₦airaland Forum

persius555:
I keep wondering why a lot of nigerians becloud their sense of judge with partisan sentiment at the expense of the economy. The subsidy removal protest then was in many ways justified since crude oil price was still hovering between 80 dollars to above 100 dollars per barrel. The cost of producing a barrel was 30 dollars and the govt had upto 60 dollars left to share btw itself and its venture partners.
Today, crude oil sells for as low as 38 dollars and still expected to fall further. We can hardly fund our budget because profit margin is as low as 8 dollars per barrel. The gap is so huge that if we continue to fund subsidy with the meagre we make from crude oil, its only a matter of time before the economy comes crashing down.

Jagaban's call for removal of subsidy at this point in time is just the right thing to do economically. The money should be channeled into building our infrastructures like power, railway, highway,schools etc. These sectors will form a solid base for a diversified economy. A lot of nigerians opposed subsidy then because no one trusted the GEJ's pdp led govt. As at that time, other economies were increasing their foreign reserve while we were depleting it. Today, algeria has almost 100 billion dollars in its foreign reserve and a national debt profile of 5 billion dolars. Compare that to our own 29.5 billion dollars reserve and a debt profile of over 15 billion dollars. Who is responsible for this anomaly? Your guess is as good as mine.

The two countries are monolithic based economies, algeria has a well developed infrastructural system.the same cannot be said of nigeria.We have a larger population which by all general economic index should be an advantage.

LesbianBoy:
Wait.....was it not this same subsidy ish that made many Nigerians wail 3 years ago How come its now a welcome idea Smh! Click like if you think Nigeria is a JOKE!

Pidggin:
Are these not the same people who campaigned against subsidy removal 3 years ago? APC keeps stealing GEJ's ideas, and yet they frustrated the man's effort to actualize his programmes, What a scam!

veekid:
And if he no Commot am?

AreaFada2:
Was 3 years ago not a better time to remove subsidy? Then use it to fund more infrastructure that would be ready or nearly ready now like the railway line Amaechi is now commissioning from East to PH?

You save & invest when you have excess, not during lean times.

musicwriter:
Africa will continue in poverty cause our elites have no idea what brings development. Removing or not removing subsidy cannot create long term infrastructural development. Real development comes from investment in science education, cause only science can solve the poverty problem of any nation.

If our problem is infrastructure as he noted, then we should be investing in engineering studies in our schools, civil engineers, e.t.c. These are the people that build infrastructures, not subsidy removal.

All technologically/infrastructurally advanced countries have one thing in common, and it's sound science education.

miqos02:
even all governors during that administration supported subsidy removal including oshiomole

Dreambeat:
Hipocrisy!After winning an election riding on the back of 'do not remove subsidy',you have suddenly woken up from your slumber to realize that subsidy claims have been holding the nation back.This man is one of those Nigerian politicians that need to be done away with in a revolution.He has directly or indirectly killed dreams.I am sure God cannot wait to judge him.

miqos02:
even all governors during that administration supported subsidy removal including oshiomole

MichaelSokoto:
Jagaban of Borgu has spoken! Haterz can kontinue havin erektion over it!
Pained morrafuckers!

Dreambeat:
Hipocrisy!After winning an election riding on the back of 'do not remove subsidy',you have suddenly woken up from your slumber to realize that subsidy claims have been holding the nation back.This man is one of those Nigerian politicians that need to be done away with in a revolution.He has directly or indirectly killed dreams.I am sure God cannot wait to judge him.

jonuel1:
Demented fellow!

dododawa1:
Tinubu is talking about DEMON, has he forgotten, he brother is there too E.G wale tinubu

mars123:
Tinubu is talking short term, you are talking long-term. If the government is serious, subsidy would be removed and palliatives will be put in place to cushion the effect on vulnerable citizens like free meals, transport, portable water. The end justifies the means. There will be protests initially but with palliatives, it will go down. governance is not rocket science. Tinubu is making sense.

Remii:
the earlier the better, hoarding will continue as long as speculation to remove continues. there is gain of N3.3m on one 33k litres tank @10 margin / litre

engrhorla:
Even if he did, does that mean he can have a change of opinion?

