A week ago today, President Buhari wrote to the Senate, seeking the approval of a supplementary budget of ₦2.557 trillion. According to the President, the amendment is meant to provide for subsidies on petroleum products from June to December this year. This letter came just under a month after the FG suspended plans to remove subsidies on petroleum products.
The Petroleum Industry Act, passed last year after years in legislative limbo, essentially called for the scrapping of the subsidy, but the government clearly lacks the political will to do it. Finance Minister, Zainab Ahmed, had said only ₦443 billion was available to fund subsidies in 2022. She also said the NNPC requested a total of ₦3 trillion from the FG to fund the petrol subsidy in 2022.
The petrol subsidy is probably the most political of political higi-hagas in Nigeria, and the Buhari government has gone down the same rabbit hole that its predecessor went, and along with two recessions, the borrowing binge, and the very high levels of insecurity, the petrol subsidy will be one of the lasting legacies of Buhari’s government.
Asides from 2016 where there is no data available because we were doing “under recovery” and pretended not to pay a subsidy that year, the subsidy payments since Buhari came to office have been ₦144.5 billion, ₦730.9 billion, ₦551.2 billion, ₦1.192 trillion, and ₦1.428 trillion, an 890% increase.
Nigeria is in a deeper financial hole than it has ever been, and the only thing the government has done is to dig even deeper
The 2022 figure would be the highest on record, surpassing anything that Goodluck Jonathan paid. Nigeria is in a deeper financial hole than it has ever been, and the only thing the government has done is to dig even deeper.
Let’s cast our minds back to 2015 at the start of Buhari’s first term where there was a lot of noise about deepening the tax base, plugging public spending leakages and unravelling the intricate patchwork of legacy patronage around subsidies for fuel and electricity.
The Office of the Vice President and erstwhile finance minister, Kemi Adeosun, proposed and started the Voluntary Assets and Income Declaration Scheme (VAIDS) to incentivise tax remittances. That has apparently gone back to England along with her.
A lot of noise was made about the implementation of the Treasury Single Account (TSA) to consolidate revenue generation under one roof. In reality, we still hear stories about various agencies running their own accounts and doing things as they like.
Last year, both Customs and the FIRS declared record generated revenue. So why do we have to borrow huge amounts to still fund a wasteful subsidy?
The one notable absence in this reform effort would have been ending the petrol subsidy regime, and the passage of the Petroleum Industry Act which happened last year. Rather, new and fancy terminologies for subsidies such as “under recovery” and “value shortfall” entered our political and economic lexicon.
Coming to today, despite the return of the economy to positive growth – GDP has grown (not so robustly) for five straight financial quarters since the 2020 recession – there has been no attempt to explain how subsidy payments have ballooned so much.
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The early excuses about riding out dwindling revenue flows due to oil prices being at generational lows are no longer valid as oil is firmly in $80-$90 per barrel territory.
On issues such as the petrol subsidy and the naira-dollar exchange rate, it is remarkable how the Nigerian political and intellectual elite have successfully cast what is principally an elite concern as that of the general populace.
This is the narrative that we need to change so that absorbing the political cost of removing expensive subsidies of fuel and foreign currencies becomes a more palatable proposition.
Despite the continuous explanation that subsidised petrol serves to ensure the price of consumables dependent on petrol, such as transport and food prices, are within the reach of the average Nigerian, NBS data shows that transport prices have risen nearly 300% and food prices even more over the past three years.
Since SBM Intelligence launched its Jollof Index, the prices have more than doubled. But despite all of this data, the Nigerian still believes that petrol prices have an outsize effect on inflation, and the government has capitalised on this belief to continue to play populist politics.
There is a clear change in the body language of the Buhari administration regarding its economic policy. It appears that the government has simply given up the fight and is just content to live out its remaining time in office.
Its choice now is simply ride things out and pass the burden of the subsidy to the next administration. In the final analysis, this period of Nigerian history would be noted for the abysmal failure of a discredited brand of economic populism.
Nwanze is a partner at SBM Intelligence
