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Elimination of energy subsidy, market exchange rate, monetary consolidation, and expansion of the fiscal space are key policy advice of the International Monetary Fund (IMF) and its sister institution, World Bank. Since its inauguration in May 2023, the administration of President Bola Tinubu has been implementing these policy prescriptions. But rather than validating the government’s efforts, the IMF has suggested that the reforms were not working in Nigeria. In its October 2024 Sub-Saharan Africa Regional Economic Outlook, the IMF did not mention Nigeria in the list of countries including Côte d’Ivoire, Ghana, and Zambia where it says its reform prescriptions are working.

The IMF and World Bank like to showcase the successes of the reform programmes that are based on their policy advice. For instance, in the latest World Bank’s Global Economic Prospects, Kenya and the Philippines are mentioned amongst countries that have successfully implemented domestic revenue mobilisation reform. This is without acknowledgment of Nigeria where public revenue has grown in multiple folds (in naira terms) due to the foreign exchange reform of the Tinubu administration and its efforts to increase tax revenue.

The World Bank report, covering Emerging Markets and Developing Economies (EMDEs), also cited Mexico amongst countries that have successfully undertaken fuel subsidy reform. Jamaica was also recognised for the significant success in its implementation of “a credible fiscal framework”.

Whereas Tinubu has started to claim success for his reform commitments, the lack of acknowledgement from the Washington D.C.-based institutions is a challenge that can limit the buy-in of international investors in the Nigerian reform process. And with more and more Nigerians experiencing economic hardship, instead of the positive impact the administration is claiming, not only would the credibility of the reforms continue to erode, but the Nigerian economy may also continue to decline as a consequence of low investor confidence in it.

However, the IMF has expressed support for the ongoing economic reforms in Nigeria, which it says are “home-grown.” But informed policy observers understand that Tinubu’s economic reforms are broadly advised – if not imposed – by the IMF. But a poor job has been done in implementing the reforms, causing the IMF to somewhat distance itself from them. What may not be very clear is that Tinubu deviates from IMF guidelines in implementing the policies adopted by his administration. The significant divergences are discussed in the following segments of this write-up.

Disorderly reform

For decades, the IMF and the World Bank have campaigned against “mistargeted” public subsidies. They advise an ending to such subsidies, including Nigeria’s petrol subsidy. However, both institutions advise an orderly winding down of such programmes. This would have informed the legal and budgetary mechanisms developed by the previous administration of President Muhammadu Buhari, which provided a clear six-month notice for total withdrawal of petrol subsidy at the end of June 2023. The Bretton Woods institutions generally support a phased removal of energy subsidies.

Nigeria seems to be complying with the phased approach over the last decades with episodes of part-removal of the subsidy as its cost rose amid rising debt service obligations of the government. What these previous efforts lacked was a pathway to ending the indiscriminate subsidy over a medium- to long-term economic planning horizon. The constraints of democratic transitions of government, occurring every four or eight years, and lack of breakthrough policies for Nigeria’s economic transformation, might have been responsible for this.

President Tinubu decided to address these constraints by abruptly ending the petrol subsidy programme right at the ground of his inauguration – months before he had named his cabinet and without a programme to cushion the effect of a sharp increase in the pump price of petrol on vulnerable Nigerians. He also didn’t exercise patience for the budgetary provision for the subsidy by his predecessor to run its course, terminating at the end of June 2023 – just 32 days into the Tinubu’s government. It was a chaotic and inefficient approach that would undermine accurate accounting of the final subsidy to be paid on existing petrol inventory in the country and one that left consumers with no time to plan coping mechanisms for the adverse impact of the policy change. In the disorderly ending of the programme was also an opportunity for corruption, given the history of fraudulent subsidy claims by petrol traders.

A rash of other difficult reforms have trailed the subsidy removal. This includes the floatation of the naira and fiscal initiatives intended to increase government revenue. In principle, the IMF and World Bank support these reforms, which they describe as “difficult and much-needed.” But the support should be understood from the perspective that the policies can contribute to global macroeconomic and financial stability. However, these institutions tend to pursue these global mandates at the expense of stability in systemically unimportant countries. Nevertheless, there are safety valves in their policy advice. For instance, the World Bank advises the expansion of the tax net as opposed to raising the tax rate in increasing tax revenue where this is pragmatic or makes strategic sense. There has been a marked departure from this precept as the Tinubu administration prepares to increase the rates for VAT and personal income tax (for relatively high salary earners) and shrink the tax net with wide exemptions from taxation.

As I observe, the IMF and World Bank tend to aggressively push their policy recommendations in developing countries, but they are less insistent on their implementation guidelines. The negligence is both beneficial and functional for the institutions as it enables them to maximise the growth potentials of their balance sheets and maintain relations with the political authorities. But it is also a deeply dysfunctional approach that minimises the chances of success of their programmes. Therefore, while Tinubu has adopted IMF/World Bank policy advice, the implementation of the reforms tends to contradict the requirements of their success, hence the growing evidence of their failure.

Lack of transparency

The Nigerian petrol subsidy programme was officially ended by a presidential proclamation at the end of May 2023. A few months after, the government started to talk about the “savings” from the stoppage to the payment of the subsidy without providing the numbers. But it later came to light that the government was clandestinely still paying the subsidy, with the amount involved and the beneficiaries becoming even more opaque.

