A Year of Broken Promises

By Dr. Mustapha Bello Muhammad

It has been a year since President Bola Tinubu’s administration removed fuel subsidy, promising economic development and prosperity for all Nigerians. President Tinubu justified this removal as essential to preventing national bankruptcy. However, many Nigerians are left questioning what tangible benefits have emerged from this policy shift. How much has the government saved in the past year, and how have these savings been managed?

The government also intended to float the local currency, allowing market forces to determine the Naira’s value. However, instead of market forces, we saw police forces clamping down on Bureau de Change (BDC) operators and online money exchange platforms. While the necessity of these clampdowns can be debated, using the police to force the economy against initial plans and promises is another issue. Our foreign exchange reserves also witnessed a significant depletion of $2.2 billion in just 29 days, from March 18 to April 15, 2024.

The combined implementation of the subsidy removal and floatation of the local currency caused unprecedented inflation and price gouging. Since the civil war, Nigerians have not endured unthinkable miseries and difficulties as they do now. Could these difficulties have been avoided? Were there no other alternatives? The president’s call to hold him accountable must be heeded as we review the last 13 months of his tenure.

Why must Nigeria remove the subsidy?

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Fuel subsidies in Nigeria began in the 1970s and became institutionalized in 1977 with the Price Control Act, which prohibited selling certain products, including petrol, above regulated prices. However, the subsidy era was marred by corruption, budget deficits, and an increasing debt profile. From 1999 to 2007, Nigeria had only five approved oil importers.
This number increased to about 140 under President Goodluck Jonathan. In 2012, a parliamentary report exposed a corruption scandal where 15 fuel importers collected more than $300 million without importing any fuel, while over 100 oil marketers collected the same amount multiple times. In January 2012, the government made a massive payment of over ₦1 trillion (approximately $6 billion—about a quarter of Nigeria’s then annual budget) in fuel subsidy claims within 24 hours.

Although President Buhari appointed himself as petroleum minister to tackle corruption, it continued in other forms. For example, in June 2022, the Managing Director of NNPC Limited indicated that daily consumption of PMS had increased to over 103 million liters per day, with at least 58 million liters being smuggled. This situation meant that smugglers and other West African countries benefited more from the fuel subsidy than Nigerians. By 2022, about 40% of Nigeria’s revenue went to subsidies, and almost 90% of the remaining 60% was spent on debt servicing.

The mentioned cases of corruption and debt convinced both the present and past governments more than ever that subsidies had benefited only oil marketers and a few government officials. Therefore, it needs to go. One of the reasons that Nigerians did not resist the move
in 2023 was that most of the presidential candidates promised to remove it. This consensus stifled public opposition, reminiscent of a prank where everyone bows to a child dressed as an elder because others do. The governments believed that the removal was the only solution, but there were alternatives. How about tackling the corruption in the oil sector so that the subsidy benefits only the generality of Nigerians rather than oil marketers? The amount of money being constantly lost to corruption can be used to subsidize fuel. From 2005 to 2022, $30 billion was spent on subsidies. From 1999 to 2007, more than half of this amount (precisely $16 billion), supposedly for electricity generation, was lost to corruption. Till now, no electricity, no $16 billion, and no one goes to jail for that. Sanusi Lamido Sanusi, as the Governor of the Central Bank of Nigeria (CBN), revealed in September 2013 that the Nigerian National Petroleum Corporation (NNPC) had failed to remit $49.8 billion, generated from crude oil sales between January 2012 and July 2013 to the Federation Account. No one was also brought to book for this. Instead, the CBN governor was sacked.

The NNPC virtually became unaccountable for mismanagement and misappropriation. According to the
World Bank, Nigeria has lost $400 billion in oil revenue to corruption since independence.
Removal of subsidy seems to be a case of throwing the baby out with the bath water.

Now, let us have a look at some economic indicators before and after subsidy removal. In his inaugural speech, President Tinubu stated, “Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions.”

Literally, the government took away the benefit of fuel subsidy from the generality of Nigerians, with the hope of bringing it back to the people in a much better way and coverage by re-channelling “the funds into better investment”. This corruption will not allow the subsidy to come back to the Nigerians in the same way much less in the better way. According to the 2023 Corruption Perceptions Index by Transparency International, Nigeria ranks 145th out of 180 countries. The corruption ensures that the benefits of subsidy removal have not reached the people. That is why, after a year of no subsidy, no one can point to any concrete gain that Nigerians have made other than transient palliatives given to a few percentages in a televised manner. In President Tinubu’s year in office, the hardships worsened: borrowing continued, corruption remained, educational subsidies were removed, electricity tariffs were hiked, interest rate was raised, both cross border and domestic taxes increased, the inflation rate and cost of living rose, while the standard of living declined. `

Truth be told, subsidy removal was aimed at improving the government’s revenue, and corruption hardly allows judicious management of this revenue. The decision simply takes away benefits from the people for the government, leaving them with blurred hope for the
future.

Alternative Solutions

In this digital age, many reputable international and national IT companies can study and analyze the chain and establish IT infrastructure that tracks each and every single liter imported and delivered to the filling stations. The government should be clear that only tracked liters will be subsidized. Our borders should be secured so that no more than a particular amount of fuel crosses them. Precautionary measures such as ensuring the bulk of agricultural products in the national stores and the provision of a considerable quantity of gas-powered vehicles should have been taken. All these are short-term fixes that require effort and commitment. Outright removal of fuel subsidies does not.