I don't get it!

Why are we always divided over political, religious and tribal issues?

If Tinubu or Anenih or Babangida should call for the removal of subsidy, we shouldn't attack the personality.
We should rather focus on the issue.

For me, I think every well meaning Nigerian needs to have a better understanding of the dynamics of fuel subsidy.
Are we really feeling the subsidy? Is it working? What about if it is removed? What impact will subsidy removal have on the economy that we are not feeling now?

These and many questions are what we, irrespective of your political, religious or cultural inclination, should focus on.

God bless Nigeria

persius555:
I keep wondering why a lot of nigerians becloud their sense of judge with partisan sentiment at the expense of the economy. The subsidy removal protest then was in many ways justified since crude oil price was still hovering between 80 dollars to above 100 dollars per barrel. The cost of producing a barrel was 30 dollars and the govt had upto 60 dollars left to share btw itself and its venture partners.
Today, crude oil sells for as low as 38 dollars and still expected to fall further. We can hardly fund our budget because profit margin is as low as 8 dollars per barrel. The gap is so huge that if we continue to fund subsidy with the meagre we make from crude oil, its only a matter of time before the economy comes crashing down.

Jagaban's call for removal of subsidy at this point in time is just the right thing to do economically. The money should be channeled into building our infrastructures like power, railway, highway,schools etc. These sectors will form a solid base for a diversified economy. A lot of nigerians opposed subsidy then because no one trusted the GEJ's pdp led govt. As at that time, other economies were increasing their foreign reserve while we were depleting it. Today, algeria has almost 100 billion dollars in its foreign reserve and a national debt profile of 5 billion dolars. Compare that to our own 29.5 billion dollars reserve and a debt profile of over 15 billion dollars. Who is responsible for this anomaly? Your guess is as good as mine.

The two countries are monolithic based economies, algeria has a well developed infrastructural system.the same cannot be said of nigeria.We have a larger population which by all general economic index should be an advantage.

Ofodirinwa:
However, because the distance between government and the people is far and genuine level of affection is low, government sees no utility in continuing to spend the current level of money on the people. In their mind, the people are not worth the money. Government sees more value in “saving” money than in saving the hard-pressed masses.
Yet, what does government actually saveu by this measure? The concept of a government that has the unfettered ability to print its own currency needing to save that currency for fear of insolvency is an anachronism. That his economic advisors would cling to this notion is like a person insisting on taking to the expressway in a horse-drawn carriage. For a government that prints its own currency, attempting to save in that very currency in order to defend against bankruptcy in that currency is a relic of the gold standard abandoned forty years ago. If government thrashed the fuel subsidy based on considerations that it will run out of naira then it based its decision on a factor that have not been relevant since the time of the Biafran war.

In 1971, the world left the gold standard replacing it with “state” or “fiat money.” Under the gold standard, a nation had to save gold to support its currency or risk insolvency. After 1971, bondage to gold was broken. Since then, the worth of a nation’s currency is not tied to gold which means that the ability of a nation to print currency is not determined by its holdings of gold. The worth of the currency is based on the strength of the economy and the amount of money the nation prints is determined by that strength as well as the nation’s future economic objectives. A nation can no longer fall insolvent concerning debts or payments issued in the national currency. As long as the fuel subsidy is paid in naira, then Nigeria cannot go bankrupt paying it any more than the ocean can run out of salt water. In a fiat money system, the problem with the fuel subsidy is not impending insolvency as the government asserts. The serious constraint is inflation. Here we must ask whether the payment is so inflationary as to distort the economy. We have been making the payment for years and inflation has not wrecked the economy. This historic evidence refutes the imminent disaster claimed by government.
In advancing the argument that subsidy would lead to imminent bankruptcy, government reveals its lack of trustworthiness on important matters of fact. Is this the same government that several weeks ago claimed Nigeria was among the world’s best performing economies with a GDP growth rate of 7 percent annually? It seems government has a vast canvas on which it can paint a number of different scenarios of Nigeria depending on the whim of the moment. While government may alter its portrait of the nation, the people are forced to live one reality at a time. Is Nigeria a fast growing economy? If the nation’s GDP is growing so strongly, the subsidy or a similar expenditure on the people cannot be the lethal burden government now maligns it to be.

