In the first instalment of this series last week, we noted that Tinubunomics is centred on removing state subsidies from fuel, electricity, tertiary education and currency management. Therefore, it represents no more than a further intensification of the familiar ideology of the withdrawal of the Nigerian state from critical sectors of the economy, at a time when even leading economies around the world are providing subsidies to select sectors of their own economies. We thus ended by asking whether it would work or not.
The answer to that question is, of course, simple: it depends. Consider, first, the very different cases of student loans and the soon-to-take-off withdrawal of subsidy in the electricity sector. First, whether stated or not, in its repealed form as signed by President Tinubu earlier this month, the Access to Higher Education (Student Loans) Act 2024 represents two things in the Nigerian university education system particularly: the simultaneous withdrawal of the Nigerian state from funding university education and the introduction of tuition fees. That is, the new law simply means the government will no longer be paying money to universities to cover free tuition, which in turn means that the universities will be forced to introduce tuition fees, particularly the state universities that, despite the name, depend almost entirely on the federal government for most of their funding.
Still, I strongly believe that the new law can be a game changer in the Nigerian university education system. As I have said previously, it is clear that the federal and state governments cannot continue to fund tertiary education in Nigeria, given the country’s small tax base, poor tax returns to the government overall, and the very expensive nature of higher education everywhere. Particularly in Nigeria where graduates have a high tendency to japa to seek greener pastures in other countries, the current system of tuition-free university education simply amounts to subsidising the human capital development of other countries.
Therefore, the new student loan scheme can actually work out well and add value to the overall system: by significantly increasing the amount of funding available to our universities for teaching, research and general development; by expanding university places and enrolment; by giving students greater voice in university management; and especially by providing opportunities to indigent students who might not otherwise be able to afford university education.
But everything, in my view, depends on two crucial factors. First, the effectiveness of all longs depends on the ability of the loanee to repay. In a country where a majority of graduates do not find good paying jobs for years, repayment of student loans could easily become a big problem. Secondly, and most importantly, unless the student loan scheme for higher education works simultaneously with the reform of and increased funding for basic education, the system will in fact aggravate the very inequality that it is designed to reduce.
At the signing ceremony of the new law, President Tinubu said that education is the surest means of reducing poverty and that he aims to ensure that every Nigerian child is able to have access to higher education through the student loan scheme. This is a good idea. The problem is that his dream can only work if every Nigerian child has access to quality basic education wherever they live in the country. Money to pay tuition fees is not the only thing that prevents the average Nigerian child from accessing university: quality primary and secondary school education are even bigger hurdles to getting into and completing university.
Without quality primary and secondary education, a child cannot get to apply for university, and will therefore not have access to student loans. This is the case with millions of Nigerian children attending primary and secondary schools in many parts of the country today. The end result will be that only the children of the better off, who are able to pay for private primary and secondary education for their kids will be able to access the student loan, a situation that will worsen, not lessen, the very inequality the president wishes to reduce.
Now, let’s take the removal of subsidy for electricity. The truth is that most Nigerians do not even know that the government subsidizes electricity consumption in the country, and the fraud in that sector is probably worse than in the long-running fuel subsidy saga. How much exactly does the government pay in subsidy for a kilowatt per hour of electricity consumption by the average household in Nigeria?
The government has said that it will save N1 trillion per year by withdrawing subsidy from 15 per cent of the population on Band A who consume about 40 per cent of the total electricity supply in the country. The remainder 85 per cent of the population will still continue to enjoy the subsidy in electricity consumption, the government says.
But that is precisely where the problem lies. The privatization of the old National Electric Power Authority (NEPA), into the Power Holding Company of Nigeria (PHCN) and finally into 11 or 13 Distribution Companies or DisCos and a number of Generating Companies or GenCos is possibly the most unusual form of privatization exercise ever devised anywhere on earth. First, electricity has three components: generation, transmission and distribution. In 2011, the government retained control of transmission but privatized generation and distribution. But the privatization of generation and distribution is more like “parcelization”.
Regional units of the old NEPA were “parcelled” into the new DisCos, such that each DisCo can only do business in one, two or three states in the country. The result is that each DisCo is effectively a monopoly in its area of operation. This is unlike MTN, for example, which can do business throughout Nigeria simultaneously in competition with other providers everywhere you go. In other words, if I happen to live in Abuja or Niger or Nasarawa, I can only be supplied by AEDC, nor can AEDC supply anyone in Kaduna or Kano, thus, effectively removing the competition that is the hallmark of private enterprise.
Moreover, the division of the country into Bands A, B, C D and E is the most open and shameful government approval of inequality and class segregation ever imagined, let alone practised so blatantly. Everywhere else in the world, electricity bands are based on consumption and use, not supply, since supply should be everywhere in the country in the first place. But in Nigeria, our electricity banding system is based on supply, such that if you live in areas categorized as Band A, then you will be receiving 20 hours or more of electricity supply per day; if you live around Band E, you might be lucky to have five hours in three days.
If public policymaking must be underpinned by values, and they must, then this is the worst possible outcome of privatization for Nigeria, to consign millions of citizens in the world into darkness merely because somebody deems them unable to pay and therefore do not deserve to be supplied in the first place? Worse still, many users such as government buildings and offices, industries, military barracks, and others, many of which fall under Bands A and B do not in fact pay their bills, as recent stories in the news amply demonstrated.
The commutative effects of all these are that DisCos and GenCos are either unable or not incentivized to invest in new equipment such as meters, transformers, or increased generation, while the government-owned transmission company stifles everyone’s efforts by doing business as usual, while the regulatory body either looks the other way or lacks the capacity to effectively do its job. Thus, we arrive where we ended last week: subsidy withdrawal is no answer that fits all situations. It can work for higher education, given certain conditions, but will scarcely work for the electricity sector.
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