Removal of subsidy will further impoverish the Nigerian poor, writes Ike Okonta
I am happy that Dr Kalu Idika Kalu, General Ibrahim Babangida’s Finance Minister in the 1980s, is alive and well. Dr Kalu, working closely with the then Country Representative of the World Bank, avidly promoted the Structural Adjustment Programme and ensured that General Babangida imposed it on the Nigerian populace. Kalu argued that the government had no role in the economy, that the Naira should be drastically devalued and that subsidies in the education and health sectors should be removed or drastically curtailed. He also called for the privatization of all public enterprises and the removal of tariffs on imports which the federal government had put in place to protect the local manufacturing sector.
Following the introduction of SAP in 1986, the value of the Naira crashed in the foreign exchange market. Local factories that were producing such products as automobiles, textiles and vehicle batteries closed shop. Privatised enterprises did not fare any better. They were subjected to asset-stripping and then abandoned while employees were left to fend for themselves. By the time General Babangida was forced by pro-democracy forces to leave office in August 1993, it was clear to suffering Nigerians that Dr Kalu and the World Bank and International Monetary Fund had sold them a dummy. Nigeria had been forced back into the orbit of the international capitalist system as a marginal satellite that imported everything from toothpicks to automobiles from the Western countries while the fledgling steps she had taken on the path to industrialization in the 1960s and 1970s was abandoned.
Three decades later the government of President Muhammadu Buhari is still making common cause with the discredited World Bank. The government has served notice that it will remove subsidies on petrol and electricity in 2022. It claimed that the burden of subsidizing these two sectors is now too much for the government to bear and that in any case petrol subsidies was benefiting only the well-off. Then the government committed a blunder. It assured Nigerians that the sum of N5000 would be paid to 40 million poor Nigerians for one year to cushion the effects of the petrol subsidy removal. Alert public-interest economics did a quick calculation and found out that the amount of money that would ostensibly be expended in the payment to poor Nigerians would far exceed the yearly subsidy! Who is trying to fool who?

The core argument of President Buhari and the World Bank Country Representative in Nigeria is that the government has no business subsidizing utilities and that such sectors as electricity and petrol should be left to the vagaries of market forces. This is indeed the central position of Neoliberalism, the extreme right-wing regimen that late President Ronald Reagan and Prime Minister Margaret Thatcher began to push soon after they were both elected into office in the early 1980s. Neoliberalism, it must be noted, is not about economics. Not at all. Stripped bare, it is a political strategy whose aim is to strengthen the grip of harsh capitalism on the world system and remove socialism as a contending political alternative. This was why Prime Minister Thatcher attacked trade unions in Britain in the 1980s and also sought to cripple the Labour Party. For his part, President Reagan drew up a strategy paper that was later christened ‘The Washington Consensus’ and pushed it to the International Monetary Fund and the World Bank to implement around the world. The collapse of the Soviet Union a few years later only strengthened the grip of this noxious extreme right political regimen globally.
It is interesting to note that the coming of President Joe Biden in January 2021 has served notice to Neoliberalism that its end has come. Within eleven months President Biden has steered two key bills through the US Congress – one designed to revamp public infrastructure and the other to give subsidies to such vital sectors as healthcare, childcare, and the environment. In short President Biden and the Democrats are arguing that Big Government is back; that the old practice of cosseting the rich at the expense of the poor and public welfare has come to an end. President Biden made it clear that he meant every word when, faced with rising inflation, especially the cost of petrol, he released strategic oil reserves in the US in a bid to force down the price of the product. He did not pay the slightest attention to right wing economists who wanted so-called market forces to continue to determine the cost of petrol in the US – to the detriment of the ordinary consumer.
I have always argued that President Buhari does not have a clear and definable economic strategy. His policies are made on the hoof; not properly thought-out and with the cares of the ordinary Nigerian as their primary focus. Unemployment is currently about 40 percent. Food inflation has further forced those lucky enough to have jobs to cut corners as they struggle every month with their meager salaries. Removing subsidies on petrol and electricity will only jerk up inflation even higher and worsen the plight of poor Nigerians who even now are hardly able to eat three meals a day. The key to prosperity in Nigeria are diversification of the economy through rapid industrialization and expansion and modernization of the agricultural sector. This will entail establishing a vigorous steel-manufacturing sector and ramping up electricity production beyond the current paltry 4000 megawatts.
The Buhari Presidency has not been able to take these steps. Instead it wants to further impoverish the Nigerian poor by removing the few subsidies they still enjoy. I urge the government to rethink this policy. In any case it is now a lame-duck government as fresh elections are already around the corner. The decision whether to remove subsidies should be left for the in-coming government in 2023. President Buhari has given his best and it is simply not good enough.

