Nigeria’s government may be on overdrive as its policies continue to chip away at our last hold on hope
By Mahmud Adamu
I still find it hard to fathom how a country with one of the lowest minimum wages on earth could see logic in implementing policies that have caused some of the most biting cost increases for basic services for its poorly paid population.
If I was to relate Nigeria’s current situation with a fitting phrase, none would do better justice than Ludwig von Mise’s words; “The worst evils which mankind has ever had to endure were inflicted by bad governments.”
From its inception, we have seen the government of President Bola Ahmed Tinubu yank off a subsidy on petrol, a product that is the key determinant of food and services costs for Nigerians and a buffer against the severe ramifications of a disparity between low earnings and high costs.
This year alone, petrol went up in quadruple value. The Nigerian currency, the Naira, lost more than a hundred percent of its May 2023 value, dipping from N450 to N1800 and has found its level at N1200 to the dollar; stocks and shares took a severe tumble. Now, electricity has gone up also in near quadruple value for the strangely classified Band A just as cost of living is over 300% higher.
The resulting hike in living costs is a consequence with severe repercussions for millions of people already struggling under an economic crisis.
Nigeria’s Agriculture has never had it so bad. For a president that stressed his desire to build agricultural capacity- and even earned a moniker for his constant drumming of his vision for agriculture, the country appears to have hit a new low this season.
As Tinubu rummages through his obviously depleted box of policy tricks, he appears to have completely ignored complaints that framers have voiced for over 10 years, and now there are fresh issues. Insecurities abound; the rural road infrastructure is worn out; Capital investment is at an all time low and the millions of farm labourers promised are nowhere to be seen. This reality is made worse by the overpriced inputs and outrageous cost of production.
One farmer puts it lucidly; “To buy a litre of petrol is now N1,100, when you harvest the same crops how much will you be selling it? What gain is there? Is this really how we wll be doing agriculture?” This is a pertinent question that the president and his team need to answer.
It is worrisome that Nigerians are struggling to have electricity in their homes and fuel in their cars. The deafening silence of this administration to the current plight of the people is gravely concerning. Regardless of one’s political leaning, this should be rightly called out and condemned.
The government has not stopped there, they have gone ahead to implement huge tariff hikes on electricity that is hardly available- the Nigerian legislature has rightly reversed the hike.
The profile of Nigeria’s new minister of Finance, Oluyemi Cardoso, clearly demonstrates the deep ties many economic policy makers in Africa have with the International Monetary Fund (IMF) and World Bank and why they sell the destructive policies of these organisations as local solutions. He was with World Bank for many years where he worked on economic and financial packages for several countries in Latin America and the Caribbean.
It is as if the Nigerian government is intent on serving the International Monetary Fund’s (IMF) interests alone, implying that IMF is the constituency it was elected to serve.
Even more frightening is how firm a grip these hawkish establishments have on the economic thought and policy making on the continent.
It is strange that, after the IMF had only recently asked the government to remove petrol subsidy in its entirety and stop electricity tariffs, the government swiftly implements these demands without consultations with the people it is supposed to govern.
Even stranger is the affirmation of IMF bias in its demand that the British government invest more in sectors it had asked the Nigerian government to divest from.
There are clearly different standards employed for Africa and the West as they relate to government’s role in public funding, and Nigeria has become a perfect example of how entrenched the servitude to imperial demands remains.
While these Bretton Woods institutions demand a total removal of economic buffers for the people in developing states, they do not hide their well documented support for the implementation of same buffers for Western economic powers.
Even more ironic is the Dutch Prime Minister Mark Rutte of Netherlands commending President Tinubu for removing fuel subsidy in Nigeria while Netherlands is flushed with subsidies for farmers. The country’s citizens enjoying subsidised energy, to aviation, that is not including benefit payments.
The United States of America, currently the largest economy in the world and the world’s most vocal advocate of individualism and limited government involvement in social security, has more people than ever suckling at the federal subsidy teat than most African States.
According to the Cato Institute Tax and Budget, “there is little room in the Constitution for the federal government to subsidise state governments, private organisations, or individuals, yet there are large numbers of programs that do just that in areas such as agriculture, education, health, and housing.”
In the UK, several sectors benefit from government subsidies as well- health insurance, technology, housing, education, electric vehicles and sustainable solutions among them – which provide financial help via loans, grants and tax credits, among others.
Listen to the words of the minister of power, Adebayo Adelabu, as he responded to questions about the reason for the extreme hike in electricity tarrifs. He says “We need to tell ourselves the bitter truth as Nigerians: we don’t have consumption management in this country. Some people leave their AC and freezers on for days because we’re not paying enough for the power .”
For someone who is supposed to represent an institution that makes policies based on rational considerations, the minister should have been aware that some thoughts should never leave the deep recesses of our imagination. As a public official, there are some things you should never say in public because they are not just insensitive but may cause serious damage to one’s reputation as intelligent.
If the minister is truly concerned about regulated consumption of energy, the first step would logically be to ensure availability of power. He has also ignored the fact that many Nigerians are paying estimated bills for unavailable electricity and further depending on generating sets for household and commercial supply.
The fact that he sees consumption habits as justification for an increase that was suddenly imposed without consultations with Nigerians clearly suggests that mediocrity has crossed a major threshold in the country’s leadership space.
The minister appears to have a reputation for constantly making insensitive remarks. I’d he thinks that Nigerians are not paying enough for electricity. Well, a simple comparative analysis would show that he is misinformed about the facts.
Electricity in South Africa is N147 per kWh. In Calgary, Canada it is N122 per kWh. In Nigeria, it is between N60 and N70 per kWh. Minimum wage in South Africa is N312,000. Minimum wage in Calgary is N2.3 million. Minimum wage in Nigeria is N30,000. India has a capacity of over 400,000 MW. Pakistan has a capacity of 40,000 MW.
Nigerians cannot continue to pretend that these reforms are acceptable. We cannot ignore the fact that the government has not successfully dealt with the pains associated with the implementation of those measures, and has blatantly ignored calls to address the causes rather than symptoms.
For example, it is important that we understand the root cause of the inefficiencies in the power sector before unleashing reforms that exclusively focused on increasing financial returns. One would have expected that one of the first steps by the government would be to revisit the privatisation programme that produced the failing Electricity Distribution Companies (DISCOS).
The hike in electricity tariff will create more difficulties for the citizens as inflationary pressures go through the roof. Our manufacturing sector will similarly feel the impact of higher interest rates on loans and increased costs for fuel while paying higher wages as a result of the new minimum wage. The President may not know this but he and his men are pushing the economy into a deeper crisis. His reforms are without a human face and so will not win him public approval.
As a matter of urgency, President Tinubu must ensure that these reforms are sequenced and he must implement measures to mitigate the pain that Nigerians are feeling. Considering the current predicament of many Nigerians, it is better to cut prices than inflate them.
Mahmud Adamu writes from Kano, Nigeria
