By Alabi Williams / posted June 12, 2023
We saw it coming. Leftist arguments in support of a little subsidy for multi-dimensionally poor Nigerians no longer convinced some, the same people who marketed similar arguments in 2012. In the eight years of the Buhari administration, it appears some have fed too fat to retain old beliefs and have moved on. Many have benefited from the confusion that characterized the economy and have outgrown previously austere disposition. They no longer reason a little to the left. Many have held important and lucrative positions, which unlocked for them unearned wealth and access to an undisciplined fortune. That perhaps, explains the fictitious character of Nigeria’s progressives manifesto. It’s not an ideology, just a fragile wish on paper.
Not to forget, proponents of fuel subsidy removal have been unrelenting. They’ve been lurking around since the days of the Military with very unfriendly conditionalities. Not long ago, the World Bank mounted a renewed campaign across newspapers and other media houses to convince Nigerians why fuel subsidies must go. The argument is always that the debt burden was too heavy, leaving little for infrastructure, health, and other sectors, but hardly any punishment for government officials who invented subsidies. The government did not just walk blindly into the huge debts. The government simply abandoned local refining for full-scale importation. They also failed to secure the borders against criminals who smuggle the product to neighboring countries.
I remember that encounter in November 2021, with the World Bank Country Director, Shubham Chaudhuri, when he preached that subsidy is not sustainable and should be dismantled. However, he cautioned that government should build consensus before it goes ahead to enforce the unpopular policy. Asked why the World Bank was not expending the same energy to encourage the government to clean up its act and begin local refining, and stop wasting forex on imported refined fuel, Chaudhuri’s unyielding argument was that even with local refining, the difference between the price of locally refined fuel and the imported version would be close to nothing. Really? What will happen to freight, insurance, cargo transit time, and ancillary cost that local refining will definitely eliminate? The man stuck to his gun and that’s what we are going to have even when serious refining commences, hopefully soon. The template has been carefully laid out.
Whereas elementary economics teaches that proximity to the source of raw material is added value to a local refiner or manufacturer, we are told not to expect anything. They say the international market will decide for us the price of crude that is fetched nearby and whatever disadvantages we suffer in that process will be transferred to citizens. But I insist: that there is no way cutting those costs will not add up as a comparative advantage. With that advantage, we could become very competitive all over West Africa. If we did not take advantage of that officially, then why are we in ECOWAS, and why did we sign AfCFTA, to access other African markets? They keep blaming smugglers.
Former President Buhari, no doubt, was under tremendous pressure to unleash on Nigerians what was calculated for him as subsidy liability. They told him before he came into office that subsidy did not exist, but when his eyes became clear he couldn’t do much but manage it. Through pump price increases, he was able to deal with the purported numbers presented by NNPCL. If local refining were ongoing at the same time, and the government closed in on smugglers, the pressure of imported fuel on forex would have lessened. But that did not happen.
Of course, Buhari signed the Petroleum Industry Act (PIA). With that, everyone knew and expected that with the appropriate application of corporate governance in oil and gas, it was only a matter of time before subsidy to find its natural place. That would have taken place after the right investments were done in mid and down streams, with a plethora of refining activities.
The point to note is that socialist instinct scared Buhari from jumping to remove the totality of cooked figures bandied as subsidies. He was concerned about the far-reaching consequences that could have on the people. I’m sure the politicians also reminded him of the consequences it could have on the 2023 elections for them. And so, despite signing the PIA in 2021, the government continued to make budgetary provisions for a subsidy, until June 2023 when he left office.
On one occasion Buhari bluntly told Bloomberg in a June 2022 interview that Nigeria runs a unique economic model that is people-centered. He argued that the conventional model had failed in the past. He said the suspended Governor of the Central Bank, Godwin Emefiele, was following a model outside of economic orthodoxy. Hear him: “Instead, the governor is following an alternative economic model that puts the people at the heart of policy. Nigeria should be free to choose its development model and how to construct our economy, so it functions for Nigerians.” He was actually talking to the World Bank and IMF, major drivers of fuel subsidy removal.
