TheBillyonaire:
IMF does not have any other job than to be monitoring Nigeria.

What a spy network.

Truth is very bitter when you are an agent of APC.

4Play:


I will say around 10 years.

After the initial shock of a change in the price level of petrol, future changes will happen at a slower rate so living standards will adjust better. In the meantime, the money used in subsidizing petrol will be put to better use even if some of it is embezzled which happens with subsidy money anyway.

I would have preferred that the removal is done gradually to mitigate the impact on Nigerians but better it be removed than not all.

You have too many expectations from the government that hasn't shown any validity of trust.

If I may ask, what was Diesel and Kerosene subsidies used for that will warrant the trust that the windfall from PMS subsidy won't go the same way?

seunmsg:


We can build modular refineries that will serve over 200m Nigerians in 6 months? Just dey play you hear 🤣🤣🤣

Don't we have refineries on ground already to build on if he is serious?..

Warriors
Portharcourt
Kaduna
Edo..

inoki247:
Is like IMF are on drugs after telling us to remove Subsidy remove this and that we don remove now they're still yarning jargon...

Because IMF know say Jagaban naa zombie, non of the Refineries are working and Tinubu quickly removed subsidies without thinking about the consequences on the masses

seunmsg:


We can build modular refineries that will serve over 200m Nigerians in 6 months? Just dey play you hear 🤣🤣🤣

Oga, why aren't the 4 refineries in Nigeria working after 8 yrs of your Buhari? Why are we still importing PMS and others? Your country is a failed one. Kadoso Mutairu aka seunmsg!

4Play:


I will say around 10 years.

After the initial shock of a change in the price level of petrol, future changes will happen at a slower rate so living standards will adjust better. In the meantime, the money used in subsidizing petrol will be put to better use even if some of it is embezzled which happens with subsidy money anyway.

I would have preferred that the removal is done gradually to mitigate the impact on Nigerians but better it be removed than not all.

How do you remove petrol subsidy gradually in an economy plagued with double digit inflation and a product whose international price is volatile?

If it was a product whose price was static and in an economy where inflation was low such as 2%, such would be feasible.

Shock therapy was needed. The government purse is empty. The subsidy was estimated to cost 2.3% of GDP this year alone, in a country where tax collection is barely 10% of GDP, this was clearly high.

As you yourself pointed out, Nigeria debt sustainability is poor. Shock Therapy was necessary and the markets rewarded its removal.

4Play:


https://punchng.com/insecurity-will-slow-nigerias-growth-says-imf/

A 3.2% economic growth rate is quite respectful considering the economy grew on average at 1.1% annually during Buhari's lost decade.

I feel slashing corporate taxes down to 15% or less will encourage a flood of capital into the economy which will help boost growth in the short term, and better the present forecasts.

seunmsg:


We can build modular refineries that will serve over 200m Nigerians in 6 months? Just dey play you hear 🤣🤣🤣

It is estimated it takes 5-7 years from conceptualization for a new refinery to be built. 6 months my foot. That guy was kiding

grandstar:


How do you remove petrol subsidy gradually in an economy plagued with double digit inflation and a product whose international price is volatile?

If it was a product whose price was static and in an economy where inflation was low such as 2%, such would be feasible.

Shock therapy was needed. The government purse is empty. The subsidy was estimated to cost 2.3% of GDP this year alone, in a country where tax collection is barely 10% of GDP, this was clearly high.

As you yourself pointed out, Nigeria debt sustainability is poor. Shock Therapy was necessary and the markets rewarded its removal.

It's precisely because inflation is high that the full removal of subsidy at once is ill-advised. The higher the fuel price, the higher the rare of inflation.

High levels of inflation undermine economic confidence, currency stability and ultimately override any gains in debt sustainability.

By the way, I think the government's reforms are half-baked. For instance, the spread between the official and black market exchange rates is re-emerging partly because the CBN retains restrictions on forex access to certain items and I suspect highly connected people can't let go of the round-tripping opportunities multiple exchange rates offer.

At the end, foreign investors will come to see Tinubu’s policies as driven by desperation to sustain/increase government spending rather than a genuine embrace of wholesale reforms.

