Dr Muda Yusuf, foremost Economist and Chief Executive Officer of Centre for the Promotion of Private Enterprises (CPPE) speaks on the impact of President Bola Ahmed Tinubu’s economic reforms, concluding that the worst is over even as he expressed optimism that Nigerians are beginning to see the impact of the reforms.

How will you rate the economy at the moment? 

The economy is improving because we are beginning to see a lot of positive developments around some major macroeconomic indicators. The first one is the exchange rate. 

Between July 2024 and now, we have seen some relative stability, unlike what we saw in the first half of 2024 or the second half of 2023. The exchange rate was very volatile during those periods but in the last few months, we have seen some stability. 

We are also seeing more frequent intervention by the Central Bank in the foreign exchange market to stabilize the rate and that, of course, is also elevating the confidence of investors in the economy. Many of them are now able to plan better.

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Ultimately, this may also lead to some moderation in prices. The impact is already beginning to show with respect to some prices. So, the exchange rate situation is one major indicator that things are getting better.

We have also seen better foreign exchange inflows from autonomous sources. Unlike what we used to have when the inflows from the International Monetary Transfer Organizations was very weak, the inflows from that channel have improved significantly. 

Many of the exporters are now bringing in their export proceeds, unlike before and all of these are evidence or outcomes of the reforms around the foreign exchange. The foreign exchange environment is now more transparent because of all the measures that the Central Bank has put in place.

We all know that foreign exchange is very critical to economic stability, inflation and planning. The fact that we have some stability in that space is an indication that the economic outlook is getting better.

If you look at energy prices, it is also one of the biggest challenges, especially with the subsidy withdrawal. Now, we are also beginning to see some deceleration in the prices of products from the energy sector for two reasons. 

Domestic factor – We are beginning to see an increase in domestic refining of petroleum products, which we have not seen in many years.

Now, we have a lot more domestic refining, but our domestic refining capacity is far in excess of our domestic demand. So, ideally, we should not be importing petroleum products anymore. For some reasons, some people still want to continue to import. 

But the good news is that we are not importing as much as we used to import before because domestic refining had increased significantly, especially coming from the Dangote Refinery, which is helping to stabilize our energy situation, although we still have the international or the global factor affecting the energy costs. 

Now, crude oil prices are dropping because of the dynamics around the geopolitical environment. You know, the Trump factor is there. Trump is committed to bringing down energy prices. 

The issue of the Russian-Ukraine war – There are indications that the crisis will be resolved, and that will also help to increase oil production, which will also bring down prices. Then, OPEC is also increasing output. So, from the customer or citizen’s point of view, that is something positive for energy prices. 

It is positive for PMS price, for diesel, for aviation fuel and the rest, but from the government revenue perspective, a drop in crude oil price is not particularly good news. You know the budget was premised on a benchmark of $75 per barrel.

Today, I think the oil price has dropped to around $70 and I think sometimes this week it may even come down to below $70 per barrel. So, that may have implications for government revenue. 

It may also have implications for exchange rates unfortunately, because if that trend continues, it may bring some pressure on the exchange rates. So it’s a double-edged sword. 

Generally, the energy price situation is bringing a lot of relief to citizens. So, that is also something positive. Again, all the challenges of fuel queues have disappeared.  

Now, a lot of businesses are looking inwards, some citizens who used to go abroad either for medical treatment, trying to take their children abroad for education, are now looking inwards, and instead putting their children in local schools. 

A lot of manufacturers are also looking inwards for alternatives to importation. 

Some people who used to go abroad for vacation are now exploring vacation sites in Nigeria. So, there’s a whole lot of import substitution going on as a result of this reform because as it’s now, it has become more expensive to rely on imports.  

A lot of recycling is taking place now. Things that people normally threw away are being recycled because they’ve discovered that recycling is big business. 

You’d be shocked how much money they are making from all the wastes they collect from all over the place. So import substitution is gaining a lot of traction just as the security situation also seems to be improving. 

What are other positive indicators you have seen?

We are beginning to see an increase in food production, up North. From what we see, many of the farmers seem to be doing much better than they were doing last year. So all of these show that we are on the recovery path.

What more can be done to sustain these gains? 

We have to watch out for some key economic management issues. First is to reduce our debt burden. We have to be careful of the rate at which the debt is growing. 

Firstly, we do not put too much pressure on our resources to be servicing debt. Secondly, too much debt can cause a crowding effect for the private sector, in the financial markets.

Thirdly, if you are taking too much of foreign debt, you could create pressure for our foreign reserves because you have to be servicing debt. So, we need to watch it and make sure that we slow down as far as debt accumulation is concerned. 

And if you are taking any debt, it has to be debt for something that will enhance our productive capacity, not debt that we use for things that are not easy to monitor, like all these empowerments here and there.

But if you say you are taking debt like this Sukuk for roads, you will see the signboard that this road was funded with Sukuk.

If you are doing tax credits, you see that this road was constructed with tax credits. If you are taking a loan from China, you can say this MM2 or this Abuja Airport or rail was constructed with Chinese loan. Everyone will see it.

So, commitment of debt to infrastructure is what you should be focusing on, not on all those things that you cannot measure. The corruption risk around those things is very high and you don’t get much value from it. 

Then our monetary policy should also be more investment friendly. Interest rate is too high. It is difficult to justify the level of interest rate that we have in Nigeria.

It’s difficult to justify why we should be having a cash reserve ratio of 50 per cent, which is the highest in the whole world and interest rate now is over 30 per cent and above. 

What business can anybody do with that kind of interest rate? So, we should move to a situation where we see a relaxation of monetary policy tightening.

If you want to fight inflation, you should not rely too much on monetary policy. You should be focusing more on boosting supply, like growing more food, reducing cost of transportation and things like that. You get more results from that than increasing interest rates.

Most Nigerians believe that some of these recent achievements in the economy have not really impacted on their lives? 

Well, one can say that the worst is over as far as all these economic shocks are concerned. 2025 cannot be as terrible or as difficult as 2024. 

We are entering a recovery phase. 2024 and part of 2023 were essentially like a transition phase for the reform but now, I think we are beginning to recover and the economy is beginning to stabilise. 

We are beginning to see some of the indications. We have already talked about the foreign exchange and about the food price that is coming down. We even talked about cooking gas which, I think, has come down a little. So, those are indications that things are getting better. 

But the government also needs to do a lot more to ensure proper trickle down effect of the benefits; something that will have more impact on the prices of basic things that people consume, because that is the only way that the citizens can appreciate the fact that things are getting better.

They want to see a drop in the price of bread, pharmaceutical products, cooking gas and noodles. By the time people begin to see a reduction in those prices, then they will agree that something positive is happening.

However, at the macro level, things are getting better. I’m sure it will soon trickle down to the micro level.