To most Nigerians, the expression “subsidy is gone” on the day of the inauguration by President Bola Tinubu came as a surprise and a big disappointment. People conversant with the economic implications of subsidy removal and its consequences know that it will certainly bring untold hardships, hence their disappointment. But for others, since the opponents of the President are in court to contest his victory such a fundamental decision ought to have been deferred till after the supreme court pronouncement.
Whichever way these two categories of Nigerians felt, President Bola Tinubu thought otherwise. He felt and rightly so that he has been inaugurated and that he must hit the ground running. Hence he took a decisive decision which his predecessors since 1999 couldn’t take. Some of these are General Olusegun Obasanjo and Major General Muhammad Buhari. The issue of subsidy has indeed become a contentious issue such that virtually all governments since the advent of the fourth republic have had to tinker with the price of premium motor spirit aka petrol.
This is because petrol rather than diesel and kerosine is the most consumed of the three. Diesel and Kerosine were deregulated which led to an increase in their prices yet the negative response wasn’t this high. Rather people revolt whenever the same was done to petrol. Besides the fact that the consumption of petrol for vehicles is high, we also need it to fuel generating sets in an economy where the electricity supply is unstable. Whereas most citizens have objected to the abolition of subsidy that has changed the trajectory, some Nigerians believe that if that critical decision was not taken on that first day, it would have been difficult. The other alternative strategy would have been what we are used to.
The government makes a partial withdrawal of subsidy, the people react negatively, the organized labour force goes on strike and the government is compelled to reduce the price.
Some of us felt something different was needed. Was the president justified in doing so?
Events around our economy show that Nigeria is in dire straits resulting in borrowing to fund our budgets. Over 90% of revenue is also spent to service our foreign debt. Nigeria is now the poverty capital of the world with over 133 million in multidimensional poverty.
Also, Nigeria is the only member of the Organization of Petroleum Exporting Countries (OPEC) that imports refined fuel. Above all, our young, bright, and educated ones have chosen to go abroad in search of greener pastures.
Do we need to go through the same route as we have traversed before? This simply means doing something the same way and expecting a different result.
Nigerians believe that crude oil is part of our natural resources hence we must enjoy its benefits in terms of its availability and affordability. They are justified because mismanagement of our economy has ensured that our refineries are comatose thereby resulting in the importation of refined oil with its cost implication and other related hazards.
Previous governments since Obasanjo, in spite of the large money spent on Turn Around Maintenance(TAM), haven’t made any of our four refineries functional. Renowned economists like former Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi and the sitting governor of Anambra State, Professor Charles Soludo also an erstwhile CBN governor among others have posited that the subsidy regime is unsustainable.
The candidates of the three major political parties promised to do away with the subsidy regime if elected during the electioneering campaign. President Tinubu said even though organized labor would go on strike, subsidies would be withdrawn. And he went ahead to do so. However, some questions were left unanswered.
If it is true that the Buhari government budgeted and made provisions for subsidy till June 2023, what happened to the budgetary allocation for June 2023 when the subsidy was withdrawn a month earlier? Was the Dangote refinery built in four years, commissioned with fanfare by ex-president Buhari with 650,000 litres daily capacity of PMS not meant to augment the importation of refined oil? The cumulative capacity of our 4 refineries is 450,000.
Twin major policies were taken by President Tinubu to overcome the sharp practices attendant with the prevalent system. The wholesome withdrawal of subsidy and the floating of the exchange rate. Among other reasons, the president posited the subsidy had to go because some unscrupulous businessmen were profiting from it as well as the fact that the product was smuggled across our borders to help our neighbours.
While the dual exchange rate lasted, the government fixed the exchange rate of the dollar at less than N500 while the autonomous, or the Bureau De Change (BDC) dollar changed for close to N800. This resulted in round-tripping which meant people with the right connections accessed the dollar at the official rate and disposed of it at the BDC rate and made around N300 cool money on each dollar. This, the government felt should go.
The twin policy at the same time has led to a sort of reduction in the value of our currency and the exchange rate has gone up thereby exacerbating our problems. Some call it devaluation. The major economic theory underpinning the current government’s policy is the classical and neo-classical which strongly believe that the market forces (demand and supply) should be allowed to determine the price of fuel. The “invisible hand”, they argue will do it better whereas economists of the Keynesian theory are of the view that there should be government intervention. Previous governments went the Keynesian way while this government has opted for the classical and neo-classical paradigms.
Can our economy be classified as capitalist? if it is, what do we produce apart from the rent we amass from our sole inelastic product of crude oil? At best my description of our economy is pseudo-capitalist. If we indeed produce goods as we did in the first republic till the 70s, this current policy could have suited the direction taken. If care is not taken the price of a litre which started off at N500 per litre and now at N615 may go as high as N1000 or beyond.
This is predicated on the fact that if the price of crude oil goes up in the international market, which is beyond our control, we the end-users will still pay more. Some economists have predicted that by the first quarter of 2024, prices will stabilize and the economy would be the greatest beneficiary. This hope and expectation, good as it is, is subject to other economic variables, ” ie ceteris paribus,” other things being equal.
Nigerians are groaning, the price of virtually everything has gone up except like someone jokingly said, salary, allowances, and prerequisite of people in government. And that includes the Presidency down to the councillor and other appointed political office holders. Prices of transport fares, food, school fees across the board, electricity( in plan), house rents etc have all gone up.
People point to the fact that outside Nigeria especially in the United States where we copied our system from only the President, Vice-president, and Chief Justice are accommodated at the expense of the state or taxpayers. Besides a reduction in salary and allowances, I am of the view that items like computers, furniture, cars, etc can be done by leasing. Also, the homogenous money spent on accommodation money can cease.
The Dangote refinery which we thought would come in handy is not ready going but the information in the public space indicates that the production may commence in 2025 rather than July/August 2023 earlier projected. The abolition of subsidies has brought more revenue into the Federation Account by extension higher revenue to the state governments.
However, trust deficit on the part of the people based on past experiences does not give citizens the confidence that governments will do the right things. Unfortunately for us, many Nigerians are of the view that the parliament that is supposed to scrutinize public finance is in cahoots with the executive to mismanage the economy.
Is the situation irredeemable?
Certainly not, it only requires commitment on the part of the leadership and support from everyone. On the part of the government, they should come clean to show people the sacrifice they are prepared to make.
Refineries should be made to work in the long run with a specific time limit which must not fail. Food security as promised by the president should be vigorously pursued with adequate security provided by the government to ensure that the farmers can access their farmlands unhindered. The interim solutions like the provision of public buses, fuel allowance for public servants, and public sale of some staple foods announced by some state governments are just temporary measures that cannot last.
At this juncture, I strongly believe that maybe in the interim, a combination of the neo-classical and Keynesian theories can do the job. We are not capitalist per se where the neo-classical theory can be adopted and the control in the past to has not helped. The floating of the naira in such an economy may not serve our peculiarity.
LESSONS FROM THE CURRENT TRAVAILS
We can make the best out of the current travails by exploring other ways of doing things. For example, experts have suggested that Compressed Natural Gas (CNG) can be used as an alternative to PMS. Some people have changed the petrol carburettors in their generating sets to that CNG which according to experts is cheaper and environmental-friendly.
We should see the current adversity as a challenge to do things differently rather than see it as a problem to weigh us down. On erratic supply of electricity, we can explore and exploit other opportunities before it becomes a serious problem. We can do more with proper and effective planning.
I humbly submit that a strike may not be the solution to the challenges at hand but understanding and cooperation.