As for the markets, I don't know if you are aware that Nigerian equity markets were one of the world's best performing in 2020 and 2022, as well as posting a decent performance in 2021.

https://www.thecable.ng/nse-ranked-2020-best-performing-stock-market

https://tribuneonlineng.com/nigerian-equities-market-gains-n5-7trn-to-rank-4th-globally/

https://businessday.ng/markets/article/nigerias-stock-market-ends-year-2021-with-positive-return-of-6-7/

The currency market (which is much bigger than the stock market), and the bond market to a lesser extent, are painting a different picture.

Until reforms are comprehensive and inflation is brought under control, things will continue to get worse. I think the way fuel subsidy has been removed, despite the splattering of positive comments by some foreigners, will amplify Nigeria's economic problems.

4Play:


It's precisely because inflation is high that the full removal of subsidy at once is ill-advised. The higher the fuel price, the higher the rare of inflation.

High levels of inflation undermine economic confidence, currency stability and ultimately override any gains in debt sustainability.

By the way, I think the government's reforms are half-baked. For instance, the spread between the official and black market exchange rates is re-emerging partly because the CBN retains restrictions on forex access to certain items and I suspect highly connected people can't let go of the round-tripping opportunities multiple exchange rates offer.

At the end, foreign investors will come to see Tinubu’s policies as driven by desperation to sustain/increase government spending rather than a genuine embrace of wholesale reforms.

As for the markets, I don't know if you are aware that Nigerian equity markets were one of the world's best performing in 2020 and 2022, as well as posting a decent performance in 2021.

https://www.thecable.ng/nse-ranked-2020-best-performing-stock-market

https://tribuneonlineng.com/nigerian-equities-market-gains-n5-7trn-to-rank-4th-globally/

https://businessday.ng/markets/article/nigerias-stock-market-ends-year-2021-with-positive-return-of-6-7/

The currency market (which is much bigger than the stock market), and the bond market to a lesser extent, are painting a different picture.

Until reforms are comprehensive and inflation is brought under control, things will continue to get worse. I think the way fuel subsidy has been removed, despite the splattering of positive comments by some foreigners, will amplify Nigeria's economic problems.

Partial removal of the petrol prices has never really worked here.

Now, what if the government partially removed subsidy and pegged the price at N400, will the present drop in the Naira and inflation not make the N400 outdated?

You see citizens stating that government removed 80% of subsidy at such a time, how come the subsidy is high today? All the masses want is cheap petrol.

Though petrol is no longer subsidized, the price is not deregulated. Government needs to go the whole nine yards. Anyway, you did mention a need for caution which might also have steadied the government's hand. There's a limit to the amount of suffering the masses are prepared to tolerate.

grandstar:


Partial removal of the petrol prices has never really worked here.

Now, what if the government partially removed subsidy and pegged the price at N400, will the present drop in the Naira and inflation not make the N400 outdated?

You see citizens stating that government removed 80% of subsidy at such a time, how come the subsidy is high today? All the masses want is cheap petrol.

Though petrol is no longer subsidized, the price is not deregulated. Government needs to go the whole nine yards. Anyway, you did mention a need for caution which might also have steadied the government's hand. There's a limit to the amount of suffering the masses are prepared to tolerate.

They don't have to fix a price, they could set a fixed subsidy budget. Say N500bn in year one, N400bn in year two, and so on.

That way, the fuel price is partly driven by market forces but the overall increase in price is limited.

I am all against doing the same things that haven't worked in the past but a fixed subsidy budget (which reduces each year) is different from simply fixing a new price which is what past partial removals entailed.

If your fear is that exchange rate depreciation will keep pushing fuel price up, one way of amplifying depreciation is to add to inflationary pressures.

If the government isn't prepared for much higher CBN interest rates and what I suggested before (an IMF bailout to obtain scarce forex), we will learn the hard way when inflation pummels the economy to smithereens.

4Play:


It's precisely because inflation is high that the full removal of subsidy at once is ill-advised. The higher the fuel price, the higher the rare of inflation.

High levels of inflation undermine economic confidence, currency stability and ultimately override any gains in debt sustainability.

By the way, I think the government's reforms are half-baked. For instance, the spread between the official and black market exchange rates is re-emerging partly because the CBN retains restrictions on forex access to certain items and I suspect highly connected people can't let go of the round-tripping opportunities multiple exchange rates offer.

At the end, foreign investors will come to see Tinubu’s policies as driven by desperation to sustain/increase government spending rather than a genuine embrace of wholesale reforms.