https://www.thisdaylive.com/index.php/2021/12/19/before-president-buhari-removes-petrol-subsidy/

it was clear to suffering Nigerians that Dr Kalu and the World Bank and International Monetary Fund had sold them a dummy. Nigeria had been forced back into the orbit of the international capitalist system as a marginal satellite that imported everything from toothpicks to automobiles from the Western countries while the fledgling steps she had taken on the path to industrialization in the 1960s and 1970s was abandoned.

Same old mistake about to make.

Subsidy removal is important but we can't do it now

Primary responsibility of the Government is to see to the welfare of its citizens using any and every means necessary

United States won't mind piling up debt and selling bonds or going to war in the middle East to steal resources as long as American citizens get to enjoy life with best standard of living, enough social benefits and welfare

Already Land borders are closed, Naira is devalued over 200% , there is 2 digit inflation, gas electricity and other utility is at all time high removing subsidies without a local refinery is terrible move


.

itsme01:
Subsidy removal is important but we can't do it now

Removing subsidy on imported products. Brother reason it now.

1.The reason why we had issues in the 1980s was because we had a lack of Forex thanks to the oil price crash of 1982, which is what drove us into SAP in the first place.

2. A big reason why we don't have power and refineries is because both sectors charge subsidised tarrifs meaning they cannot make enough profit to expand, upgrade and improve themselves. ( GSM grew the way it grew because the goverment was not forcing them to sell at a loss in the name of subsidising the sector)

3. Subsidy has to go because the oil revenues aren't enough to fund it . And our tax to gdp ratio is too low to fund it as well. The only way we can find money for subsides is by goverment taxing the 70 percent who don't pay income tax to the federal government due to working in the informal sector.

And doing that is not politically popular in this country because we are all poor apparently.

I pray they should remove the subsidy so that the revolution will begin already..

itsme01:
Subsidy removal is important but we can't do it now

So we should keep it and the debt we incur from keeping it?

Removing subsidy is important. Very important. It won't make the economy better in one day, but it would get us refining more and more at home, provide jobs and save more and more money

It is time it went.

So many factors to consider before removing subsidy.
Exchange rate-value of naira
Dependence on importation
Duties
Tariffs
Corruption
External debts
Minimum wage
Refining of crude within the country
Until the above issues are resolved, removal of subsidy will be a suicide mission on the innocent masses

Remove fuel subsidy inside this massive suffering. Hmm! APC and buhari get mind shall.

yinkus6750:
So many factors to consider before removing subsidy.
Exchange rate-value of naira
Dependence on importation
Duties
Tariffs
Corruption
External debts
Minimum wage
Refining of crude within the country
Until the above issues are resolved, removal of subsidy will be a suicide mission on the innocent masses

1. Exchange rate and value of the naira is affected by subsides because we spend scarce Forex on importing and subsiding fuel. So less Forex means reduced value of naira

2.Removing subsidy means more refineries since it is now profitable to refine at home meaning less importation of refined product.Dangote need not hold a monopoly.

