Why Inflation Has To Do With It, By Nasiru Suwaid
Before the 2015 presidential elections, it would be safe to say, there is no Nigerian critic of petroleum subsidy as General Muhammadu Buhari (as he then was), because, throughout the duration of the campaign season, the candidate of the main opposition party, used every opportunity of the political platforms of adversarial debating exchanges, to condemn, castigate and reject the fuel consumer economic relief as a government sanctioned theft and an avenue by fraudulent state officials, to fleece the Nigerian people, hiding under the cover of providing necessary utility of cheap energy source to fuel key and all important transport sector of the economy. During those times, the leading presidential candidate would often want to promise that on the assumption of office, he is going to tackle the petroleum subsidy conundrum, as part of the general effort to ‘kill corruption before it kills Nigeria.’
Generally, the presumption of many an economic pundit, observer and an analyst, is that the newly elected government, would use the opportunity and momentum of the euphoria of the celebratory mood of the nation to remove petroleum subsidy, once and for all. After all, it would be tolerated by a Nigerian population in a romantic mood of ‘change’, more so, such policy proposal is the easy way to tackle corruption in the Nigeria ‘s oil industry, because, it would eliminate the necessity, function and existence of one the country’s most fraudulent institutions, the Petroleum Products Prices and Regulation Agency. A hideous and secretly run regulator, which cannot definitively state production cost of a liter of refined petroleum product, yet, it usually pronounces and announces a landing cost of the imported refined product, without any defendable explanation as to how such figures were arrived at.
Under such a situation and an untenable reality, the easy route to take in such a moment and exploit the momentum was to quickly remove the increasingly unsustainable petroleum subsidy, because, even its traditional proponents in the social critics community, those activist whom the former spokesperson of the Nigerian president, Dr. Reuben Abati pejoratively called ‘the collective children of anger’ and even seemingly compromising Nigerian Labour Congress, with all its factions and affiliates, wouldn’t dare torpedo a government, so far acclaimed, as the first to emanate from the wishes of the Nigerian electorate. And, by that singular action of subsidy removal, it frees up billions of dollars of investable infrastructural funds, which could be used to bridge the intolerable gap between recurrent and capital votes in the budget, while ensuring that the Nigerian state, comprising the federal, state and local governments gets more funds to spend on the people.
But, why would President Muhammadu Buhari, now reject such a noble and accountable governance idea last week, while he was receiving a debriefing from the officials of the Federal Ministry of Petroleum Resources and the Nigerian National Petroleum Corporation. Unfortunately, it is because it is a lazy and irresponsible economic model or option, because, what is seemingly seen as a free fund is not actually so, as the mere fact of such removal, especially for a largely import defendant product, automatically, it raises the price of the petroleum product, raising transport cost and for an economy suffering contraction, because of the inability of the public sector to pay wages and slowly but creeping inflationary movement towards the double digit figures, it would be economically wrong, to deprive the consumer much needed funds and tie it in the hands of the institutional state, when there is no proven guarantee that the freed funds would be judiciously spent on the productive sector of the economy.
Indeed, even before the likely economic contraction, which would have resulted due to the subsidy removal, with more consumer funds spent on transport and energy generation, data released from the Nigerian Bureau of Statistics (NBS), have confirmed the rising of the current inflationary rate, which is captured by Consumer Price Index (CPI) rising to 9.2% (year on year) in June 2015, even though, the average retail price across the 36 states of the federation and Abuja declined by 5.25% percent, yet, prices of food items rose by about 10% percent in June, 2015, due to irregular supply of petroleum products. It should be noted that the preceded period of scarcity of the product, was characterized by its availability only at exorbitant and uncontrolled cost, with the product selling at between N130 to N150 naira per liter and by all estimates, were the subsidy to be removed today, it is would likely sell at the price range sold during the scarcity.
It is very instructive to note from figures released by the Nigerian Bureau of Statistics (NBS), that the average retail prices did not increase during the period, in fact, it even declined by 5.25% percent across the country and most importantly, in an economy having higher production cost, due to much higher energy cost, higher transport cost, a higher foreign exchange cost and in a much more unstable financial environment, because of the change of government. To put in a lay man’s language, Nigerian industries did not increase the prices of their goods, despite the fact of a much higher production cost and harsher economic condition. Surely, it is not in such an environment, you decrease purchasing power of consumers by removing petroleum subsidy and expect not to have a much higher inflation and a contraction of the economy, because of lack of incentive to produce and the creation of a much higher inventory of unsold goods.
Meanwhile, Nigeria’s real Gross Domestic Product (GDP) growth rate, which declined and stood at 3.86% percent in the first quarter of the year (Q1, 2015), as against 5.94% percent growth rate in the corresponding period last year (Q1, 2014), has further lowered to somewhere below 3% percent and slowly inching towards 0% percent growth rate and a certain recession, generally, it is not in such a time that you introduce policies that threaten industrial production and growth Basically, this is the reason why President Muhammadu Buhari was cautious in removing petroleum subsidy now, even though, it is such an opportune time to do it and even the highly disagreeable Nigerian public opinion would accept it.
And this two other things:
ENOUGH OF NATIONAL ASSEMBLY CRISIS
It seems the Nigeria’s new ruling party, the All Progressive Congress is having problems in electing its officials, as the fiasco and imbroglio which became of the selection of the leadership of the National Assembly can confirm, where a so called genuine party members, conspired with the opposition to undermine their own party, yet, they expect their party’s leadership and its presidency to take them seriously. The simple truth is that for those who crave leadership through whatever means and even courted rebellion of their assembly houses in the process, the proof in the pudding is to internally solve their own contrived problems and let Nigeria be.
WHY A VISIT TO AMERICA SHOULD VALIDATE APC BOT CHAIR
Meanwhile, every available report points to a straight fight between Asiwaju Bola Ahmed Tinubu and Alhaji Atiku Abubakar for the Chairmanship of the Board of Trustees of the All People’s Congress, well, rather than resorting to any divisive elections, I urge the party leadership to ask the two candidates to go to the United States of America like President Muhammadu Buhari and any of them who pass the fear of arrest test and does not have a proven case of corruption with the United States Justice Department (USJD), should be allowed to mount the chair, as the conscience of the party, after all, you just can’t preside over a party trumpeting about the ideal of fighting corruption and be scared of going anywhere, just because of a corruption past.
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