The IMF and World Bank takes transparency as a cornerstone requirement of successful reform efforts. In general, they advise the use of technology in public procurement process to improve spending efficiency, transparency and accountability, and public finance management. However, digital innovation is not the first prerequisite for fostering public sector transparency – not in Nigeria today. The first and foremost requirement for the success of many of the reforms the country needs is the moral and political will of the leaders to do the right thing. Where this is absent, digital innovation would be futile – and could be officially sabotaged as with the Independent National Electoral Commission and its central election coalition server in the 2019 and 2023 presidential elections.

The lack of transparency in ending the subsidy regime was compounded by opacity and scandals in the implementation of palliative programmes to help cushion the direct and inflationary impacts of the sharp increases in the pump price of petrol in the country. This makes it difficult to showcase the removal of petrol subsidy as a successful reform effort in Nigeria.

Lack of fiscal credibility

The need for President Tinubu to introduce fiscal reform was not in doubt. The country’s economic growth, on the average, had been sluggish for eight years before his administration. The fiscal space, which the World Bank defines as “the room in a government’s budget that allows it to spend without compromising debt-service capacity or economic stability”, was quite tight. Without new policy interventions, the economy would continue to unravel – with macroeconomic indicators continuing on their wrong trajectories.

Therefore, Tinubu’s reform efforts to expand the fiscal space by increasing government’s tax revenue and reducing the percentage of government revenue that is used for debt service were both appropriate and in alignment with IMF/World Bank policy advice. But these policy goals require sound public expenditure pattern, which the administration has now demonstrated it is not inclined to establish and follow. The government’s spending has pandered to elite mentality and a sense of entitlement by government officials, whereby billions of naira have been spent on the purchase of a big presidential jet, acquisition of exotic cars for public officials, and expensive renovation of the residences of senior government functionaries, amongst other wasteful public expenditures.

Given this spending pattern, public debt has been growing rapidly as the government has continued to borrow from local and foreign sources regardless of the savings from its ending petrol subsidy payments. According to data from the Debt Management Office, the total public debt increased by 53.69% between June 2023 and June 2024. In 2025, the proposed budget deficit of N13.4 trillion represents 3.89% of GDP and debt service and the Sinking Fund will gulp 44.9% of government revenue.

Also eroding the credibility of the fiscal reform of the Tinubu administration is its poor project selection. The Lagos-Calabar Coastal Highway project stands as a prime example of this. The mega roads project, estimated to cost N15.4 trillion, is likely to end up as a “white elephant” project which the World Bank advises against. While the government hastily awarded the project and released substantial part of its counterpart funding, sourcing the full project financing would be challenging, even as its economic rationale has been questioned, its scope changed within months of construction, and the contract was awarded to a company owned by a business ally of the president. Even more offensive to World Bank’s recommendations is the controversy around the unavailability of the environmental impact assessment study for the project before it was launched.

Lack of public support

The IMF/World Bank harps on the need for public support to successfully implement economic reform, especially the sorts that it deems “difficult and much needed.” However, President Tinubu has not countenanced the need for public support of his reform agenda. Banking on the support of the pliant National Assembly, he has pushed his reform agenda on the basis of its necessity and long-term benefits as he sees them despite the untold hardship the policies have caused.

However, his tax reform proposal is now facing what looks like a serious political roadblock. Many stakeholders have called for more consultations on the provisions of the Nigeria tax reform bills. While opposition politicians may deliberately want to thwart the tax reform initiatives, Nigerians may have become fatigued by Tinubu’s reforms that have adversely affected them and their businesses in the last 20 months. Yet, there are no indications that the government will take the IMF’s recommendation of giving “greater attention to communication and engagement strategies, reform design, compensatory measures, and rebuilding trust in public institutions” to underpin the success of his reform.

IMF/World Bank culpability

The IMF and World Bank are nevertheless culpable in the failure of economic reform in Nigeria and in many other economies where their policies are being implemented. The policies are prescribed without accounting for local context. The institutions are also eager to lend when such financing would worsen the debt service obligations of the country, thereby contradicting their recommendations. They are also often acquiescent to political pressure, providing nuanced but open support for policies whose details or implementation approaches they don’t necessarily agree with.

A far-reaching reform – or redesign – of these institutions’ lending should see greater percentages of their financing going to the private sector. So far, IMF lends only to governments. In fiscal 2024, the International Finance Corporation (IFC), the private sector-lending arm of the World Bank Group, contributed just 27% of the group’s total financing. Increasing financing to the private sector would increase the efficient use of the financial resources of these international institutions. They can concentrate more on governments that are willing to abide by the recommendations for implementing their programmes while generally encouraging public private partnership.

Remedy for Tinubu’s reform failures

President Tinubu should not only adopt IMF’s policies, but he should also heed the recommendations for successful implementation of the economic reforms. To the extent that he wants to succeed with his reform efforts, it is important to adhere to good practices in governance. As he nears the mid-way point of his first term, his option is to either focus on the politics for his reelection while accommodating vice and incompetence in his administration or overhaul his cabinet with competent professionals and honest political leaders to begin to turnaround the economy.

The ancient wisdom of the Greek poet Menander says, “time heals all wounds.” This is a fallacy. The deeper economic ‘wounds’ that the Tinubu’s reforms have caused in the last 20 months need more than time to heal. They require a change of attitude to governance, competence in economic policy formulation, discipline in the execution of the policies, public engagement, and transparency.

Jide Akintunde is Managing Editor, Financial Nigeria publications. He is Director at Nigeria Development and Finance Forum.