By Abba Hamisu Sani
Africa-Press – Nigeria. 29th June this year marked one month since the inauguration of Bola Ahmed Tinubu as the Nigerian President.
Tinubu succeeded President Buhari whose presidency ended on May 29th this year.
Nigerians were expecting new policies and programs that will enhance their life since they experienced many huddles during the immediate past government under the retired military general Muhammadu Buhari whose leadership was characterized by many security ,economic and unemployment challenges.
Tinubu a long time advocate of democracy is expected to introduce policies and programs that will provide relief for Nigerians but his first policy is the removal of fuel subsidy which make prices of good and services skyrocketed even though World Bank ,International Ministry Fund (IMF)and some economists appreciated the move but majority of Nigerians are not happy with the policy as it increases their suffering.
Another economic policy of Tinubu which also created additional havoc to common Man is what he called the unification of the exchange rate. This made the exchange rate of dollars to go as high as 800 Naira per dollar last week and Nigerians who go to market to buy basic goods also find it difficult as their purchasing powers are getting weak with these two policies.
Tinubu’s Policies seems to create more hardship to Nigerian masses
According to the Tinubu’s government it ‘s policies of subsidy removal and exchange rate unification is meant to channel the resources to other sectors like education and health but recently some higher institutions particularly Universities increased their fees which will make it difficult for the poor citizens to pay, the same government also approved a new annual vehicle ownership fee, and endorsed a raise in telecommunications tax.
The same World Bank that hails the government for removing the fuel subsidy projected that more Nigerians will be poor.
The World Bank that has for decades railed against the subsidy has now forecast the number of poor Nigerians to rise to 101 million soon on the back of the inflationary and poverty-inducing effects of its removal and the naira flotation.
It said an additional four million slid into poverty between January and May this year to join the 89.8 million poor Nigerians, and that another 7.1 million would soon be added to them unless the government compensated them or provided them with palliatives.
What Tinubu’s government should consider
Umar Yakubu is an economic analyst . He is with the Centre for Fiscal Transparency and Integrity.
Umar said Since 2011, several arguments have been pushed for the removal of energy subsidies. The neo classical proponents have pushed the narrative so hard that all Nigerians problems will vaporize once subsidies are eliminated.
” The debate about corruption has been pushed to the margins. Government has forgotten that it is its responsibility to combat grand corruption in the oil and gas sector, control the borders and ensure efficiency in governance. Since abdicating these responsibilities, especially in the oil and gas sector, the dominant narrative has been to remove subsidies.” Yakubu said.
The analyst said the proponents of subsidy removal emphasized that the government will save at least two trillion naira from the removal of subsidies on Premium motor Spirit (PMS.) We should recall that subsidies have already been removed on all other components of the energy sector, such as electricity, diesel and kerosene, and have been saving trillions from there. The immediate effect will be that headline inflation will rise from 22.2% (April 2023). Food inflation was 24.7% this April, whereas it was 18.37% in April 2022. Statista had projected that this inflation would come down to 15.83% in 2024.
With the removal of subsidies on PMS, even the International Monetary Fund (IMF) has slashed our growth prospects, and the revised projected inflation rate will be at least 25%.
He added that based on that singular action, the existing incomes of about 10.1 million Nigerians will remain the same but with reduced purchasing power, as food inflation, which accounts for the bulk within Nigeria’s inflation basket, climbed further to 24.45%, owing to increases in the prices of oil and fats, bread and cereals, potatoes and yam.
Effectively, 10 million Nigerians will join the current 130 million already categorized as multi dimensionally poor. That’s another 10 million people who cannot afford the basics of life.
Small and medium enterprises (SMEs) generate most of the employment in the country and this single policy of government will drive most of them under. For the major industries, there is a limit to which they can pass on rising energy costs to consumers. The purchasing power is simply not there.
