The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, on Tuesday highlighted key lessons African countries and the rest of the world can learn from Nigeria’s economic reform experience.
Mr Oyedele spoke at the Africa’s Golden Future Forum, held on the sidelines of the World Bank/IMF meetings in Bangkok, Thailand.
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The minister said that proper sequencing, consistent communication and public trust were critical to successful reforms. He also identified fuel subsidy removal, foreign exchange liberalisation and tax reform as Nigeria’s major economic reforms in recent years.
“My experience is for reforms to build resilience, growth, we have to start with the end in mind, like I said. Think about what can go wrong, perhaps, in relation to scenario planning and how you respond to that. And while you’re at it, keep communicating with clarity to build trust,” Mr Oyedele said.
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He explained that one of the things that worked for Nigeria with the reforms is presentation of the counterfactual realities.
“People can easily tell that because of the reform, life is harder. But you need to show them without the reform, it will be hardest,” he said.
“And it doesn’t mean they will believe you the first time, but you keep saying it. Second thing, sequencing matters. So a lot of the reforms were price correction issues. So you do price correction to bring volatility, then you focus on stabilising the system, and then you scale. But most importantly, think about how do you make it sustainable. And that’s by putting it into institutions and putting it into law.”
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Nigeria has introduced a series of reforms the government said were focused on fixing the structure of the economy, although the impact has been enormous for many Nigerians grappling with cost-of-living crisis.
The government introduced reforms in the foreign exchange market, abolished what it termed a wasteful, corruption-ridden subsidy regime amid fiscal pressures, and institutionalised tax reforms.
While the reforms have been hailed as positive for the nation’s fiscal health by global development and financial institutions, many Nigerians have expressed frustrations over their impact on the domestic front amid skyrocketed energy prices, high cost of living and sundry inflationary pressures.
The minister explained that the right deployment of the law and the need to institutionalise reforms also mattered and helped with consolidation.
“So most of the reforms we did in Nigeria are either enacted into law or embedded into institutions. Because you need to be able to do that for sustainability. And the last one is you must stay the course.
“Policy consistency is important. Capital follows trust before it follows returns. They need to be able to plan and predict what you’re going to do.”
Mr Oyedele added, however, that the peculiarity of African economies and the population should also be considered in sequencing and communication.
“But while you’re at it, bear in mind, particularly in Africa, many of our citizens live in poverty. Many of them are not well educated. When people are hungry and they are angry, they cannot be rational,” he said.
“So how do you keep these people being able to survive? Because for them, they have to be alive to see tomorrow that they are promising. And this is when the support system becomes very important. Cash transfer funds.
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“In Nigeria, we’ve done over 10 million households. We also did education funds to our… students, enabling not only for them to continue with their education, but for their parents and their guardians to have the sources of funds for other important things that they have to do. So at the end of the day, we need to ensure that we have clarity.”
The minister also lauded the political leadership for its tenacity, adding that it helped in maintaining policy consistency.
“I have to also say that we’re very lucky with the political leadership at the very top to be able to see these reforms through. So if it was possible in Nigeria, it’s possible elsewhere,” Mr Oyedele said.
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