The Nigeria Employers Consultative Association (NECA) has urged President Bola Tinubu’s administration to adopt future-focused action in a bid to cushion the negative effects of the fuel subsidy removal.
While the call for palliatives and other short-term interventions are valid and necessary, however, experiences over the years have shown that short-term solutions such as the provision of mass transit and cash transfers, as proposed with the $800 million loan among others, are shallow and not sustainable, according to a statement on Monday.
It said since 1999, several quick-fix efforts such as the sponsored mass transit, SURE-P and other initiated palliatives in response to fuel price upward adjustment failed.
“It is now clear that more sustainable interventions that the nation urgently needs to cushion the short-term effect of subsidy removal will take medium to long-term to materialize, including the urgent rehabilitation and transparent privatization of the local Refineries across the country,” it added.
Last Monday, President Bola Tinubu during his inaugural speech announced the removal of the petrol subsidy.
Barely three hours after the speech, fuel prices across the country surged by an average of 174.6 percent from their then price a month ago.
Currently, fuel in Africa’s biggest economy is selling at an average of N526.7 per litre from an average of N191.8 per litre a month ago, according to BusinessDay’s calculation of NNPC’s new/old price list.
“The announcement by the President triggered the hoarding of petroleum products and inflationary pressures with negative consequences such as increase in transportation fares and the upsurge in prices of goods and services, among others,” Adewale-Smatt Oyerinde, director-general of NECA, said in the statement.
According to Oyerinde, these pressures will, in the short-term further erode the purchasing power of average Nigerians, increase the input, operating, and production costs for organized businesses and if not urgently checked, would result in heightened contraction in domestic production and business activities.
On the positive side, he said the removal could unlock over six trillion naira in revenue annually, which can be channeled into infrastructure development, etc.
“Reports have shown that less than three percent of Nigerians (the super-rich)benefit from the subsidy regime. Efforts to provide immediate short-term palliatives should be fast-tracked in view of its urgency,” he added.
NECA recommends the government to step up widespread public awareness campaigns to communicate not only the reason for the subsidy removal but also its potential impact and measures to mitigate the short-term negative effects.
“While pay rise across-board and other palliatives seem an immediate response and a low-hanging fruit, a more fundamental and long-term approach should be to create deliberate economic paths toward improving the general standard of living of Nigerians,” the association said.
It highlighted that there should be an immediate reversal or suspension of the recently approved 2023 Fiscal Policy Measures and Tariff adjustment, unify the exchange rate and support the electricity value-chain for significant investment in generation, transmission and distribution.
“Review several taxes and levies imposed on the private sector and collected by the three tiers of government. Initiate immediate tax adjustments and reforms to reduce the burden on organised businesses and workers, while expanding the tax net,” they said.