Nigerians have a collective stake in the ownership of our oil resource held in trust by the government of the day. What we need then is the effective management of this scarce resource that will beget long term prosperity to the suffering people of Nigeria and not the present racket in which those in power abuse access and control of NNPC and oil revenue to warehouse money to fund their election campaigns.
This brings us to another inconsistency. On one hand, government states the expenditure is unsustainable yet on the other it claims the amount now earmarked for the subsidy will be used to fund other people-oriented programs. However, the two assertions cannot exist at the same time . If the subsidy is bankrupting us, then reallocating funds to different programs will be no less harmful. A bankrupting expenditure retains this quality whether used for the subsidy or another purpose. Earmarking the funds to something else will not change the fiscal impact. If government is sincere about using the funds for other programs, then it must be insincere about the threatened insolvency.
The concern about government saving naira is purely superfluous. Officials cry that Nigeria will become like Greece. Those who say this disqualify themselves from high office by their own words. Greece sits in a terrible situation because it forfeited its own currency. Thus, it cannot print itself out of insolvency and it must save or earn euro to pay its bills. Because Nigeria issues its own currency, it does not face the same constraint. Again, Nigeria’s problem with the subsidy is not insolvency. Therefore, to go from subsidy to nothing is not wise economics for it “saves” government nothing. What it does is produce real havoc and misery for the majority of the people while the governing elite worship their mistaken fiscal rectitude. Ironically, by acting like the old gold standard fiscal constraints are real, this government will incur the very thing it seeks to avoid. It will subject Nigeria to a crushing economic contraction. The difference between us and the Greeks will be that their situation is the inevitable result of being a weak member in a monetary union dominated by a strong economy, while our downturn will be a discretionary one artificially induced by the backwardness of our policymakers.
By its action, our government placed itself on the list of conservative governments imposing unwise austerity programs on tired and weak economies. The results have been alarming. Greece, Ireland, Spain, Italy, and the UK have imposed stiff austerity. Each nation that has done so now has an intimate relationship with recession. Must we travel the same path? Why does our government think an independently-minded Nigerian success is inferior to the mimicry of European failure? I don’t understand why we take this road. Our government has allied itself with the goals of the European conservatives and not with the needs of the Nigerian populace. No one plucks a chicken to feed his children feathers. Nor does a man set his house on fire just so people can bring him water. However, this is spirit behind government policy. There has been no nation on the face of the planet that has developed or achieved long-term prosperity by devotion to conservative, ultra-free market economic ideas that dominate this government. America, the United Kingdom, and now China all based their initial thrust toward national economic development on significant government interplay in the economy and on sustained government fiscal deficits. If no nation has grown using these conservative ideas when growth was constrained by the gold standard, why would we shackle ourselves to these ideas when we operate under a monetary system that provides the federal government greater policy latitude to achieve economic development objectives.
Again, we must rid ourselves of the old notion that government saving and budgetary surpluses are inherently good and that deficits are always bad. For government to save naira, that means it brings in more than it pays out. Where does this influx come from? It comes from you and me, the private sector. If the federal government saves more, it means the private sector will have less. Government surplus means private sector contraction. This shows that the administration has its priorities confused. It acts as if the people are there to help government run itself. The more beneficial relationship is that government should be giving people the help needed to better live their lives. The government’s position is akin to a wealthy parent demanding his young children bring home more food for him to consume than the parent gives them to eat. We would deride any parent for such meanness. Yet, this government believes this conduct is wise and prudent.
Another argument government has presented is that removal of the subsidy will stabilize the exchange rate. This makes no sense. True, since marketers convert much of the naira from selling petrol gained into dollars, there is downward pressure on the exchange rate and foreign reserves. However, this pressure is not a byproduct of the subsidy. It is a byproduct of importation. With the subsidy lifted, the marketers will earn the same or more from the sale of petrol. For there to be less pressure on the exchange rate would mean the marketers would seek to exchange significantly less of the same amount of naira into dollars simply because the subsidy was removed. There is no logical basis to assume the new Jonathan tax will have the behavioral impact of causing importers to want to hold more naira. The downward pressure on our currency and reserves will not change simply because the imported items are no longer subsidized. In fact, the higher rate of inflation caused by the removal may make importers keener to change naira into dollars. Thus, the real challenge in this regard is for government to pave the way to increased domestic production.
