Monday Column By Hameed M. Bello, PhD
By presidential declaration on May 29, the fuel subsidy removal was put to rest and some bottled up unrest. It was put to rest because the highest authority in the country, President Bola Ahmed Tinubu has said so, and there does not seem to be any going back. Critical stakeholders have also been dissecting the subject matter vis a vis its operational framework after the initial shocks. Subsidy removal has equally been put to unrest because the presidential declaration has awoken the proverbial sleeping dogs – the civil tension and the resultant high cost of livelihood it has caused are manifesting in the market places, in rents and in transportation costs among others. On one hand, the President had talked about reviewing the minimum wage of workers and provide palliatives to cushion the effect of the removal of subsidy, while on the other, the workers umbrella union, the Nigerian Labour Congress, NLC would not buy into that, insisting on return to the status quo, which is reversal of the subsidy removal. As all these engagements are going on, with the president taking up the gauntlet in confronting the challenges of governance to master the dynamics of the power game at the centre, the fate of the ordinary Nigerians who legitimized the government in the first place is hanging in the balance. Some will argue, however, that it is a sacrifice that Nigerians have to make in the interim to bring about a better country in the future. But they must not die before the desirable outcome comes.
Recall that President Tinubu had in his inaugural speech as President on May 29 said there was no provision for a fuel subsidy beyond June 2023 by the previous administration of former President Muhammadu Buhari. The implication of that is that, according to the President, “fuel subsidy is gone.” The presidential declaration had initially provoked needless fuel scarcity and panic buying. It was subsequently followed by a high cost of transportation and of living, especially with the Nigerian National Petroleum Company Limited, NNPCL swiftly raising pump price of petrol from N195 per litre to N537 per litre across its platforms. According to the Chief Corporate Communication Officer of the Nigerian National Petroleum Company Limited, NNPCL, Garbadeen Muhammad, the changes were in line with the current reality. The action of the NNPCL raises the question as to why it had to fix prices in a deregulated market regime, rather than allowing market forces of demand and supply in the competitive market to determine prices. Such a question may appear simplistic or naive, but it is indeed worrisome to the man on the street as to why pump price of fuel was fixed on products already in stock before subsidy removal was proclaimed. This is especially because the products already in stock were not produced and supplied before the take-off of the policy on fuel subsidy removal. On its own, removal of subsidy makes economic and commercial sense when market forces are allowed to determine prices which could crash in the face of a healthy competition in the long run. This is why questions are asked when the NNPCL had to quickly fix prices in an apparent breach of the principles of deregulation since no market force had impacted on the prices at the time of the increase. The question is could the increment by the NNPCL be arbitrary or not? Besides, the increment from N195 to N537 per litre of fuel seems rather mechanical than systematic, which is about 200% increment done without prior stakeholders consultation.
And at the time of the withdrawal of subsidy on May 29, the government had said it made provision for subsidy only up till the end of June, about a month away then, and now the subsidy is removed before the target date. We are not sure if the already budgeted funds for the subsidy between May 29 and June will be returned to the government coffers.
Another grey area of concern is whether the minimum wage for workers will be sufficient to cushion the crushing impact of the subsidy withdrawal, with Federal Civil servants taking the minimum wage of N30, 000 thousand monthly. In many states of the country, minimum wage still remains at N18, 000 monthly, not to talk of workers in the local government areas who hardly get paid. According to reports, minimum wage in countries like the USA and Germany among others hovers around N500, 000 and N600, 000 in our local currency equivalent. It can only be imagined how much of the salary of workers will be increased, as promised, to be able to cope with the new order.
It is needless to revisit the appropriateness or otherwise of President Tinubu’s declaration on the removal of fuel subsidy considering that government is a continuum. Perhaps the President could have relied on the legacy he inherited and allowed the situation to go seamlessly after June by gradually introducing his own touches. Arguably, the Presidential declaration could be received either as an accidental or deliberate strategy. It could be a deliberate style to hit the ground running with a controversy that launches the new government into public consciousness, and a reminder of the existence of a new political order. But such a style could come with gain and pain.
Realising the enormity of the effect of the declaration, a media officer of the president responded to manage the impact of the declaration. A tweet in that respect said contrary to his unequivocal pronouncement during his inaugural speech that fuel subsidy was gone, a pronouncement that led to immediate scarcity of the product, President Bola Tinubu had reviewed his position, resorting to a cautious approach to the issues. The Asiwaju Bola Ahmed Media Centre explained that the announcement of the removal of the fuel subsidy by the President would no longer take immediate effect. The statement explained the development was neither a new one nor an action of his new administration.
The Tweet reads: “The public is advised to note that President Bola Tinubu’s declaration that “subsidy is gone” is neither a new development nor an action of his new administration.
“He was merely communicating the status quo, considering that the previous administration’s budget for fuel subsidy was planned and approved to last for only the first half of the year.
“Effectively, this means that by the end of June, the Federal Government will be without funds to continue the subsidy regime, translating to its termination.
“Furthermore, President Tinubu was clear about his plans to re-channel the funds previously devoted to the payment of subsidies into better investments that will cushion the effects of the removal on the general public, especially the poor of the poor.
“This includes but is not limited to investments in public infrastructure, education, healthcare and jobs that will materially improve the lives of millions of Nigerians and increase their earning potential.”
The brand new President clearly has good intentions, but he may have played into the hands of fuel supply cathel. They capitalized on the president’s announcement to hoard products and hike price to maximize profit. If the policy will not take immediate effect, as the President’s media office said, why then did the NNPCL arbitrarily fix prices without waiting for the appropriate time to do so, and even doing so without consulting critical stakeholders?