So, there seemed some hesitation on the part of the former president, maybe it was Hayakawa’s instinct, whereas the new government of renewed hope seems in a hurry to add to the misery in the land. It brutally yanked off the supposed facility before settling down to look at the numbers. In the last two weeks, it has become clear that the figures may not be real after all. We are now hearing of billions of dollars wasted on refineries in eight years of APC Federal Government, allegations that have nothing to do with ordinary Nigerians. This is where Tinubu should have started his reforms for the full-blown implementation of PIA.
President Tinubu also didn’t consider in advance measures to mitigate the suffering he unleashed. It was only last Wednesday he ordered his vice, Senator Shettima, and governors to work on salaries and palliatives. Ridiculous. So, what was he doing in London and France before his inauguration? Even the idea of palliatives constitutes an assault on citizens’ psyche. Such remedial actions only deal with symptoms and not the ailment.
As the announcement was made that fuel subsidy was gone, and the NNPCL quickly shared deregulated prices of PMS, citizens are wondering why it’s taking the CBN time to unify the forex market. Why has the President not ordered immediate convergence if the argument that foreign exchange dictates the cost of the subsidy is correct? It’s been two weeks now and there is confusion in that market, with the naira still being remote-controlled. Or, is it because there are big players, politicians majorly, who are yet to convert the dollars they were paid during the last parties’ primary elections?
We demand full implementation of PIA. Fuel subsidy is about the lowest hanging fruit in a reformed oil and gas regime. It seems cowardly to go after poor Nigerians and leave those who have ruined the system for years.
It is understandable that President Tinubu wants to act macho before the World Bank and Western governments. He needs some legitimacy out there and the masses are his pawns. Easy preys!
As for Labour, it’s unlikely the workers’ body will recover from its 2-0 loss to the government when negotiation resumes on June 19. The government has the upper hand with a court order annulling any strike action. Labour didn’t need to agree to two weeks adjournment during which the new fuel pump price would have settled in. Hapless citizens are adjusting already.
The N200,000 new minimum wage demanded by the Trade Union Congress (TUC) should remain the benchmark. It is barely enough for a small family after taxes. Unfortunately, employment figures are not very fantastic. Statista data agency put the number of employed individuals at just above 50 million as of 2020. So, a good number of Nigerians will not benefit from salary adjustments. Many are underemployed and are just struggling to survive. So, about 150 million people could be left out of any form of salary increase.
Even in the private sector, salaries have been largely static because the cost of production has gone up drastically in the past two, three years. Manufacturers have been struggling with the high cost of diesel to power the factories in the absence of a reliable public energy supply. Citizens’ disposable incomes have shrunk miserably, such that manufacturers are struggling to sell.
The major beneficiaries of subsidy removal are state governors and they are gloating. No amount of FAAC collection is enough for them, as they are always asking for more. Now, they will get more. But the Federal Government should insist that all debts owed by state governments are deducted at source when they start sharing subsidy windfall. It is after the debts are cleared that states can earn extra, same with the Federal Government.
Vehicles that will be procured for mass transportation should not be handed to Labour and state governments. Many states have no sustainable mass transit schemes and do not deserve to take custody of mass transportation vehicles. Labour has also not shown the capacity to manage mass transit vehicles. Over the years, they have mismanaged vehicles procured to mitigate the impact of increased petroleum prices under successive governments. Let government identify reputable private transport companies and hand the vehicles to them. Government can regulate fares depending on distance and routes. Also, designated fuel stations can dispense at recommended subsidy to identified mass transport companies.
NOTE: This article was first carried by The Guardian and the opinion expressed by Contributors/Columnists is theirs and does NOT necessarily represent the views of www.ddnewsonline.com