Tinubu’s government risks repeating past mistakes: Capital Economics 

The President Bola Tinubu-led government is at risk of repeating previous mistakes made by his successor as the country’s fiscal position comes under pressure, Capital Economics has said.

The London-based economic research firm said a nationwide labour strike may have come and gone this week, but Tinubu remains under fire due to high inflation. 

“Spending pressures will persist as long as inflation remains high, meaning fiscal policy is set to remain loose,” it said.

Nigeria’s main labour unions caused havoc with a nationwide-strike on Monday, which was embarked upon after they failed to agree a new minimum wage with the government. 

On Tuesday, the strike was suspended after the government pledged to return to the unions with a better wage offer.

“But there remains a risk of future industrial action,” Capital Economics said, adding that bridging the gap between the labour union’s demand and the government’s offer risks stoking inflation, potentially fuelling a vicious wage-price spiral.

It said: “The government is thus faced with some painful trade-offs in its inflation fight. Recent decisions to remove food import duties are welcome as these were likely distortive anyway. But alongside actions like the continued subsidising of petrol, the fiscal position is coming under pressure.

“A worse fiscal position in the past has pushed Nigeria into unorthodox policies like deficit monetisation, which have contributed to the current inflation crisis. The government needs to learn from this recent history otherwise it risks repeating previous mistakes.”

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