The removal of subsidy on petrol, rise in inflation and unification of exchange rates have raised the level of hardship nationwide, as citizens anxiously await the government’s palliative measures, OKECHUKWU NNODIM writes
Nigerians are currently confronted by daunting economic challenges as the cost of most goods and services have tripled, whereas the income of many citizens has remained the same. In fact, the 22.41 per cent inflation rate has eroded the value of what many have.
During his inauguration speech on May 29, 2023 as Nigeria’s 16th President, Bola Tinubu declared an end to the subsidy on Premium Motor Spirit, popularly called petrol.
By May 31, 2023, less than two days after, the pump price of the commodity jumped from about N198/litre to an average of over N500/litre across the country. This triggered a widespread increase in the cost of goods and services nationwide, including transportation cost.
While many Nigerians struggled to reconcile themselves with the new reality, on June 14, 2023, the Central Bank of Nigeria unified the exchange rates, allowing market forces to determine the rates. Before the unification, the CBN had an official exchange rate of about N461/$, while at the parallel market it was over N750/$.
But after the unification of the rates, the naira has been floating above N750/$.
Economists and operators across sectors have commended the floating of the naira against the dollar and the removal of fuel subsidy. They, however, called on the government to start rolling out palliatives to cushion the spike in inflation and economic hardship caused by the recent decisions.
A former president, Association of National Accountants of Nigeria, Dr Sam Nzekwe, told our correspondent in an interview, “Nigerians have been confronted by severe hardship for about three weeks now due to petrol subsidy removal and unification of exchange rates that have further spiked inflation. The situation is critical, the government has to roll out its palliatives now.”
On June 7, 2023, Tinubu directed the National Economic Council to come up with inputs on palliatives and the minimum wage review as part of measures to cushion the pain of subsidy removal.
Speaking during a meeting with members of the Nigeria Governors’ Forum, led by its Chairman, Governor AbdulRahman AbdulRazaq of Kwara State in Abuja, Tinubu directed the NEC, led by Vice President Kashim Shettima, to mobilise various interventions to cushion the hardship faced by the most vulnerable Nigerians.
Nigerians are still watching to see the roll-out of the interventions amidst the worsening hardship across the country.
It was observed, for instance, that some residents of the Federal Capital Territory and many others in Northern Nigeria where petrol currently sells above N540/litre, had abandoned their vehicles.
“I cannot afford to fuel my car with over N5,000 daily just to go to work from Kubwa to the Central Business District in Abuja. How much is my salary? The best option is to trek some distance and join commercial buses,” Fred Uvi, an Abuja resident, stated.
101 million may become poor
The PUNCH reported recently that the World Bank stated that the removal of subsidy on petrol could increase the number of poor Nigerians to 101 million if the government failed to provide palliatives.
The bank said Nigeria had one of the highest inflation rates, which pushed an estimated four million people into poverty between January and May 2023. It disclosed this during the launch of the June 2023 edition of the Nigeria Development Update in Abuja.
The report stated that the bank also revealed that about 7.1 million poor Nigerians would become poor if the Federal Government failed to compensate or provide palliatives for them, following the removal of fuel subsidy.
It said 89.8 million Nigerians were poor as of the beginning of this year. The lender noted that an additional four million Nigerians became poor between January and May this year, raising the figure to 93.8million.
Latest projection means the number of poor Nigerians will rise to 100.9 million if the government fails to compensate vulnerable citizens for the hardship imposed on them by the fuel subsidy removal.
“An increase in poverty in a country comes with grave consequences. It comes with increase in crime rate such as robbery, kidnapping, rape, etc. We don’t pray for such an increase in Nigeria and what it means is that something has to be done fast,” Nzekwe advised.
He added, “Nigerians are fed up with excuses. They have to tell us categorically how the poor masses will get these palliatives and how they intend to use the savings from subsidies for the benefit of Nigerians.”
The Executive Secretary, Nigeria Extractive Industries Transparency Initiative, Ogbonnaya Orji, during an interview with journalists in Abuja, said the government must come out with a robust plan on how to deploy the savings from the removal of subsidy.
He added, “For a very long time, my disposition has been for the removal of subsidy. And this government, right from day one has taken that bold step. There shouldn’t be any going back.
“We should move forward from there and then put in place a robust arrangement that will show a clear departure from the way and manner we have operated under subsidy. Nigerians want to see what will change when the subsidy is no more.
“And we have highlighted this because we know that subsidies put a lot of impediments on transparency and accountability in the management of revenues from the oil and gas industry over the years.”
The NEITI boss stressed that some steps should be put in place to cushion the immediate effects that subsidy removal had brought on the vulnerable Nigerians, who were spread across the working and non-working classes.
“We just need the impact of this subsidy removal to reflect in the improvement of the general well-being of Nigerians and in our social infrastructure,” he added.
On where to invest subsidy savings, Orji said, “We had suggested that the subsidy should be removed. Now it has been removed. We are now pleading and requesting that a robust arrangement be put in place to show Nigerians the impact of subsidy removal in terms of roads built, infrastructure, access to health, education, etc.
“The savings from this subsidy should be visibly impactful in the lives of Nigerians, and that is where all of us must take responsibility. NEITI has a responsibility working with the media in this direction.”
Nigerians await solution
Reacting to the current economic hardship caused by the subsidy removal, the National President, Independent Petroleum Marketers Association of Nigeria, Chinedu Okonkwo, said Nigerians were looking forward to seeing what the recently constituted technical committee of government would come up with.
He stated, “After the meeting between labour unions and the Federal Government, a technical committee was constituted to come up with measures to address these challenges. The committee was given eight weeks, and about three weeks have gone already.
“So, let’s see what they will come up with, but I think the government is also arranging to roll out its palliatives. The state governors have also been asked to do likewise. So let’s exercise some patience till the expiration of the eight weeks and then we will be talking authoritatively.”
On June 19, 2023, the Federal Government said it had set up a steering committee to consider the various demands presented by the organised labour following the removal of fuel subsidy.
The Special Adviser to the President on Communications, Special Duties and Strategy, Dele Alake, and Presidents of the Nigeria Labour Congress and Trade Union Congress, Joe Ajaero and Festus Osifo, respectively, had disclosed this to journalists in separate briefings after a meeting at the State House in Abuja.
Okonkwo also stated that a lot of efforts were being put in place by operators, the government and other stakeholders to cushion the effect of the PMS subsidy removal since it took effect in May.
The IPMAN president stated, “Some companies have started rolling out Keke-Napep (tricycles) that are powered by electricity. Also as marketers, we are doing well in our efforts to deploy CNG (Compressed Natural Gas).
“So sometimes a difficult situation gives birth to a solution that will bring the desired relief to some issues. Right now, everyone is trying to see what they can do to get out of this conundrum of fuel subsidy removal.”
Also, the President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, outlined other areas where the government should invest its savings from the removal of fuel subsidy.
“The subsidy that has been removed is going to impact the economy positively. Therefore the government should take steps to apply the total amount of the subsidy removed to grow the economy.
“And one of those will be to make sure that there is affordable public transportation, rail lines, buses running on gas, especially CNG that will give more energy and will be cheaper.”
Gillis-Harry noted that there were a lot of other things that should be done, stressing that “our health sector should improve; Small and Medium scale Enterprises in the private sector should be given some kind of grants or low interest loans to make sure we can expand our operations in different areas.
“These are what we have advised since over two years now, that subsidy should be removed and applied to the sectors that I have outlined above, as well as in other industries in Nigeria.”