Nigerians still smarting from the increase of Value Added Tax (VAT) to 7.5 percent from 5 percent in February got more than they bargained for on September 2 when the Federal Government headed by Muhammadu Buhari announced the removal of subsidy and went on to increase the price of fuel to N162 per litre.
This was quickly followed by an increase in electricity tariff which was communicated a day later further compounding the pains and hardship inflicted by the COVID 19 pandemic on an already stretched citizenry still trying to grapple with the faltering economy and attendant impact of inflation.
Dissenting views from different quarters, trailed this decision by government but what reverberated more from analysts was the collective argument on why refineries were not built or fixed by government and the wrong timing of the hikes especially with the COVID 19 Pandemic still raging which had diminished purchasing power of Nigerians, thereby inflicting more economic woes on the populace and most importantly presenting the Nigerian government as insensitive and unfeeling.
While inflation rose to 13.7 percent in September, interest rate on savings dipped to a miserable 1.25 percent.
Prices of rice, beans, pepper and tomatoes also rose steeply as a bag of rice which used to be N20, 000 increased to N35, 000, transport fares also rose astronomically by 100 percent. With minimum wage still rooted at N30,000 while no fewer than eight states are yet to implement it nine months after the deadline the Nigeria Labour Congress gave state governments. The States are Osun, Kwara, Ekiti, Imo, Gombe, Kogi, Zamfara and Ebonyi state governments.
Economist, Tajudeen Olufadi, who spoke to Money Central, noted that the subsidy removal t, took a hefty toll on Nigerians causing untold hardship and pain at a supposed period of the country’s 60th Independence celebration where many naturally expected some form of defined policy that would help alleviate the resultant pain and austerity the economic downturn brought in its stead.
“Though government came out with a statement explaining the rationale behind its decision that the payment of petrol subsidy, a scheme that has long been accused of corruption, was not sustainable. Following which, it therefore, opted for a so-called deregulated market, where government modulates the price of the commodity monthly.
“For me subsidy was truly used as a conduit for fraud by Nigerian elites and politicians. This however was done because the government in place at various periods acted as if it was bereft of ideas in resolving the issues of fixing or building refineries to optimum capacity as most purposeful Nations do and instead continued to feast on trillions under the guise of subsidy. The Port Harcourt and Kaduna refineries became a waste pipe of some sort. With various NNPC heads running it at a massive loss to the detriment of Nigerians.
“Nobody should deceive any Nigerian, we have no business importing fuel, Buhari himself said this much when he was desperate to become President before the 2015 elections, he was also quoted as saying there was no such thing as Subsidy, that it was all lies. My candid question now is what has changed now? You don’t take people for a ride for too long. Something will give eventually and that is part of what has informed the massive protest being experienced now across the country. Without any iota of doubt, this is beyond End SARS, it clearly mirrors a pained and frustrated people who thought they had found a messiah in Buhari, only to realise that they were deceived!”
According to Olufadi; “the most upsetting and annoying statement for me as an economist credited to the government recently was when it compared Nigeria’s petroleum price with that of Saudi Arabia, Egypt, Chad and Ghana. That is like turning logic and economics on its head. “For you to arrive at a reasonable assumption you must also compare other prices, such as the cost of labor including salaries, interest rates, rent and inflation rate.”
Olufadi continued, “I think President Buhari’s handlers should do better with research and proper analysis before statements like that are made to the public and most importantly not on a day as sensitive and auspicious as that of the Independence Day when what your people want expect is hope, assurance and commitment to their wellbeing, if you ask me that was insensitive and disappointing particularly when we pride ourselves as largest oil producer in Africa but have done nothing to show for that status.”
Olufadi noted that, with Governments failure to fix refineries which is clearly unwise judging from Nigeria’s contribution to the economy of the countries where refineries are located that is more significant than her total capital expenditure of N2.03tn for the same period. “Nigeria should naturally look inwards and increase her local refining capacity to confront this scourge,” he noted.
Nigeria is Africa’s largest oil producer, pumping about 1.78 million barrels per day. Oil sales contribute about 90% of the country’s foreign exchange earnings, 60% of the revenue, and 8% of GDP.
The President of the Trade Union Congress, Quadri Olaleye, also took a swipe at Buhari for his comments during the now infamous 60th Independence speech that Nigeria should not be compared with other countries as the country had achieved nothing despite six long decades of oil exploration. He noted that successive governments had looted, laundered and wasted the country’s resources while patronising hospitals outside the country.
