• Thursday, May 23, 2024
businessday logo

BusinessDay

Electricity tariff hike: Removing social subsidies will deepen poverty in Nigeria

Stakeholders unveil electricity challenges in ‘UP-NEPA’ documentary

A nation is civilised not just because of its aesthetic achievements and its beautiful architecture. More importantly, a nation is civilised because of how it treats its citizens and because of the duration and quality of their lives. That’s why social security, or the safety net for the poor, is a badge of a healthy society. However, Nigeria creates billionaires but eviscerates the middle class and makes everyone else poorer without meaningful state support.

Former President Olusegun Obasanjo once bragged that he created many billionaires while in government. “My aim when I was in government was to create 50 billionaires,” Obasanjo said. “Unfortunately, I failed. I created only 25.” But how? Well, he banned imports of certain products, allowing some manufacturers to enjoy a monopoly in the domestic market and rake in billions; he granted waivers of import tariffs to favoured people who imported large shipments of consumer products, such as rice, tariff-free and sold them expensively, thereby becoming billionaires; and he gave oil blocks to a select few, turning them into billionaires. It was crony capitalism. Whereas in a true market economy, billionaires emerge through the free operation of market forces, in Nigeria, capitalism is rigged to favour a small elite.

Read also: Electricity tariff: AEDC to refund excess charges to downgraded Band A customers

A few years later, President Goodluck Jonathan was livid when the World Bank listed Nigeria among the five poorest nations. “If you talk about ownership of private jets, Nigeria will be among the first 10 countries, yet they are saying that Nigeria is among the five poorest nations,” Jonathan said, angrily. He was measuring the wealth of Nigeria and the prosperity of Nigerians by the number of billionaires who owned private jets. It didn’t bother Jonathan that while some Nigerians owned private jets, several millions wallowed in abject poverty.

Well, Bola Tinubu, Nigeria’s current president, is following in the footsteps of his predecessors: making the super-rich richer, emasculating the middle classes, and deepening the poverty of the poor. His removal of the fuel subsidy, without mitigating its impact on the poor, has had that effect. Now, hiking the electricity tariffs and removing the electricity tariff subsidy will have the same effect.

Of course, the fuel subsidy created billionaires through corruption, especially during the eight years of President Buhari’s acquiescent government. But instead of tackling the corruption and recovering public funds from the subsidy fraudsters, Tinubu scrapped the subsidy altogether. The scammers are enjoying their stolen billions while ordinary Nigerians face the inflationary pains of the subsidy removal. Former Governor Nasir El-Rufai of Kaduna State said last week that the Federal Government is now paying more for fuel subsidies than before the subsidy removal, which, without tackling the subsidy scams, would create more shady billionaires. The government denies that it is still paying for fuel subsidies and says it has saved trillions of naira from subsidy removal. But it has not used the savings to alleviate the cost-of-living pains of poor Nigerians beyond the paltry “palliatives” of bags of rice.

 “The government denies that it is still paying for fuel subsidies and says it has saved trillions of naira from subsidy removal. But it has not used the savings to alleviate the cost-of-living pains of poor Nigerians beyond the paltry “palliatives” of bags of rice.”

What about electricity subsidies? Since 1999, when Nigeria returned to civil rule, electricity generation and distribution have gulped about $10 trillion, which, of course, has created several crony billionaires. Yet, according to one UN-backed report, over 92 million Nigerians have no access to electricity. Indeed, there are just 12 million registered electricity customers. Even for those 12 million subscribers (households and businesses), regular electricity is a mirage. Yet, the Tinubu government wants to raise electricity tariffs from N68/per kilowatt-hour to N225/per kilowatt-hour—an over 200 percent increase—for so-called Band A customers, who include businesses. Recently, the Organised Private Sector of Nigeria (OPSN) warned that the electricity tariff hike may force over 65 percent of businesses to shut down. That, of course, would further gut the middle classes and further immiserate the poor, who will face the knock-on effects.

But my interest here is not in the details of the subsidy removals. Rather, it is the fact that successive Nigerian presidents have violated the Constitution. The truth is, constitutionally, Nigeria is a welfare state. But successive presidents have ignored that fact. Recently, someone wrote a column saying that Nigeria did not need a new constitution because the current constitution includes a bill of rights and a charter of freedoms, such as the right to life and economic self-determination. I laughed. Which of those rights is justifiable? Any constitution that creates human and civil rights for citizens but also creates an extraordinarily powerful state and presidency that can get away with virtually anything is a bad constitution. A test of a good constitution is the extent to which it constrains executive power. For instance, the US constitution guarantees the rights of the citizens, including “life, liberty, and the pursuit of happiness,” and limits the power of the president in relation to those rights. What’s more, the American Supreme Court unwaveringly safeguards those citizens’ rights against state encroachment. That’s not the case in Nigeria, where the state’s unfettered powers trump the “rights” of the citizens.

Take Section 16(2)(c) of the 1999 Constitution. It states that the state “shall direct its policy towards ensuring that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of a few individuals or of a group.” Has that been the case in Nigeria, given the prevalence of crony capitalism and the rentier culture of the state? In its Inequality Index 2019, Oxfam ranked Nigeria 157th out of 189 countries where the gap between the rich and the poor has worsened and ranked Nigeria 157th out of 158 countries in the Commitment to Reducing Inequality Index 2021. So, why have successive presidents ignored Section 16(2)(c) of the Constitution, and why is the provision not justiciable?

Read also: World Bank, AFDB partner to bring electricity to 300 million Africans by 2030

Then, take Section 16(2)(d) of the Constitution. It requires the state to “direct its policy towards ensuring that suitable and adequate shelter, suitable and adequate food, a reasonable national minimum living wage, old age care and pensions, unemployment, sick benefits, and the welfare of the disabled are provided for all citizens.” Tell me, has any Nigerian government done any of these? Does Nigeria have “unemployment benefits”? Does Nigeria have a “reasonable national minimum living wage”? Note the words “living wage,” which are different from the ordinary minimum wage. The total remuneration package of a senator is about $15 million per month, and Tinubu recently approved a $65 million annual salary for the Chief Justice of Nigeria. Basically, the political class commands a large share of Nigeria’s national income. So, why is Section 16(2)(d) of the Constitution not actionable? Yet, at the same time, the government is withdrawing all social subsidies!

As an economic liberal, I believe that the market, not the state, is the best allocator of resources. But I also believe that capitalism must be compassionate and have a human face. Adam Smith, the father of capitalism, wrote The Wealth of Nations (1776), the bible of capitalism, which says the “invisible hands” of the market should determine economic activities. But the same Adam Smith earlier wrote The Theory of Moral Sentiments (1759), saying that “the source of our fellow-feeling for the misery of others is by ‘changing places’ in fancy with the sufferer.” It is the “fellow feeling for the misery of others” that led capitalist countries like the UK and the Scandinavian countries to introduce a social security system, a welfare state, that caters for the needy. But Nigerian leaders are not “changing places”; they are not putting themselves in the shoes of poor and vulnerable Nigerians.

Yet Nigeria is, constitutionally, a welfare state. If Tinubu can’t honour the constitutional obligation, he must not increase the misery of Nigerians by hiking the price of everything!