By Temitope Ajayi
The demand of this period is not needless posturing but that of concerted efforts and determination to revamp an economy that is tail spinning towards disaster.
At the moment, our country is at the epoch where the citizens must exercise some patience and cooperate with the President and his team to turn around the fortunes of the country. We are all bearing the consequences of decades of distortions and mismanagement of the country and it certainly won’t be easy to turn the tides within a few days or months for any government.
The removal of fuel subsidy and the convergence of the foreign exchange markets, the two major policy objectives President Bola Tinubu has committed himself to since assuming office, inevitably came with economic cost to the people who have had to bear the pains of higher costs of living.
The jump in the pump price of fuel and devaluation of naira, in a bid to close the gap between the bank and parallel market rates, has meant higher transportation costs, soaring food prices and higher costs for small business owners.
There is no doubt that the people, most especially the poor, are hard pressed and seeking succour from a President who promised them a better life during his electoral campaign.
However, for long, our nation has been inured to various theories on how to combat the gaps in our exchange rates, as well as how to battle the sleaze and hazy optics of the subsidy regime. Talk has been plenty but action lacking. This brings to the fore the compelling words of Peter Druker that “Strategy is a commodity; execution is an art.” One of the most crucial elements of leadership is the capacity for decision making. According to Aristotle, “good deliberation is one of the fundamental characteristics of a prudent man.” The President made a conscious effort at good deliberation, which has led to this painful but purposeful rational action.
The pain, albeit uncomfortable, is only temporary but necessary. From the President’s most recent national broadcast, one thing stands out, our beloved country, Nigeria, is simply in a catch-22 situation. The President must find the most pragmatic way to deal with the two ugly elephants in the room that have distorted our economy for decades, promoted humongous corruption via rent seeking and kept the poor, even poorer.
For over seven years, Nigeria has consistently held the appalling title of the poverty capital of the world, according to the World Bank, overtaking India with a population of about 1.5 billion people. Nigeria’s population is only a little over 200 million.
Nigeria has, in the past 40 years, progressively wasted trillions of naira that would have been better spent on social services, human capital development and critical economic infrastructure that should support productivity and growth to give citizens cheap fuel. The culmination of these has, no doubt, stunted the growth of the nation and its people.
We must deal with the albatross of continuously funding fuel subsidy, which only a small group of people benefit from, at the expense of the larger populace, even when our country is teetering towards fiscal collapse. Rational and economic logic and equity dictate that those trillions of naira should be put to better use in the service of the people. It is highly imperative to re-channel the funds into higher quality investments in public infrastructure, education, health care and other productive ventures that will materially improve the lives of millions, as the President said in his inaugural speech.
Having seen the distortions that fuel subsidy and the preferential foreign exchange policy have caused for the country, I am persuaded that we must get out of this decades-long conundrum. From a fiscal standpoint, the consequences of retaining those policies longer than when it was finally removed by President would not have been pretty. The dire social and material condition of the poor masses that some ideologues pretend to be fighting against will get worse than it currently is if Nigeria sinks into a bottomless pit.
In pandering to popular sentiments, two major national newspapers in their recent editorial positions severely criticised President Tinubu for taking this less travelled road. Leaders before him only kicked the can around, in matters of fuel subsidy removal, without having the boldness and the courage to bite the bullet.
In a front page commentary on Monday, 24 July, Daily Trust newspaper called for the reversal of the subsidy removal because it is strangulating the poor masses.
The newspaper also accused the government of a chaotic handling of the policy because all the issues around palliatives should have first been resolved before the removal of fuel subsidy. Daily Trust wants the Federal Government to keep the ruinous subsidy regime because of momentary inconvenience, without regards to the fact that within two months of this removal, the country saved over ₦1 trillion, which would now be better utilised to benefit the masses directly.
Toeing the same path with Daily Trust on same day, The PUNCH newspaper charged President Tinubu to change course before he “loses the plot” of his new administration. The PUNCH newspaper went further to berate him for executing the two policies on whims without undertaking “a critical assessment of the economy nor the implications of his hasty subsidy removal, and the unification of the naira exchange rates.”
What I found rather bizarre in The PUNCH editorial was a quote credited to Mr Francis Meshioye, the President of Manufacturers Association of Nigeria, who reportedly said his members thought subsidy removal would only lead to a one-off price increase and not “a skyrocketing one.”