Olaleye said, “It is ridiculous to compare Nigeria with Saudi, Dubai, or any other country, not even in Africa. With the natural resources that we have, we could rule the world, but government is not interested. There is no need for this comparison because it looks like the president is defending fraud and the impoverishment of Nigerians.
“Come to think of it, what has Nigeria achieved with all the money made from oil since over six decades of oil exploration in commercial quality? Nothing. Absolutely nothing. All successive leaderships have done is loot, launder and buy properties in foreign land. So, if the president is defending the hike (in pump price), what does he want to do with the surplus they will make from the hike? The same old story of providing infrastructure! Our roads are nothing but death traps. Our leaders are not patriotic at all. In Saudi Arabia, roads, water, and to some extent, jobs were not big issues. On the other hand, Nigerians contend with estimated bills because power firms had refused to provide meters”.
He described the action as an indication of total disconnect between government and the people. “We expected that the impact of COVID-19 would provide the government with a much-needed lesson towards holistic innovative thinking, like every other civilised nation, to block and harness loopholes, reduce government spending especially that of the executive and lawmakers which keeps rising and most importantly, mitigate people’s socio-economic plight but our government, led by Buhari has clearly shown otherwise,” he added.
Another Economics, Kolapo Oluwo averred that the inability to refine products in Nigeria would continue to affect the country negatively. He was however hopeful that the situation could improve if Dangote refinery comes on stream soon.
He maintained that it is shameful for an oil-producing country like Nigeria to stick to fuel importation. “I hope the Federal Government can address the issue holistically by passing the Petroleum Industry Bill, encouraging more private refineries to come on board and encouraging investments in the oil and gas sector,” Oluwo said.
An economist and Dean, College of Postgraduate Studies, Caleb University, Segun Ajibola, said: “N3trillion expenditure on PMS in one year is a humongous figure, given the size of Nigeria’s annual budget and GDP.” He advised that the only way out is to complete the turnaround maintenance of the local refineries and make them operational at full capacity to meet local demand.
“For that to work, it would only require fiscal discipline, prudence and accountability and the will to clip the wings of the economic rent seekers, while looking forward to Dangote refinery to correct the state of disequilibrium in the downstream sector of the oil industry,” he noted. Also, more investors should be encouraged to discourage monopoly in that sector.
It will be recalled that Nigeria last year spent a whopping N3trillion importing about 18 billion litres of Premium Motor Spirit (PMS) popularly called petrol. This revelation irked some stakeholders who criticised the poor state of the country’s refineries and the absence of modular refineries. They also decried the impact of the situation on Nigeria’s fragile economy, urging government to stop the payment of subsidy and muster the political will to rehabilitate the refineries.
Before it called off its planned national strike, Deputy President of Nigeria Labour Congress, NLC, Joe Ajaero, faulting the President’s defence on Fuel hike said: “You can’t say the downstream is deregulated and yet prices of fuel are still fixed.
“There is need to fix the country’s refineries and make use of the product and then sell the rest instead of the current practice of paying more for what you produce because you lack the ability to refine what you need.
“If you are charging N161 and Chad is charging N200, Ghana, N300, when you compare the exchange rate, then it is a shame on the country.
“There are lots of lies around the issue of petroleum subsidy. You can’t subsidize a product you have both competitive and comparative advantage over, it’s not possible. I was telling them on the negotiations I attended that Nigeria is selling its crude cheap and buying refined products at higher cost.
“Tell the runners of our economy that they are getting this one wrong. So, we decided that for Nigeria to enjoy the product, God gave to them, the refineries must be repaired at a certain period so that nobody will be telling us stories.
“There are lots of things that come out of refineries and if they are refurbished, it will generate lots of jobs for the citizens. If we continue to import finished products, the prices of petroleum products will continue to increase and we can’t be import dependent on something we can process in Nigeria and you cannot regulate in a deregulated sector”.
Emeka Ohanyere, a public analyst said “it is pertinent that government be reminded of its critical duty to protect citizens from the crushing effects of market forces as is the case in other market economies and not further compound it as it is doing now. Playing with your commitment to serve your people and throwing all manner of hardship at them in VAT, Electricity tariff, Fuel Hike and others is like stirring the hornets’ nest”.
Ohanyere further noted that the previously calm bees have been awoken to the many deceits of this government and have now angrily bared their fangs with protests, against police brutality, bad governance and SARS across the country.
“These protests aptly capture the frustration of Nigerian’s and only a responsive government that is not deaf to its yearnings can heal the wounds of bad leadership the Nigerian citizens have endured for far too long,” Ohanyere said.