3.Duties, tarrifs and corruption have no link to the subsidy debate.

4.Subsidy is one of the reason why we have external debts so large. We spend an increasing amount of Forex yearly on subsides meaning we end up taking loans to replace the cash spent on subsides.

Subsidy is the amount paid to cover the difference between the cost of refining fuel and the cost of selling I at goverment prices, which are lower than the cost of production or refining fuel.

Because of rising cost of production, the difference between actual.cost and goverment sanctioned price at the pump keeps rising, and thus the subsidy cost.

5. Minimum wage can only rise with rise in goverment revenue which means government has to tax everyone. Including the.poor.

6. You can only refine crude in the country if goverment guarantees you will make a profit doing so. Subsidy does not guarantee that. It guarantees you would lose money refining fuel at home ( which is why NNPC refineries collapsed in the first place)

But buhari, Tinubu, Oyegun, Lai mohammed, Oshiomole, Rotimi Amaechi etc kicked against subsidy removal few years back ( the best time to have removed this parasite called subsidy).

They even hired musicians and social media activist to match through the streets of lagos and Abuja to condemn the planned subsidy removal by the GEJ administration. They even claimed that subsidy was a scam.

The same people now see subsidy as an unbearable burden? This is the highest level of hypocrisy.

Godfullsam:
But buhari, Tinubu, Oyegun, Lai mohammed, Oshiomole, Rotimi Amaechi etc kicked against subsidy removal few years back ( the best time to have removed this parasite called subsidy).

They even hired musicians and social media activist to match through the streets of lagos and Abuja to condemn the planned subsidy removal by the GEJ administration. They even claimed that subsidy was a scam.

The same people now see subsidy as an unbearable burden? This is the highest level of hypocrisy.

Oga note: we spent scare forex on debt servicing.
All borrow borrow buhari is borrowing are in foreign currencies.
Servicing and paying back must also in same currency.

Exchange rate and value of the naira is affected by subsides because we spend scarce Forex on importing and subsiding fuel. So less Forex means reduced value of naira

Laggafin:
I pray they should remove the subsidy so that the revolution will begin already..

Personally I agree we need a revolution.

But at the end of the day, even if we get a revolution, we would still run into the issue of finding money to pay for the subsidy on fuel so that we can sell fuel at a low price

Which puts us back in the same issues as before.

The USSR tried what you are proposing. Their economy eventually collapsed as did their country.

If you want a working economy you have to let people make profits . Otherwise you won't get a good economy.

Hmm no Revolution anything happening in Nigeria

[quote author=Luckydubby7 post=108624714]
Oga note: we spent scare forex on debt servicing.
All borrow borrow buhari is borrowing are in foreign currencies.
Servicing and paying back must also in same currency.

Exchange rate and value of the naira is affected by subsides because we spend scarce Forex on importing and subsiding fuel. So less Forex means reduced value of naira

Luckydubby7:

Oga note: we spent scare forex on debt servicing.
All borrow borrow buhari is borrowing are in foreign currencies.
Servicing and paying back must also in same currency.

Exchange rate and value of the naira is affected by subsides because we spend scarce Forex on importing and subsiding fuel. So less Forex means reduced value of naira

I am not against subsidy removal. In fact, it is a welcome development all be it at the very WRONG time.

I am only against those who wants subsidy removed now because they are the same set of people who once criticised it.

backbencher:
1.The reason why we had issues in the 1980s was because we had a lack of Forex thanks to the oil price crash of 1982, which is what drove us into SAP in the first place.

2. A big reason why we don't have power and refineries is because both sectors charge subsidised tarrifs meaning they cannot make enough profit to expand, upgrade and improve themselves. ( GSM grew the way it grew because the goverment was not forcing them to sell at a loss in the name of subsidising the sector)

3. Subsidy has to go because the oil revenues aren't enough to fund it . And our tax to gdp ratio is too low to fund it as well. The only way we can find money for subsides is by goverment taxing the 70 percent who don't pay income tax to the federal government due to working in the informal sector.

