Nigeria’s new Govt: Economic progress at what cost?

By Marcel Okeke

Without any iota of doubt, Nigeria was the cynosure of all eyes on Monday, May 29, 2023, when the country inaugurated its new President at the Federal Capital Abuja. The event attracted the crème de la crème of the Nigerian populace as well as heads and leaders of several countries from across the globe. High powered delegations and diplomats from numerous developed and developing nations were also there in their numbers. But, obviously, the “hewers of wood and drawers of water”—the “wretched of the earth”, the masses were sparsely represented. However, the key highlight of the occasion, suffused in pomp and pageantry, was the Presidential (inaugural) address of the brand new Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria, Senator Ahmed Bola Tinubu, GCFR.

Expectedly, his speech was intermittently punctuated with roaring applause and ovation, especially when his pontifications appeared to be in sync with the expectations of the high profile audience, dominated by the ‘who is who’ among the political elite in the topmost echelon of the Nigerian society. This writer, as an interested observer, watched all these (live) on a television set in my parlour. The ovation, seemingly was loudest, when the new President made an “obvious” statement to the effect that fuel subsidy was gone. He said: “We commend the decision of the outgoing administration in phasing out the petrol subsidy regime which has increasingly favoured the rich more than the poor”, adding that “Subsidy can no longer justify its ever-increasing costs in the wake of drying resources.” Mr President concluded with the hackneyed line by saying “we shall instead re-channel the funds into better investment in public infrastructure, education, healthcare and jobs that will materially improve the lives of millions.”

This Presidential pronouncement was expected (especially, by his elite audience) because fuel subsidy removal was a key plank of the Tinubu Manifesto during the electioneering. However, the timing and apparent insensitivity to the feelings of the masses of Nigerians who stand to bear the brunt of the subsidy removal renders the audacity counterproductive. In fact, because the Tinubu Manifesto has since been in the public space, fuel station owners/managers had started shutting their businesses few days to his inauguration; knowing full well that the ‘end had come’. And till today (days after the Presidential inauguration), those fuel stations are either still under lock and key or a few that brave it to open, sell fuel at prices ranging between N300 to N700 per litre in major cities across the country. This is the reality!

All along, the Buhari administration had shrouded the issue of fuel subsidy removal (or otherwise) in secrecy, prevarications and doublespeak. It was as the administration was leaving that it was made obvious that provision for subsidy was made in the 2023 budget up until June 2023—and no more! And this is why the new Government ought to have been sensitive enough to utilize the first few days/weeks in June to widely consult with critical stakeholders before the ‘deed is done’. Yes, it has become obvious that fuel subsidy regime in Nigeria is riddled with so much fraud and opacity, but it is also true that the country still imports about 100 per cent of its fuel needs. So, the import of President Tinubu’s end of subsidy is supply of fuel from where? Nigerians want to know; but Mr President said nothing to that effect.

Surprisingly and unfortunately too, Mr President in his address said absolutely nothing about the massive four refineries owned by Nigeria that have remained moribund for years. No talk about their privatization or re-activation, to, at least, reduce total dependence on imported refined products. The Dangote Refinery that was commissioned (though uncompleted) few days before Buhari left office is not very likely to commence real production until the third quarter 2023. There is even a lot of uncertainty about the Dangote Refinery because it can choose to function as if it is located in another country—it is in the Export Processing Zone (with all the privileges and exemptions). The owner of the Refinery is a shrewd business man who would not dash fuel to Nigeria, merely out of patriotism or philanthropy. Indeed, the entire globe is his market: and he might go for profit optimization if not maximization. After all, his refinery shall largely be operating as a monopoly—with all the possible ills.

Now, as I write, the cost of practically everything is going through the roof; high cost of fuel has fed into transportation, food items, drugs, house rents, etc. In fact, many commuters/workers in the past few days have either managed to trek to their places of work or stayed home. Practically all vehicles are on queues at various filling stations. All these will feed into the hyper-inflationary trend that has seen Nigeria’s Consumer Price Index (CPI) standing at 18-month high of about 23 per cent as at end-April 2023! Unfortunately due to what is called ratchet effect in Economics, these prices that have gone up will certainly not come back to their original lower positions in the near future. So, this is what will become the feature of the new administration, unwittingly.

In all of this, hardly had there been any official statement to douse the tension in the polity; give credible assurances as to how fuel will keep flowing and assuage much frayed nerves. Even with a tepid and woolly statement issued by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), ‘black market’ fuel sellers in jerry cans have literally taken over all fuel stations and adjoining streets in Lagos. The NMDPRA statement says the Presidential “announcement is in line with the Petroleum Industry Act (2021) which provides for total deregulation of the petroleum downstream sector to drive investment and growth.”

On its part, the Nigerian National Petroleum Company (NNPC) Limited, apparently as the fuel situation kept deteriorating, went ahead to issue a new “Pricing Template”. The template which is almost ubiquitous in the social media, gave prices per litre of fuel ranging from N500 to N600 in various locations of the country. But rather than calm frayed nerves and assure Nigerians of possible steady supply of the fuel, the NNPCL stopped at issuing new price ranges. This move looks absurd, because the NNPCL has since been “privatized” and lost regulatory powers; itself now being an operator. Apparently irked by the NNPCL’s absurdity, the Nigeria Labour Congress (NLC) is already threatening fire and brimstone, and “totally reject” the NNPCL gambit. The NLC said “Government cannot in one breathe be talking about deregulation and at the same time be fixing the prices of petroleum products.” In its release signed by the President, Mr Joe Ajaero, the NLC argued that fixing fuel prices “negates the spirit of allowing the operations of the free market, unless the government has as usual usurped, captured or become market forces itself”.

Obviously, these are not easy times for Nigeria; the fuel subsidy conundrum has since put the Nigerian economy between Scylla and Charybdis. Therefore, the ‘fiat’ via which Mr President “stopped” fuel subsidy has been unleashing unfathomable ripple effects. The magnitude; the dimensions, nature and spread of these ripples are yet matters for conjecture. All said, Nigerians need fuel, but not at outlandishly high prices that will deepen impoverishment and misery for the majority of the citizenry. The economy has since been left wonky by hyper-inflation, humongous public debt, high unemployment rate, insecurity, crude oil theft. Name it!

• Mr. Okeke, a practising Economist, Business Strategist, Sustainability expert and ex-Chief Economist of Zenith Bank Plc, is a National Daily Columnist. He can be reached via: [email protected]