which perhaps remains a trite response to The Economist’s fresh commentary that we may be back from the brink. Below is a repeat of the mid-25 commentary.

Precedent suggests that macro stability will not necessarily generate micro transformation, the real undeniable quality of life improvements citizens desperately need. Positive real interest rates, stable exchange rates, elimination of ruinous subsidies etc. are intermediate goals, they are the means to quality of life ends. Sadly, the ultimate ends are not automatic. On the contrary, global post-SAP experience instructs that they rarely actualise, even in the long run.

A few matters worthy of cotemplation:

1. HOW DO WE DELIBERATELY MAKE THE PRIVATE SECTOR THE DOMINANT BENEFICIARY AND DRIVER OF GOVERNMENT AGENDA: The two biggest reforms of petrol subsidy removal and Naira devaluation had the severe consenquence, perhaps unintended, of transferring significant resources from households and businesses to government. Some contend that any reform that empowers govt at the expense of businesses and households is doomed to be ineffectual because it makes the most inefficient of the three organs the driver. We need new models that deliberately make business the major beneficiary of reform in a construct that ensures those businesses drive record increases in middle-class and living-wage employment. I doubt that this can be pulled off the pages of any textbook, it will require our best minds to do better than think and do outside the box, they will need to birth entirely new boxes. The excellent tax reform makes this more urgent. Excellent as they are, the tax reforms could on aggregate, worsen the transfer of resources from businesses and households to government.
2. In spite of the huge increase in fiscal receipts from these two reforms, the federal government is on an aggressive borrowing agenda. In less than three years, the Federal budget has grown almost 3-fold fold from N18 trillion to N58 trillion. The debt service of N15.5 trillion is 86% of the entire 2023 budget of President Buhari which was N18 trillion. Shouldn’t advisers be finding ways to temper Mr. President’s faith in big government, steering ownership and implementation of key projects and initiatives to business rather than government.
3. While it was necessary to close the gap between the official and free market FX rates, the 100% devaluation was unprecedented. Official rate was about 450 and free market of 750 at inception of governmentin May 2023. In our history, whenever large gaps between both markets
   were closed, a new rate emerges somewhere between the two. In this instance, we ended at 1500, a 100% devaluation of the free market and 230% of the official market. Some speculate that huge capital flight from sub-nationals’ whooping increases in FAAC receipts may be the culprit. Others point to the almost empty reserves position at the inception of the current CBN leadership. Whatever the reason could be, isn’t there a point in exploring a strengthening of the currency on a gradual market-led basis – without reverting to the former corrupt and inefficient duality. Indeed, the recent 7.4% improvement in official rate from 1500 to 1396 is positive, but the other market has not moved much from 1500 and the emerging arbitrage is at its tolerable limit. The challenge of sustaining this improvement towards 1200:$ WITHOUT ALLOWING a gap of more than 5% from the other market is one that needs be confronted and overcome.
4. How can we transform public education, public health, and policing to private sector managed and federal government regulated endeavours. A private sector managed intervention that makes teaching a lower middle-class, medicine a middle-middle class, and policing straddling both, alongside private sector led improvements in education, health, and security outcomes to continental leadership standards will deliver the tangible quality of life improvements which the citizenry need, beyond macro milestones. Before alarms on “private policing” ring loud, contractors have been engaged in military combat in the Middle East, and South Africa has significant private involvement in security. That it sounds alarming does not mean it can’t be done. Honest and visionary licencing and supervision is what is needed. A collaboration of such private policing with the army can be tasked to totally wipe out insurgency and insecurity in 12 months, with a significant part of contract compensation tied to success.
5. Leakages and corruption will need to reduce to minimal levels. We simply don’t have the resources to carry these changes alongside corruption and leakages. Once we choose sustaining leakages, we have inadvertently excluded transformational quality of life improvements. The macro stability will continue to majorly benefit the bureaucracy, the political ruling class, their thin layer of business alliances and the financial sector.

The foregoing notwithstanding, the current leadership of CBN has been outstanding, ranking amongst the best we’ve ever had. And we should acknowledge and salute the courage of the President in taking on two difficult reforms. But the citizenry will remain very poor and the results ineffectual except there is a moral rebirth led from the very top, and new models birthed and executed by our very best to transmit reform benfits to households on a structural sustainable irreversible basis.

–Ayeye is an Investment Banker and development expert