There is another “philosophical mystery” in the government’s position. They state the subsidy must be removed to end the unjust enrichment of the importing cabal. There is a major problem with this assertion. If this is truly a subsidy, there should be no unjust enrichment. A subsidy is created to allow the general public to pay a lesser price while sellers earn the prevailing market price. Subsidy removal should not increase or decrease the amount earned per litre by the suppliers. If the amount earned by the suppliers will diminish materially, what government had been operating was in part a pro-importer price support mechanism on top of the consumer-friendly subsidy. If this is the case, government could have abolished the unneeded price support while retaining the consumer subsidy. More to the point, government has failed to show how the system it plans to use will be protected from the undue influence and unfair dealings of those who benefited from the discarded subsidy regime. Because it is capital intensive by its very nature, this sector of the economy is susceptible to control by a few powerful companies. Most of the players will remain the same except that a few cronies of the administration will be allowed entrance into the lucrative game. Sending the economy into the gutter is a steep cost to pay just so a few friends can reap a new windfall.
Government claims the subsidy removal will create jobs. This is misleading. The stronger truth is that it will destroy more jobs than it creates. For every job it creates in the capital intensive petroleum sector, it will terminate several jobs in the rest of the labor intensive economy. Subsidy removal will increase costs across the board. However, salaries will not increase. This means demand for goods will lessen as will sales volumes and overall economic activity. The removal will have a recessionary impact on the economy as a whole. While some will benefit from the removal, most will experience setback.
What is doubtless is that the Jonathan tax will increase the price of petrol, transportation and most consumer items. With fuel prices increasing twofold or more, transportation costs will roughly double. Prices of food staples will increase between 25-50 percent. Yet this is more than about cost figures. Most people’s incomes are low and stagnant. They have no way to augment revenue and little room to lower expenses for they know no luxuries; they are already tapped out. The only alternative they have is to fend as best they can, knowing they must somehow again subtract something from their already bare existence. There will be less food, less medicine, and less school across the land. More children will cry in hunger and more parents will cry at their children’s despair. This is what government has done. Poor and middle class consumers will spend the same amount to buy much less. The volume of economic activity will drop like a stone tossed from a high building. This means real levels of demand will sink. The middle class to which our small businessmen belong will find their profit margins squeezed because they will face higher costs and reduced sales volumes. These small firms employ vast numbers of Nigerians. They will be hard pressed to maintain current employment levels given the higher costs and lower revenues they will face. Because the middle class businessman will be pinched, those who depend on the businessmen for employment will be heavily pressed. States that earn significant revenue from internally generated funds will find their positions damaged. Internally generated revenue will decline because of the pressure on general economic activity. The Jonathan tax will push Nigeria toward an inflation-recession combination punch worse than the one that has Europe reeling. This tax has doomed Nigeria to extra hardship for years to come while the promised benefits of deregulation will never be substantially realized. People will starve and families crumble while federal officials praise themselves for “saving money.” The purported savings amount to nothing more than an accounting entry on the government ledger board. They bear no indication of the real state of the economy or of the great harm done the people by this miserly step.
As stated before, the threat of bankruptcy is nothing more than a ghost of something long dead. The real consideration is not whether this sum should be spent but whether it is better spent on the subsidy or on other programs. Nigerians do not need to be wedded to the subsidy. It is not the subsidy that gives life to the social compact; the amount of the expenditure is the better litmus. When attempting to douse popular sentiment, government pretended that the social contract would remain intact because government would spend the money saved from the subsidy on other programs. This would be nice if supported by action. If government were sincere in this regard, it would have used an entirely different strategy. It would have looked on the removal as evolutionary, long-term process instead of as a sudden event accomplished by executive decree. If government had proceeded along these lines, it would have first perfected the plans for the new programs and projects that would receive the funds previously allocated the subsidy. These plans would have been in place and ready to implement. Only then would the subsidy be removed. To say that they will develop programs once the subsidy is removed suggests government‘s heart is not in these alternatives. Government only raised this possibility as a public relations afterthought to douse public opposition.