The World Bank thinks an $800 million loan (less $33 million, being payment for consultancies) will bring relief to 10 million households. They want to rely on the same social registers that other billions have previously filtered away through. Assuming the registers are true reflections of the information on qualified Nigerians, the relief will come down to about 7,000 Naira ( less than 10 dollar ) per person! We have been down this path a number of times with no meaningful impact.
On the other hand, you have trillions saved from the removal of energy subsidies but with no inflation containment strategy. All that has been contemplated are the usual lazy initiatives. One is to provide buses that will be off the roads within two years and the earlier mentioned cash transfer palliative. These are always the easier things to do. Has any hand’ looked at the importance of transportation on economic development and how a few buses will supposedly cushion the rise of transportation prices by more than 100%? What about the rise of other factors that drive production and industrialisation? These have been the previous prescriptions that soothed the psychological aspect but did little about disposable incomes.
Umar Yakubu said another impact is that the cost of implementing projects will rise because most of the components usually used are imported. You will be needing more naira to buy fewer dollars. So also is the cost of debt servicing, although this has more to do with the harmonization of the exchange rate. Foreign exchange is a large part of our budget component. Let us not forget that the Buhari administration left a 77 trillion naira ($167 billion) debt to local and foreign creditors.
On yet another hand, salaries will be increased to douse conflict with the labor unions. Aggregate demand will increase, and this is another inflationary pressure. Labour will usually demand what the government can never afford. So what happens? I think the days of abusing the Ways and Means grants are over, but salaries will increase with reduced purchasing power. The naira will further weaken, as more of it will chase fewer goods. Let us not forget another hand, which is that cheaper imports affect our balance of trade and generally have negative effects on prices.
Lack of transparency is still not tackled
“On still another hand, with regard to transparency and efficiency, what mechanism has been put in place to utilize the trillions saved effectively? They say it will be put into hospitals and schools. Fine. Will it be through the same system and procurement processes utilized in building previous schools and hospitals, or have changes been made to the system? Multiple sources still report that over 70% of public sector corruption is through public procurement. Corruption is reported to be pervasive in the key service sectors of health and education.
In terms of the spending patterns, what has been the improvement in our education and health sectors in the past decade? Have those two sectors delivered value for the trillions spent so far? Since the government has not provided the data that things have improved in the last ten years, why do we assume that pumping more money into the sectors will automatically improve our education and healthcare?” The analysis stated.
He also said that there is a need for a reformed civil service for the effective delivery of public goods. Where do you start the reforms from? One hand will say dust up the Oronsaye Report on the rationalization of agencies. I believe the government can effectively run with less than 30% of its current force. So, it would help if the service is trimmed for efficiency and reduced recurrent expenditure. Then another macro economic hand rears its ugly face – unemployment and underemployment. Cutting out 70% of the current public servants effectively means removing the livelihoods of 1.5 million public servants, out of the current estimated total of 2.2 million workers. Being an African society, each of those 1.5 million will have at least five persons he or she is benefactor to. So, that is another 7.5 million persons. civil servants are a miniscule portion of the general population.
Corruption is the root of the matter not subsidy
The analyst said the only way to maintain security is to ensure that the private sector gainfully employed those 7.5 million and the other 130 million Nigerians. To engage such a number needs a proliferation of industries to produce at a level lower than imports from China. When the energy cost calculation is done, another hand will argue for introducing energy subsidies to ensure energy security, food security and hence national security! The countries we always like to make reference with all have subsidies in critical sectors that drive both. The UK places a cap on energy costs. In 2022, Bloomberg reported that Germany was to spend €83.3 billion to subsidize energy prices, €43 billion to reduce the cost of electricity and €200 billion on energy support for Euro area members.
In principle, subsidy is not bad as some have been made to believe. It’s a requisite for economic growth and development. Why ours seems like an enigma is the other site we don’t want to talk about because most are either engaged in it, while others are waiting for their turn to do so. The cancerous hand of corruption! Although it was not in their campaign promise, let us be aware that much may not be achieved until the fingers of that hand are cut off.
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