I am at a loss why a MAN President, who was one of the strident advocates of a free market economy and a major proponent of fuel subsidy removal and unification of multiple exchange rates, thinks his prescriptions would only lead to a one-off price increase. I am still struggling with that level of contradiction. It also didn’t matter to Daily Trust and The PUNCH newspapers, with their editorial stance, that in the past they used their influential platforms to call for the removal of the subsidy, citing abuse and corruption.
The points of the current pains on the people, as canvassed by the two newspapers as a necessary fallout of the policy decisions of the President, are factual and can’t be argued against. However, the point must also be made that the benefits of these two decisions far outweigh the costs.
Fuel subsidy removal means that Nigeria will no longer lose over ₦4 billion daily on subsidised fuel, a good portion of which is smuggled into neigbouring countries. It does not make sense that a country that is struggling to provide universal basic education and suffering from high maternal mortality rate spent ₦21 trillion subsidising fuel that added marginal value to the lives of millions of its poor inhabitants between 2005 and 2023.
A recent report by the Nigeria Extractive Industries Transparency Initiative (NEITI) shows that whereas ₦13.7 trillion was spent on subsidy between 2005 and 2021, ₦8 trillion was spent between 2022 and the first half of 2023 alone.
Nothing captures our sorry state of affairs more than that NEITI report, which indicates the colossal sum that private individuals have taken away from our commonwealth on the back of payment for subsidy. The report shows that in 2005, the starting year of the survey, ₦351 billion was spent on fuel subsidy payments, while the figures for 2006 to 2010 were ₦257 billion, ₦272 billion, ₦631 billion, ₦469 billion and ₦667 billion. In 2011, which was an election year, the spending spiked to a whopping ₦2.3 trillion.
For the years 2012 to 2017, spending on subsidy was ₦1.36 trillion, ₦1.32 trillion, ₦1.2 trillion, ₦654 billion, ₦240 billion and ₦154 billion. From 2018 to the first half of 2023, government spent ₦1.1 trillion, ₦508 billion, ₦864 billion, ₦1.43 trillion, ₦4.4 trillion and ₦3.6 trillion. The NEITI report further reveals that spending on petroleum products by the five income groups in Nigeria, the richest 20% consumes 75% of petrol in the country, while the poorest 20% consumes just 1% of the product. From the figures, it was obvious that our poorest people were not getting any real benefit from petrol subsidy.
Removing the drain pipe is the best way to stop the bleeding. Individuals should not become so filthily wealthy at the expense of a nation to the point of being in a position to compromise all the institutions of state, while the majority wallow in extreme poverty. President Tinubu was right in his Monday evening broadcast when he pointed out the danger of having a few people who have amassed so much money to the extent of becoming “a serious threat to the fairness of (the) national economy and the integrity of our democratic governance.”
With his boldness and decisiveness, President Tinubu has ushered in a regime of deregulation. This will foster competition and transparency in the downstream sector, eliminate NNPCL’s monopoly on importation, encourage investments in local refining capacity and expansion of the downstream infrastructure that will create thousands of jobs. From Central Bank records, 30% of the foreign exchange demand in the past decades was for fuel importation. The removal of fuel subsidy is a good silver lining that will catalyse more investments in local refining. Already Dangote Refinery will soon come on stream and the BUA Group is making a bet of over $8 billion on a 200,000 barrel per day refinery in Akwa Ibom State that will be commissioned in the next four years. This is apart from existing modular refineries already in operation.
At the moment, our country is at the epoch where the citizens must exercise some patience and cooperate with the President and his team to turn around the fortunes of the country. We are all bearing the consequences of decades of distortions and mismanagement of the country and it certainly won’t be easy to turn the tides within a few days or months for any government. The demand of this period is not needless posturing but that of concerted efforts and determination to revamp an economy that is tailspinning towards disaster.
As President Tinubu concluded in his speech, he is back at work to ensure that not only that a looming disaster will be averted but Nigerians will have cause to be happy with the new, inclusive economy based on prosperity for all that is his campaign promise.
Temitope Ajayi, is Senior Special Assistant to the President on Media and Publicity.
***Culled from Premium Times