Economists say Nigerians may have to wait between 12 and 20 years to fully feel the benefits of President Bola Tinubu’s economic reforms. According to them, the measures are likely to deliver gradual improvements in productivity and real incomes rather than immediate relief from high prices and declining purchasing power. The economists told Nairametrics that major structural reforms typically involve a painful adjustment period before their benefits become evident, adding that the pace of improvement would depend largely on policy stability, infrastructure development, the rule of law and investments in productive sectors of the economy. Chief Economist and Partner at SPM Professionals, Dr. Paul Alaje, said structural reforms generally take 12 to 20 years before their impact becomes significantly visible, although some countries have recorded meaningful results within six to 10 years. “On the average, it takes 12 to 20 years before nations start feeling the impact of reforms. That does not necessarily mean such countries will see overnight reduction in their exchange rate. But what they will see is growth in real income as productivity expands,” Alaje told Nairametrics. Financial economist at Nnamdi Azikiwe University, Dr. Felix Echekoba, also said major economic restructuring usually imposes short-term sacrifices before delivering long-term benefits. “Most successful economic restructurings around the world imposed short-term sacrifices on the masses before long-term benefits. “The challenge is working hard enough to ensure that the adjustment period does not become unnecessarily prolonged and that vulnerable citizens are protected,” he said. According to Professor Tayo Bello, a development economist at Adeleke University, Nigeria’s experience is consistent with the pattern observed in other countries that have undertaken major subsidy and exchange rate reforms. “There is no case of any country implementing major subsidy removal and exchange rate reforms without experiencing temporary economic distress. What matters are policy stability and whether the reforms ultimately fuel productivity and investment,” Bello said. Why Nigerians are yet to feel the benefits Tinubu introduced a series of far-reaching economic reforms after assuming office in May 2023, including the removal of petrol subsidies, liberalisation of the foreign exchange market, electricity tariff increases and tax reforms aimed at improving government revenue and fiscal sustainability. The reforms have received support from international financial institutions, but their immediate impact has been overshadowed by elevated food and service prices, high interest rates and declining household purchasing power. Alaje said the absence of key conditions needed to support structural reforms is limiting the speed at which Nigerians can benefit from the government’s policies. According to him, countries that have achieved faster results from reforms typically had functional institutions, respect for the rule of law, adequate infrastructure and a high level of citizen awareness. “A functional system where the rule of law is respected and obeyed, abundant infrastructure evident in the availability of roads, electricity and rail system, as well as high level of citizen awareness” are among the factors that can accelerate the benefits of reforms,” he said. Alaje said Nigeria still faces significant gaps in these areas, particularly infrastructure and institutional effectiveness. “Businesses are now approaching the banks, but interest rates are not coming down. It ranges between 30 and 40%. Households are now struggling with a minimum wage of N70,000, with the country’s poverty rate at over 140 million, more than 60% of the population,” he said. He added that the poorest Nigerians would bear much of the burden during the adjustment period, warning that reforms alone would not be enough to lift millions of people out of poverty within a few years. “It will take more than a decade for the masses to feel any positive impact of Tinubu’s reforms,” Alaje said. Infrastructure, investment key to reform gains Bello said macroeconomic stability achieved through reforms would only provide the foundation for broader economic transformation. “Macroeconomic stability is only the first step. The real benefits come when reforms are buttressed by investments in infrastructure, manufacturing, agriculture, education and technology,” he said. He added that countries that successfully transformed their economies combined fiscal and monetary reforms with aggressive industrialisation strategies. Echekoba similarly said the government must ensure that the adjustment period does not become unnecessarily long while putting measures in place to protect vulnerable households. The economists’ assessment is consistent with experiences from countries that undertook major economic reforms before recording broader improvements in living standards. India’s economic liberalisation programme, introduced in 1991 following a balance of payments crisis, helped restore macroeconomic stability within about two years. However, broader gains in foreign investment, industrial growth and poverty reduction became more evident over the following decade. Ghana’s Economic Recovery Programme, introduced in the 1980s, also took several years before inflation declined significantly and economic growth became more sustainable. Indonesia’s reforms following the 1997 Asian financial crisis similarly took several years to restore investor confidence and return the economy to a stronger growth path. Egypt’s 2016 currency flotation and subsidy reforms initially triggered a sharp rise in inflation, which exceeded 30%. The economy subsequently recorded stronger growth, increased foreign investment and improved macroeconomic stability after several years of implementation. …
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