And doing that is not politically popular in this country because we are all poor apparently.

Oga how old were you in 1982?

Kingpin1000:


Oga how old were you in 1982?

Old enough!

Plus I do like reading history and novels and all that. That's how I know of the oil boom era of the 1973 to 82 period, where we had enough Forex to subsidize things like bread and milk and so forth.

( I also heard talesof how things were so good before 1982,including how bread cost 50 kobo and a car could cost 6000 naira or less).

A good article to read is 'Managing the Dutch disease in Nigeria'(Google for it). Gives a brief assesment of the 1982 crash

Also Chiamanda Adiche's novel Americanah and Humphrey dibia's novel A drop of mercy are partially or fully set in the period of the oil crash of 1982and the repercussions after.

We've been here before and we will be here again. Oil prices are not going to rise again and the sooner the goverment wakes up to tha the better. Especially Buhari

The best time to plant a tree is today

backbencher:


1. Exchange rate and value of the naira is affected by subsides because we spend scarce Forex on importing and subsiding fuel. So less Forex means reduced value of naira

2.Removing subsidy means more refineries since it is now profitable to refine at home meaning less importation of refined product.Dangote need not hold a monopoly.

3.Duties, tarrifs and corruption have no link to the subsidy debate.

4.Subsidy is one of the reason why we have external debts so large. We spend an increasing amount of Forex yearly on subsides meaning we end up taking loans to replace the cash spent on subsides.

Subsidy is the amount paid to cover the difference between the cost of refining fuel and the cost of selling I at goverment prices, which are lower than the cost of production or refining fuel.

Because of rising cost of production, the difference between actual.cost and goverment sanctioned price at the pump keeps rising, and thus the subsidy cost.

5. Minimum wage can only rise with rise in goverment revenue which means government has to tax everyone. Including the.poor.

6. You can only refine crude in the country if goverment guarantees you will make a profit doing so. Subsidy does not guarantee that. It guarantees you would lose money refining fuel at home ( which is why NNPC refineries collapsed in the first place)

Where were all these big ideas when Jonathan wanted to remove this same subsidy? Hmm?


Where were wia?

mightyhaze:
Where were all these big ideas when Jonathan wanted to remove this same subsidy? Hmm?


Where were wia?

The fact is even under Jonathan,most Nigerians did not support subsidy removal then.

It was the anger of most Nigerians against GEJ subsidy removal that Buhari and Tinubu used to get into power.

That's why I don't like politics.

Under GEJ ,was when I was finally.convinced that subsides were bad. Because his people explained the stuff clearly.

I think GEJ was a bad leader,but his attempt to remove subsidy was the right decision

If you are arguing that the power sector was hampered by subsidy, why hasn't the government dealt with the fraud of privatisation and NBET mismanagement over the years?

Why does Nigeria lack a coherent gas policy while gases are still flared till tomorrow in the Niger Delta?

Forget any explanation, we DO NOT have LEADERS.

backbencher:


The fact is even under Jonathan,most Nigerians did not support subsidy removal then.

It was the anger of most Nigerians against GEJ subsidy removal that Buhari and Tinubu used to get into power.

That's why I don't like politics.

Under GEJ ,was when I was finally.convinced that subsides were bad. Because his people explained the stuff clearly.

I think GEJ was a bad leader,but his attempt to remove subsidy was the right decision

You think Jonathan was a bad leader..


Well on this scale of badness/goodness of yours,where will you place your darling buhari..? E get wetin I wan use am check first

backbencher:


Personally I agree we need a revolution.

But at the end of the day, even if we get a revolution, we would still run into the issue of finding money to pay for the subsidy on fuel so that we can sell fuel at a low price

Which puts us back in the same issues as before.

The USSR tried what you are proposing. Their economy eventually collapsed as did their country.