For instance, the government’s top spokesperson said it was obvious the Administration had guillotined the subsidy since it was not included in the 2012 budget. If we take this as the measure, there is no evidence in that budget of government transferring the bulk of “subsidy savings” to other programs. Using the reasoning employed by government itself, the budget reveals no sympathetic plan to buffer the effects of the Jonathan tax.
Even if government wanted to engage in naira-for-naira alternative social spending, it would take well over a year for the programs to have even minimal effect. Such expenditures would require new legislation. Given the pace of the National Assembly, such legislation would take months even if fast tracked. Then appropriations would have to be made before the process of procurement began. If the federal government were to buy sufficient buses to subsidize urban transport across the nation, orders would have to be placed for the purchase and importation of these buses. Again, months would elapse. If we are aiming at major road construction, the processes of project planning and contract bidding will require well over a year after a project is approved and funds appropriated. Last, government has just established a large committee to oversee this alternative expenditure. We have no need for another such body. If competent, government would not require this help. Moreover, we have seen this tactic before. Time and money will be devoted to running the committee. More attention will go to the committee’s emoluments than to its fundamental work. The actual parameters of the committee’s scope of work are nebulous and ill-defined. Will it have the authority to act or only advise? This looks like another blind alley where government hopes to misdirect our attention. This committee is not meant to accomplish anything except to numb public opposition. Government hopes people will posit confidence in the body because of the eminent people named to it. By the time the public discovers the committee is a zombie creation, too much time would have elapsed and it will be too late to reignite public protests. The people then will resign themselves to their fate. This trick has worked in the past; it will not work today because the people are much too aware and too agitated.
In the end, the federal government has done the nation an awful disservice at the worst time. This is an unneeded and avoidable emergency. Pursuing the grail of elitist economics, the federal government brings economic disaster to our doorstep. Attempting to protect government bank accounts from false bankruptcy, they push the people into real bankruptcy. Government is relying on the fact that the people are long-suffering and patient. They think the people will quickly forget this latest assault and return to the grueling challenge of daily survival. Government thinks people will be so fixated on survival that they will forget government has made survival more difficult. Rarely has a government been this cynical. Not even the reclusive Yar’adua or the dictator, Obasanjo placed this hardship on the people. Of course, Nigerians know that Obasanjo failed spectacularly to lay the necessary infrastructural foundation which could have made the recent removal of subsidy an easier decision for President Jonathan and a lesser burden for Nigerians to bear.
Nigeria in Jonathan is confronted with a government “on top of the people” rather than a “government for the people”. It is as if Jonathan has turned from president to pharaoh and has decreed that the people make bricks without straw. What manner of leader has he become? I don’t know. However, there is only one just way out of this distress. Government must modify the sudden and complete removal of the subsidy. Either we restore the subsidy or use the funds for other social purposes. If we are to use the funds for other programs, those programs shall be placed on parallel track with the subsidy. As more of these programs are ready to go on line, then the subsidy can be lifted in phases. In this way, the public is assured government will not lower its total expenditure on their behalf, thus maintaining the spirit central to the social contract. Fuel price increases will be moderated so as not to cause extreme economic distress. And the people will see and feel the benefit of the alternative programs at the same time of the cost increases, thus further blunting the adverse impact of those increases. Until this change occurs, the people must remain vigilant or else we will sink under the weight of what the federal government has done.
Signed: Asiwaju Tinubu, January 8, 2012.



http://www.pmnewsnigeria.com/2012/01/11/removal-of-oil-subsidy-president-jonathan-breaks-social-contract-with-the-people/

veekid:
And if he no Commot am?

anonimi:
www.nairaland.com/attachments/2110433_photogrid1423507310454_jpeg15665798139e20373fd1ab95e35707b5