The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, has attributed the closure of approximately 800 companies in Nigeria during 2023 to the economic policies and conditions inherited from the previous administration led by former President Muhammadu Buhari.
This disclosure was made during a ministerial press briefing in Abuja, shedding light on the economic challenges that have beleaguered the country’s business environment.
Edun clarified that the economic difficulties leading to the exit of these companies were not the result of the current administration under President Bola Tinubu. Instead, he emphasized that these issues were pre-existing problems carried over from Buhari’s tenure.
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“The departure of these companies from Nigeria’s economic landscape did not happen overnight; factors like market instability, unfulfilled promises, and breaches of contract forced them out,” Edun stated during the briefing.
According to Edun, the market instability, contractual breaches, and unfulfilled promises that forced these companies out were issues deeply rooted in the policies of the previous administration. The shutdown of these companies was a gradual process influenced by an array of unfavorable conditions that were not addressed timely during Buhari’s presidency.
“Our government inherits the assets and liabilities of the previous administration. The 800 companies or so did not make up their minds overnight. They stayed until they could stay no more,” Edun remarked. This statement underscores the continuity of governmental challenges and the long-lasting impact of previous policies on current economic conditions.
One of the critical issues highlighted by Edun was the illiquid foreign exchange market during Buhari’s administration, which severely impacted business operations and investment decisions. The inability to access foreign currency to import goods, pay for services and fulfill other financial obligations led to a hostile business environment.
“The new environment which investors face is one in which inflation is being attacked and will eventually lead to lower interest rates where investors can use the very vibrant domestic market to add their own equities and invest,” Edun noted, indicating the current administration’s commitment to stabilizing the economy and creating a more favorable investment climate.
Key Policies of the Buhari Administration
To understand the full scope of the economic challenges, it is essential to review the key policies implemented during Buhari’s administration that significantly impacted Nigeria’s economy.
Forex restrictions
The Central Bank of Nigeria (CBN) under Buhari’s administration implemented strict foreign exchange controls to stabilize the naira. These controls restricted access to foreign currency for importing goods and services, leading to shortages and increased operational costs for businesses. Many companies struggled to source necessary inputs, resulting in production delays and reduced profitability.
The use of multiple exchange rates created significant uncertainty and complexity in the market. The official rate, the parallel market rate, and various other rates used for different transactions led to inefficiencies and opportunities for arbitrage. This policy discouraged foreign investment and complicated financial planning for businesses operating in Nigeria.
Border closure
In August 2019, the Buhari administration closed Nigeria’s borders with neighboring countries to curb smuggling and protect local industries. While intended to boost domestic production, this policy disrupted trade, leading to shortages of goods increased prices, and eventually, a double recession.
The closure also strained relationships with neighboring countries and regional trade partners.
Debt Accumulation
The administration accumulated substantial external debt to finance budget deficits and infrastructure projects. While borrowing is sometimes necessary for development, the increasing debt burden raised concerns about fiscal sustainability and diverted resources from essential public services.
The sky-high debt profile, which stood at an estimated N97.34 trillion ($108.23 billion) as of April 2024, according to the Debt Management Office, has created a situation for the nation to spend over 90 percent of its revenue on debt servicing.
Edun disclosed that the current administration is actively addressing the inherited challenges to foster a more stable and attractive economic environment for investors. Efforts are being made to combat inflation, improve market liquidity, and lower interest rates, all aimed at reviving investor confidence and stimulating economic growth.
“Our focus is on creating a stable and predictable economic environment where businesses can thrive. We are implementing policies that will ensure market stability, fulfill promises to investors, and adhere to contractual obligations,” Edun said.
These measures, he said, are intended to reverse the trend of company closures and attract new investments into Nigeria.
The closure of 800 companies has had significant repercussions on Nigeria’s economy, including job losses, reduced industrial output, and a decline in investor confidence. The exodus of these companies highlights the need for robust economic reforms and policy continuity to prevent such occurrences in the future.
Despite the current challenges, Edun expressed optimism about Nigeria’s economic future. The government’s proactive measures to stabilize the economy, improve the business environment, and attract investment are expected to yield positive results in the long term.
“We are working tirelessly to ensure that Nigeria becomes a destination of choice for investors. Our policies are geared towards creating a business-friendly environment, and we are confident that these efforts will soon bear fruit,” he said.