If you want a working economy you have to let people make profits . Otherwise you won't get a good economy.

So wat do u suggest? In an economy where there's no middle class and the poor is almost choked already to death with high galloping inflation inherent in the economy!!

Laggafin:

So wat do u suggest? In an economy where there's no middle class and the poor is almost choked already to death with high galloping inflation inherent in the economy!!

We remove subsides ,allow people to make a profit in the petroleum sector.which can then be reinvested in jobs and so forth.

After all the GSM sector was built from the goverment allowing them to make a profit, whilc led to job creation, directly and indirectly

mightyhaze:
You think Jonathan was a bad leader..


Well on this scale of badness/goodness of yours,where will you place your darling buhari..? E get wetin I wan use am check first

Buhari is a bad leader like GEJ.

Gej used high oil prices to.cover the cracks. Like Gowon, Murtala and Obasanjo did in the 1970s and like Shagari did in the early 1980s.

If Buhari had high oil prices ,he would still be a bad leader for me.

Because Nigeria's economy has been run on sharing cake,not on productivity. Buhari has been a cake sharer not a productive leader.

I want a leader who would take us from depending on raw materials export to industrial development like China, South Korea , Japan and Germany.

backbencher:


We remove subsides ,allow people to make a profit in the petroleum sector.which can then be reinvested in jobs and so forth.

After all the GSM sector was built from the goverment allowing them to make a profit, whilc led to job creation, directly and indirectly

We always quick to call out the telecon sector as a Sucess.. but don't u tink the success is nominal?? Moreso with de deregulation of Diesel and kerosine .. yet the prices of these commodities are still very high

backbencher:
1.The reason why we had issues in the 1980s was because we had a lack of Forex thanks to the oil price crash of 1982, which is what drove us into SAP in the first place.

2. A big reason why we don't have power and refineries is because both sectors charge subsidised tarrifs meaning they cannot make enough profit to expand, upgrade and improve themselves. ( GSM grew the way it grew because the goverment was not forcing them to sell at a loss in the name of subsidising the sector)

3. Subsidy has to go because the oil revenues aren't enough to fund it . And our tax to gdp ratio is too low to fund it as well. The only way we can find money for subsides is by goverment taxing the 70 percent who don't pay income tax to the federal government due to working in the informal sector.

And doing that is not politically popular in this country because we are all poor apparently.

But UAE gets rich on the same crude oil. How?

HenryThegreat1:
Removal of subsidy will further impoverish the Nigerian poor, writes Ike Okonta
I am happy that Dr Kalu Idika Kalu, General Ibrahim Babangida’s Finance Minister in the 1980s, is alive and well. Dr Kalu, working closely with the then Country Representative of the World Bank, avidly promoted the Structural Adjustment Programme and ensured that General Babangida imposed it on the Nigerian populace. Kalu argued that the government had no role in the economy, that the Naira should be drastically devalued and that subsidies in the education and health sectors should be removed or drastically curtailed. He also called for the privatization of all public enterprises and the removal of tariffs on imports which the federal government had put in place to protect the local manufacturing sector.
Following the introduction of SAP in 1986, the value of the Naira crashed in the foreign exchange market. Local factories that were producing such products as automobiles, textiles and vehicle batteries closed shop. Privatised enterprises did not fare any better. They were subjected to asset-stripping and then abandoned while employees were left to fend for themselves. By the time General Babangida was forced by pro-democracy forces to leave office in August 1993, it was clear to suffering Nigerians that Dr Kalu and the World Bank and International Monetary Fund had sold them a dummy. Nigeria had been forced back into the orbit of the international capitalist system as a marginal satellite that imported everything from toothpicks to automobiles from the Western countries while the fledgling steps she had taken on the path to industrialization in the 1960s and 1970s was abandoned.
Three decades later the government of President Muhammadu Buhari is still making common cause with the discredited World Bank. The government has served notice that it will remove subsidies on petrol and electricity in 2022. It claimed that the burden of subsidizing these two sectors is now too much for the government to bear and that in any case petrol subsidies was benefiting only the well-off. Then the government committed a blunder. It assured Nigerians that the sum of N5000 would be paid to 40 million poor Nigerians for one year to cushion the effects of the petrol subsidy removal. Alert public-interest economics did a quick calculation and found out that the amount of money that would ostensibly be expended in the payment to poor Nigerians would far exceed the yearly subsidy! Who is trying to fool who?