As for the markets, I don't know if you are aware that Nigerian equity markets were one of the world's best performing in 2020 and 2022, as well as posting a decent performance in 2021.

https://www.thecable.ng/nse-ranked-2020-best-performing-stock-market

https://tribuneonlineng.com/nigerian-equities-market-gains-n5-7trn-to-rank-4th-globally/

https://businessday.ng/markets/article/nigerias-stock-market-ends-year-2021-with-positive-return-of-6-7/

The currency market (which is much bigger than the stock market), and the bond market to a lesser extent, are painting a different picture.

Until reforms are comprehensive and inflation is brought under control, things will continue to get worse. I think the way fuel subsidy has been removed, despite the splattering of positive comments by some foreigners, will amplify Nigeria's economic problems.

I found your comment interesting.

We tried partial removal of subsidy for years...decades even, and it didn't really, in my opinion, help our economy. Buhari in particular was a great partial remover of subsidy during his time in power.

The problem with partial removal of subsidy is that eventually the cost of producing one liter of fuel would rise beyond any benefit partial removal of subsidy can provide, meaning we have to do it again. (Which is partly why fuel doesn;t cost 15 kobo as it did decades ago).

Also, it doesn't reduce inflation, and as the cost of produciton rises, in order to maintain fuel at the same cheap price, we have to take money from other parts of the budget, and cover up the resulting deficit with loans...and more loans. And that does much for inflation.

Also, it doesn't help domestic refining. Because prices are still being controlled by government, no bank or lender would lend to a investor in refineries...because they won't be sure of seeing their money back. And refineries still lose money, and it still contributes to the free money cooruption...which wrecked our refineries in the first place.

4Play:


They don't have to fix a price, they could set a fixed subsidy budget. Say N500bn in year one, N400bn in year two, and so on.

That way, the fuel price is partly driven by market forces but the overall increase in price is limited.

I am all against doing the same things that haven't worked in the past but a fixed subsidy budget (which reduces each year) is different from simply fixing a new price which is what past partial removals entailed.

If your fear is that exchange rate depreciation will keep pushing fuel price up, one way of amplifying depreciation is to add to inflationary pressures.

If the government isn't prepared for much higher CBN interest rates and what I suggested before (an IMF bailout to obtain scarce forex), we will learn the hard way when inflation pummels the economy to smithereens.

I liked your comment, but at the same time, the idea does not work in practice.

Remember 2022? Last year....government had a set budget for subsidy. All set in stone. Then Ukraine war happened...and crude oil prices went sky high, meaning subsidy costs went up. THEN...the weather ran amok from August onwards...raising transport costs....

At the end, subsidy costs had risen beyond what the budget could cover. Meaning government had to take money from other parts of the budget and borrow and borrow again, and even then, the government had to raise fuel prices twice

inoki247:
Is like IMF are on drugs after telling us to remove Subsidy remove this and that we don remove now they're still yarning jargons...

If they tell u to jump inside fire will you also jump?

nairalanda1:



I liked your comment, but at the same time, the idea does not work in practice.

Remember 2022? Last year....government had a set budget for subsidy. All set in stone. Then Ukraine war happened...and crude oil prices went sky high, meaning subsidy costs went up. THEN...the weather ran amok from August onwards...raising transport costs....

At the end, subsidy costs had risen beyond what the budget could cover. Meaning government had to take money from other parts of the budget and borrow and borrow again, and even then, the government had to raise fuel prices twice

The government always has a fixed price, including last year, and this is why they exceed the subsidy budget. Get rid of the fixed price and when the budgeted amount runs out for the year, fuel price can continue rising but at least injecting some subsidy funding makes the rate of increase smoother for the economy and helps with inflation (inflation is afterall a question of rate of price growth).

People are fixated with the idea that subsidized fuel means the government committs to a price that fuel will be sold at because this is how we have always done it in Nigeria. It's definitely not the case that subsidy has to be structured this way and only this way.

The idea that this way of removing subsidy gradually has failed before in Nigeria is incorrect because all partial removal I can recall (including GEJ's 2012 reduction) involved setting the price at a higher level which was bound to fail with time as there would be no political will/capital left to change the price again when Nigeria's persistent inflation problem rendered the fixed price obsolete/expensive. By discarding of the tendency to set fuel price, the government will allow market forces largely determine price but slow the rate of increase to allow for easier adjustment to the resulting price shock. It's the same reason why central banks often increase interest rates slowly toward a target level - to reduce risks to the economy associated with sudden price shocks.

I think the end point of all this debate is the country needs a massive IMF bailout (injecting forex) to make the transition to higher prices and higher CBN interest rates smoother.