Malaysia is set to remove subsidies by June 2024. The country subsidizes not only fuel but also cooking oil and rice. As part of precautionary measures to cushion the impact, they have already announced a 13% salary increment. This is based on the projected inflation rate between 2% and 3.5%. The Nigerian inflation rate rose from 22.22 before subsidy removal to 33.69% after, and there is nothing concrete to neutralize the impact. There is still no increment in the minimum wage.

Instead of sudden removal, Tinubu should have considered gradual removal of the subsidy while improving oil production. Oil production all-time high of 2,496,000 Barrel/Day was reached in Nov 2005 and a record low of 1,015,000 Barrel/Day in Sep 2022. In 2020 it attained 1,830,000 Barrel/Day. When Tinubu took office in May, oil production was 1.28 andwas below 1.1 in April of the same year. That means it is possible to double our revenue without removing the subsidy. But the president chose the easy solution for himself, which nwas difficult and tough for the rest of the people. And I wonder how some in some quarters praised the president for taking the bold and audacious decision to remove the subsidy that no past president dared to. The fact is that President Tinubu did not take any daring or bold decisions. He just took the easiest and most convenient decision for himself and his government, against the generality of Nigerians. Although the former president’s Buhari’s final budget of 2023 excluded fuel subsidies, President Tinubu should have taken a courageous and audacious step in delaying the implementation until the Dangote refinery kicks off or some of our refineries resume full operation. Local refinement of the oil means a significant reduction in fuel imports and subsidies. The sorry state of our refineries has also cost Nigeria thousands of potential jobs, economic opportunities, energy security, and national pride.

President Tinubu could have taken a brave and bold step by cutting the cost of governance and blocking waste. He should have used his charisma and stamina to influence parliamentarians, ministers, and other political office holders to give up part of their entitlements for the benefit of all. The extravagant salaries and allowances of our lawmakers drain Nigeria just like fuel subsidies did. Everyone should have made a sacrifice. Alas!! Only the downtrodden and the vulnerable were made sacrificial lamb-scapegoats. The generality of the masses did not cause the current economic woes. Those who perpetuate decade-long corruption are the cause and are in no way affected. A common man in the Nigerian street is now punished for not only the crime he did not commit but also for the crime committed against him. Nigerians should not have to pay the price of decades of political and economic mismanagement of the subsidy scheme. The authority must finally respond to longstanding demands by civil society to investigate the fuel market chain and hold accountable all those involved in smuggling, hoarding, and ‘subsidy scams’,” regardless of rank or status.

Education:

Education is the backbone of national development and modernity. When Tinubu’s government wanted to remove subsidies, they promised to re-channel “the funds into better …education”. After successful removal, they did not disburse any special things to the education. Instead, they removed the educational subsidy that had been in existence since the creation of this country. Though they later retracted, the federal government also asked the universities to return 40% of their revenue to the center. That means if a student uses any facility in our universities, he or she has to bear the full expenses of that facility and pay an additional 40% of those expenses to the federal government. And the government might use the money to buy a presidential yacht for a picnic (not for official work) or build a vice presidential lodge from the blood and sweat of the Nigerian students. As a result, school fees are arbitrarily hiked with the promise of student loans. This is the thirteenth month of Tinubu’s presidency; no student, to my knowledge, has gotten any loans. Many have dropped out of school due to exorbitant school fees. Higher education in Nigeria today is for the upper-class citizens, though the poor and lower-class are the majority. This represents a very
dangerous trend for the nation. The dropouts can end up anywhere to fend for themselves. An idle mind is the devil’s workshop.

Economic Indicators
The government promised to use the subsidy savings to improve the economy, build infrastructure, create jobs, and enhance the value of the naira. However, the unemployment rate rose from 4.2% to 5% after the subsidy removal, and the combined unemployment and underemployment rate stands at 17%. Despite saving an estimated USD 7 billion from subsidy removal, the government has not built significant infrastructure, and the Naira continues to depreciate. For the first time in Nigerian economic history, the Naira became so volatile, just like a crypto currency. In less than a year, it depreciated from N680 to N1900, then back to N900, and is now around N1500 per dollar. This instability of our local currency is even more dangerous than the depreciation. Because it gives one no confidence to save the Naira as it can depreciate anytime by a significant percentage. National currency is not a crypto currency. Prices of commodities remain high, and the minimum wage has not increased. The consumer price index (CPI) rose to 31.7% in February 2024, up from 22.41% in May 2023.

Borrowing continuous
Despite the savings, President Tinubu continues to borrow heavily. The Senate approved his request to borrow $7.8 billion and €100 million as part of the 2022–2024 borrowing plan. Over six months, Tinubu procured N2.94 trillion from the CBN, exacerbating the debt problem. The federal government recently sought fresh $2.5 billion World Bank loan.

Security and energy
President Tinubu promised to invest in security, yet banditry and kidnapping persist. Military personnel are increasingly targeted, with recent attacks in the Delta and Southeast regions. The promise to make electricity “more accessible and affordable” remains unfulfilled, with power generation becoming more expensive yet declining rather than doubling. ` During his first year in office, President Tinubu failed to fulfil most of his promises. This stems from selfishness, disdain for Nigerians, seeking shortcuts, and sheer incompetence .Nigerians hope the  direction changes in the next three years. It is up to the people to assess his performance and decide his fate in 2027.

Dr. Mustapha Bello Muhammad sent this piece from Kano