The inability of most Nigerians to identify an economic growth policy is not surprising given the trust deficit and lack of confidence policy makers have built over the years. This is such that any move by the government is treated with suspicion and causes outrage among the people.
On the back of ending wasteful subsidies and deregulating Nigeria’s downstream petrol and power sectors, prices of petrol and electricity have risen to be cost reflective. While these long-awaited critical reforms will impact the economy positively ultimately, Nigerians have instead focused on and reacted ignorantly to the immediate hurt the policy brings on them.
Are they to be blamed? Of course, no. It is understandable that many Nigerians are not economically literate enough to understand why experts will canvass for ending every iota of subsidy in the economy and the benefits thereof.
But, imagine having an economy where, over the years, policies have always yielded positive results, corruption at its barest-minimum and Nigerians welfare always topped the FG’s priorities. With that, Nigerians would have supported government policies on the back of a track record of trust and confidence even if they were not economists who have understanding of the causes and effects of such policies.
The Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) have also demonstrated ignorance. They said they were in talks with civil society allies and relevant organs of Labour towards embarking on strike over the petrol price hike.
According to Ayuba Wabba, president of NLC, “clearly, the action of the federal government is most insensitive and an affront on the Nigerian people who are bearing the heavy burden of the COVID-19 pandemic. We will resist this latest move to impoverish the working people.”
The timing of the move to end subsidies may have come at a time Nigerians are battling the negative effects of the COVID-19 pandemic – from job losses, shrinking wallets to inflationary pressures and lower purchasing power. However, just like the popular saying, the best time to have ended the subsidy would have been years back. But the next best time is now.
If keeping the petrol subsidy actually had an impact on the livelihoods of the poor, then it has failed after Nigeria became the poverty capital of the world in 2019, overtaking India for the first time despite having only a third of the Asian country’s population. Some 87 million Nigerians are categorised as poor as they live under $1.90 a day.
Why continue to waste huge funds on subsidising consumption when such funds can be directed into more productive areas with direct impact on businesses and households. The government spent four times more money last year, N730.9 billion, subsidising fuel than building new schools, health centres and equipping new science labs. Also, Nigeria still suffers huge gaps in infrastructure which will require about $100 billion annually for the next 30 years to effectively tackle the challenges. Nigeria can’t avoid wasting funds anymore. There is a lot to do to get Nigeria on the path to prosperity.
Keeping the domestic price of oil artificially low with the fuel subsidy has discouraged additional investment in the oil sector, according to a Brookings Institution report in 2012.
This is why despite issuing multiple refinery licences, Nigeria still does not have a single well-functioning refinery. The problem for investors has been how to recoup their investment under the artificially low-price structure.
It is our expectation that the federal government should learn from reactions of Nigerians against price hikes in petrol and electricity prices. It is a reaction based on lack of trust and years of sufferings. The rich and the powerful – especially in government – in Nigeria have in the past got together to run the country and the market for their benefit, hence, even when they mean well –which they rarely do – Nigerians find it hard to believe them, leading to uproars.
Trust can’t be built in a day, but with consistency in delivering market stimulating and people-oriented policies, it will be restored gradually.