In 2015, I was worried the new Buhari government will impoverish us and plunge the government into a fiscal crisis. I think we have got to that point and instead of engaging in this wishful thinking that things will work out in the end, we need to recognize that we need foreign bailout ASAP.

In economics, how you get to a goal matters as much, if not more, than the goal you are pursuing. Introducing price shocks whilst cavalierly claiming that we will be fine in the long run can introduce some negative self-reinforcing dynamics as each business closure leads to more business closures and as naira depreciation potentially leads to panic. Correct me if I am wrong, but I think the naira has fallen at a faster rate in the parallel market since Tinubu took office than it did at the same point in Buhari's new tenure. If things go badly wrong here, it will take a very long while to ever convince Nigerians to adopt much needed pro-market reforms.

4Play:
I think the end point of all this debate is the country needs a massive IMF bailout (injecting forex) to make the transition to higher prices and higher CBN interest rates smoother.

In 2015, I was worried the new Buhari government will impoverish us and plunge the government into a fiscal crisis. I think we have got to that point and instead of engaging in this wishful thinking that things will work out in the end, we need to recognize that we need foreign bailout ASAP.

In economics, how you get to a goal matters as much, if not more, than the goal you are pursuing. Introducing price shocks whilst cavalierly claiming that we will be fine in the long run can introduce some negative self-reinforcing dynamics as each business closure leads to more business closures and as naira depreciation potentially leads to panic. Correct me if I am wrong, but I think the naira has fallen at a faster rate in the parallel market since Tinubu took office than it did at the same point in Buhari's new tenure. If things go badly wrong here, it will take a very long while to ever convince Nigerians to adopt much needed pro-market reforms.

I have to be honest, I am not an economist but I have a mad love for both the free market and liberal economics ever since I was 17 when I started reading The Economist.

I doubt the country will turn to the IMF. As bad as the nation's debt sustainability is and the massive backlog of unmet forex demand of $12bn existing when Emefiele was booted out, the country would seek another means.

Debt to GDP is less than 25% and not a bunker busting 50% or more. Tinubu has already mentioned the plan to sell some of NNPC's share in joint venture with foreign multinationals which should bring in over $15bn. Then again, a sale should take about a year to prepare and execute, the money wont flow in overnight.

Then again, with the fuel subsidy "largely gone" this will free up $10bn which would have used to finance it. That amount should reduce the pressure on tge Naira. One would exact expect the Naira to appreciate but unfortunately, the complete opposite has been the case. This exposes the standing demand by the proponents by some economist such as the late Henry Boyo that the Naira substitution policy be ended.

The Naira substitution policy states that the allocation of the dollar equivalent of the monthly allocation to the 3 tiers of government is highly inflationary. Whenever it is paid to them in Naira, this leads to an excess money in circulation compelling the CBN to use costly treasury bills to mop it up. That is why commercial lending rates are always high.

Proponents argue that rather than pay them in Naira why not pay them in Dollars?. By paying them in dollars, you end the excess money in circulation overnight and instead create a situation where dollars start chasing Naira when the 3 tiers of government decide to convert their forex into Naira. This will lead to a considerable strengthening of the Naira and tight money, enabling the government to loosen rather tight monetary policy l which would lead to low interest rates in the long term. A Naira too strong will brutally hit oil based revenues which constitute 75% of revenues and would also adversely effect the competitiveness of the country's exports.

An ending of the Naira substitution policy would flood the system with dollars. Pro-active business friendly policies such as a slash of company tax to 15% or less will work wonders in bringing in fx into the system.

I don't see the problems being so bad as to warrant an IMF bailout. Debt sustainability improved with the ending of petrol subsidies and "unification"of the exchange rates. The first was a primary reason for both government borrowing and debt servicing. With those 2 gone, the government purse should breath better now.

In addition, a tax maestro has been appointed to handle taxation. He seems to be what the doctor ordered. If he can improve the the nation's tax collection by the equivalent of 2% of GDP within 2 years, this will work wonders for debt sustainability.

The country won't approach the IMF for a bailout but I could be wrong because the problem isn't as serious as it seems. They are just the handiwork of a previous government that was a byword for "fiscal irresponsibility".

TheBillyonaire:
IMF does not have any other job than to be monitoring Nigeria.

What a spy network.

They are doing their job. A crisis in one place can adversely affect other countries. Focus on the message and not the messenger.