The core argument of President Buhari and the World Bank Country Representative in Nigeria is that the government has no business subsidizing utilities and that such sectors as electricity and petrol should be left to the vagaries of market forces. This is indeed the central position of Neoliberalism, the extreme right-wing regimen that late President Ronald Reagan and Prime Minister Margaret Thatcher began to push soon after they were both elected into office in the early 1980s. Neoliberalism, it must be noted, is not about economics. Not at all. Stripped bare, it is a political strategy whose aim is to strengthen the grip of harsh capitalism on the world system and remove socialism as a contending political alternative. This was why Prime Minister Thatcher attacked trade unions in Britain in the 1980s and also sought to cripple the Labour Party. For his part, President Reagan drew up a strategy paper that was later christened ‘The Washington Consensus’ and pushed it to the International Monetary Fund and the World Bank to implement around the world. The collapse of the Soviet Union a few years later only strengthened the grip of this noxious extreme right political regimen globally.
It is interesting to note that the coming of President Joe Biden in January 2021 has served notice to Neoliberalism that its end has come. Within eleven months President Biden has steered two key bills through the US Congress – one designed to revamp public infrastructure and the other to give subsidies to such vital sectors as healthcare, childcare, and the environment. In short President Biden and the Democrats are arguing that Big Government is back; that the old practice of cosseting the rich at the expense of the poor and public welfare has come to an end. President Biden made it clear that he meant every word when, faced with rising inflation, especially the cost of petrol, he released strategic oil reserves in the US in a bid to force down the price of the product. He did not pay the slightest attention to right wing economists who wanted so-called market forces to continue to determine the cost of petrol in the US – to the detriment of the ordinary consumer.
I have always argued that President Buhari does not have a clear and definable economic strategy. His policies are made on the hoof; not properly thought-out and with the cares of the ordinary Nigerian as their primary focus. Unemployment is currently about 40 percent. Food inflation has further forced those lucky enough to have jobs to cut corners as they struggle every month with their meager salaries. Removing subsidies on petrol and electricity will only jerk up inflation even higher and worsen the plight of poor Nigerians who even now are hardly able to eat three meals a day. The key to prosperity in Nigeria are diversification of the economy through rapid industrialization and expansion and modernization of the agricultural sector. This will entail establishing a vigorous steel-manufacturing sector and ramping up electricity production beyond the current paltry 4000 megawatts.
The Buhari Presidency has not been able to take these steps. Instead it wants to further impoverish the Nigerian poor by removing the few subsidies they still enjoy. I urge the government to rethink this policy. In any case it is now a lame-duck government as fresh elections are already around the corner. The decision whether to remove subsidies should be left for the in-coming government in 2023. President Buhari has given his best and it is simply not good enough.

https://www.thisdaylive.com/index.php/2021/12/19/before-president-buhari-removes-petrol-subsidy/

Biden did not introduce fuel subsidy, he only sought to increase oil availability depending on market forces to impact prices.
It doesn't make any economic sense to continue to use 60% and growing of our oil earnings to pay subsidy while stifling private investments and employment in the sector. All other ecowas countries not richer than Nigeria pay market price for fuel and some even have higher HDI than us. Subsidy on fuel has not developed nigeria the way we hoped

freeborn02:

But UAE gets rich on the same crude oil. How?

UAE has less than 20 million people and produces more oil than we do.