Bola Tinubu was yesterday sworn in as Nigeria’s 16th president during a ceremony in the nation’s capital, Abuja. During his inaugural address, the new president announced several policy priorities that will be given attention in the coming weeks. He called security a top priority and committed to investing more resources into improving overall security.
On the economy, he reiterated the need for GDP growth to be increased so as to reduce unemployment, noting plans for budgetary reforms, reviewing industrial policy, making electricity more accessible and addressing FX liquidity constraints which will allow investors and foreign businesses to repatriate their dividends and profits. Sticking to his campaign promise to immediately remove the controversial fuel subsidies, President Tinubu announced that the subsidy will be removed as it ‘can no longer justify its ever-increasing costs in the wake of drying resources’. Instead, he committed to ‘re-channel the funds into better investment in public infrastructure, education, health care and jobs’.
In line with his Renewed Hope Action Plan, the president called for a review of monetary policy, stating that it needs a ‘thorough housecleaning’. He stated that the Central Bank of Nigeria (CBN) must work towards a unified exchange rate, while interest rates need to be reduced to increase investment and boost consumer purchasing power. He criticised the CBN for its recent plans to introduce new naira notes and withdraw old notes under a very tight deadline, stating that it was ‘too harshly applied’ although his administration will treat both currencies as legal tender. President Tinubu concluded his brief outline of policy priorities by stating that his foreign policy objective is to ensure peace and stability in West Africa and the African continent (see out latest SSA Viewpoints, Nigeria: At the cusp of renewed hope’ 24 May 2023 for a discussion on President Tinubu’s policy blueprint).
The announcement that fuel subsidies were to be removed caused some chaos in major cities, with reports that panic buying resulted in long queues at filling stations. Consumers are reportedly concerned that petrol prices will rise sharply due to the planned removal of the subsidy (Premium Times).
The Central Bank of Kenya’s MPC yesterday kept its policy rate unchanged at 9.5%, in line with our expectations. The committee cited an expected moderation in domestic inflationary pressures as rationale for the move. The MPC also noted that tightening at the March meeting was still transmitting through the economy, which combined with government measures to allow duty-free imports on specific food items should contribute to a decline in inflation. While the global outlook remains uncertain, the MPC expects the domestic economy to strengthen in 2023. The inflation outlook is improving, but we see upward risks stemming from faster-than-expected FX depreciation, volatile weather conditions, a resurgence in commodity prices, and proposed tax increases. Overall, however, we expect consumer inflation to continue to moderate in the coming months and revert to the central bank’s 2.5-7.5% target range by Q3 23. Against this backdrop, we expect the MPC to keep the policy rate unchanged through 2023, though the risk of further tightening remains (see ‘Kenya MPC: Policy rate left unchanged at 9.5% as inflation eases’, 30 May 2023).
