In the last weeks, the public discourse has been centred around the planned protest against the present economic hardship in the country. Many of the citizens have expressed their frustrations with the present administration’s unfriendly economic policies, which have led to an increase in the pump price of petrol; a rise in electricity tariffs and devaluation of the Naira. These policies have caused huge pain, and the nation seems to be at the edge while the government continues to operate business as usual.
It is beyond doubt that the terrible execution of the key economic policies of this Government led to the pitiful economic outlook today. Particularly, the concurrent removal of fuel subsidies and devaluation of the Naira–when the country was still importing all of its petroleum products–was bound to result in unaffordable fuel prices – (over N1000 per litre) for over 133 million persons already in multi-dimensional poverty.
There is no doubt that the country needed critical reforms; however, it behoves the government to properly plan and phase such policy actions to achieve the planned benefits and cushion any negative effects. The reckless policy implementation effectively plunged several millions into deep poverty overnight as the cost of food, medicine, and other basic commodities necessary for a good living became unaffordable. Despite this, the government proceeded to increase the electricity tariffs which lopsidedly affected local manufacturers and businesses who are now required to pay over 200% more for electricity. This policy has contributed to more expensive local products.
With the hasty removal of fuel subsidy and currency devaluation, and ever-increasing cost of governance, the present administration seems to have crossed the Rubicon with Nigerians as we approach a national tipping point; but I believe that we may yet chart a course for National prosperity from this bleak point. The future may yet be salvageable to alleviate the suffering of the people beyond the distribution of ineffective rice palliatives.
First, the government must tackle rising food inflation caused by insecurity in farming rural areas; inefficient transportation & logistics; and nonexistent storage for perishable farm produce; and obsolete farming techniques leading to low agricultural yields. The government must immediately introduce and deploy mechanized farming equipment and techniques for the mass production of stable food consumed in Nigeria. Also, the government must invest in massive education of farmers on modern farming methods and grant agricultural loans to small and medium-scale farmers to purchase seeds and machinery.
Importantly, the present administration must empower the local governments and law enforcement agencies to remove all barriers to the logistics and transportation of farm produce to the urban city centres. It is common knowledge that farm produce from the agricultural north transported to the urban centres is subject to numerous unofficial taxes and levies by State and non-state actors, which operate to increase the cost of final produce in the urban centres thereby driving inflation. Hence, the Government must empower the local governments to ensure that all agricultural products transported through their territory are not subject to any levies and taxes. The theory is simple: the easier and faster, farm produce is transported from the farm to the market, with fewer avoidable losses of perishable produce, the cheaper the food items will be. This will cause an immediate deflation of food prices in real-time, while the government invest in better transport systems such as railways to boost interstate agricultural trade.
While there have been several calls to open the border and import food items and poultry produce to crash the price of food; this action is counterproductive, considering that the exchange rate is volatile and conversion rates are high. Any import of food is unlikely to reduce the cost of food in the market. Rather, it is likely to hurt local production.
Secondly, the Government must temporarily suspend and or reduce the collection of Value Added Taxes (VAT) on essential goods including food and drinks, as well as personal income tax (PIT) on all workers. While this will reduce government revenue, it will greatly affect the price of commodities in the market, and simultaneously increase the disposable monies in the hand of the worker to spend. This is essentially an indirect cash palliative for millions of working families without the government granting cash transfers. In addition, the Government should also temporarily suspend the collection of customs duties, and levies on all imports of essential drugs, child necessaries, cars, machinery, spare parts, etc – this will reduce the impact of the devaluation of the currency and ensure that import of essential goods remain affordable and prices remain manageable; and the government is not profiting from the misery of the masses by continuing to levy more taxes on poverty. The uneven distribution of rice palliative and cash transfer, while commendable in deed, is fraught with corruption, as it does not broadly encompass the majority of the populace. A reduction in taxes will impact the economy to sustain the economic activity.
Thirdly, the government must immediately clean up and reform the petroleum sector and the Nigerian National Petroleum Company Limited. The country has continued to be plagued with unending fuel queues with no end in sight. While the Petroleum Industry Act (PIA) 2021 has sought to introduce a regime of transparent petroleum pricing to ensure a constant supply, the execution and implementation of the Act are lacking. There is a need for total transparency in the pricing of petroleum products. It should be stated that there is no going back on the payment of subsidy as that ship has sailed, and any attempt to return to the payment of subsidy will effectively bankrupt the country, considering the unstable foreign exchange regime.
The recent revelations by– Alhaji Aliko Dangote of Dangote Refineries, on the importation of substandard petroleum products into Nigeria have renewed calls for a comprehensive reform of the NNPC and a stop to the business of importation of fuel, which is shrouded in secrecy. This administration must ensure that where petroleum products are imported into Nigeria, all necessary import costs of the cargo must be publicly declared by the oil importers, and verifiable by members of the public from the Nigerian Midstream and Downstream Regulatory Authority (NMDRA).
Further, the administration must immediately tackle the ongoing illegal lifting of crude oil from many of the nation’s oil assets by improving security and accountability of the oil lifted from the oil fields and wells. All technical operators of petroleum assets must be mandated to install meters to ascertain the amount of oil lifted from the fields. A reform of the upstream and midstream sectors will provide short-term funds for the country while greatly improving the short-term and long-term economic outlook of the economy.
Lastly, there is need for a medium to long-term political reform to engender public trust. The government must reform its political institutions if it desires to chart a path to sustainable growth. These institutions include law enforcement, the judiciary and the electoral system. The book ‘Why Nations Fail: The Origins of Power, Prosperity, and Poverty’ published in 2012 by professors Daron Acemoglu and James Robinson sheds insight into why underdeveloped countries like Nigeria, have a hard time transitioning to modern developed economies. The central thesis of the books is that race, geography and culture are not the determinants of prosperity or poverty, but prevailing political and economic systems/institutions in these countries. It follows those political institutions such as the Police, Judiciary, National Assembly and Presidency are the keys to a successful nation. An inclusive political system that allows for a transparent political selection process is going to breed prosperity; as the leaders are incentivized to enact favourable policies that will deliver prosperity to the people to preserve political power while shunning actions that lead to increased poverty and political unrest.
Lastly, despite the success and failings of the 2023 general elections, this is the time to ensure that real electoral reforms are prioritized. Key amendments to any new electoral law should include (a) compulsory real-time electronic transmission of the electoral results by the INEC to engender accountability; (b) removal of the presidential power of appointment of the INEC Chairman and abolishment of the office of Chairman (c) empowering all State electoral bodies to conduct of all elections within its territory for better local representation (d) removal of federal or state government control of INEC including funding, staffing, & appointments (e) introduction of complete electronic accreditation, voting, computation & collation, the transmission of elections. (f) introduction of permanent special courts removed from the Federal High Court administration, for hearing of electoral matters.
It is time to end the politics and begin the difficult task of governance.
