Following the adjustment in the pump price of petrol to N617 by the NNPCL, the presidential candidate of the Social Democratic Party (SDP), Barr Adewole Adebayo, has said the new pump price would heighten the poverty rate among Nigerians.
In this interview, Adewole Adebayo speaks with Subair Mohammed on the current economic decision of Tinubu’s administration to remove subsidy, issue palliative and the implication of the current hike in fuel prices for Nigerians.
Given the price of petrol at N617 per litre consequent to the removal of fuel subsidy, would you still label critics of subsidy removal as hypocrites?
To start with, there are two types of people who criticise subsidy removal. There are some hypocrites while some are consistent in their criticism.
For instance, some of us who criticised the subsidy removal have grounds to criticise the policy but those who supported anyone or any platform that said they would remove subsidy from day one are hypocritical.
Once you agreed to throw a five-year-old child from a 10-storey building, you cannot say I would be surprised if the child broke his limbs. There is no way you will implement the subsidy removal policy as they are doing it now and you won’t have the same consequences.
Economics does not admit to cheating, you can only cheat in politics. You can inflate numbers in politics, but when it comes to economics, you can’t. You have to take the right policies because if you don’t, the consequences of wrong policy implementations will follow.
When we talk about hypocrisy, it didn’t start with the labour unions. It started with President Bola Tinubu who vehemently opposed former President Goodluck Jonathan when he adjusted a smaller amount of subsidy and they all took to the streets against it.
But when he came to power, he took the opposite direction and finished everything once and for all. It is not a political statement when you say people are hypocritical. We predicted all this. We discussed it then.
Nobody can pretend that they are not aware that it will affect factor cost and if it affects factor cost, it will affect cost of living. If it affects the cost of living, more people will go into poverty.
There is nothing new in what has happened, it is just the natural consequence of the removal of fuel subsidy. And that was why during the presidential debate, we were pushing for an alternative view that they should not do it, but they have done it now, nothing has surprised me at all. In fact, it appears this might just be the beginning except drastic steps are taking to go off that line.
Would the prices of petroleum products have been different if the country’s refineries were working optimally?
Except when the production is toxic and problematic, it is always better to produce locally. We have a duty to refine locally because it is an industrial policy decision.
However, it doesn’t automatically guarantee lower prices but it guarantees employment and reliability in case of distortion in the market and you have a marginal decrease in cost. Look at other things that are being produced in Nigeria. Their prices are not going down. The cassava we consume are planted and harvested in Nigeria. Why is the price of cassava not falling?
For over a decade, we have been producing cement in Nigeria. Former President Olusegun Obasanjo once said when we started producing cement locally, it would come cheaply. But cement has never been cheaper at all. Rather, it is even worse than before. When government wants to commit your resources to their favourites, they will tell you that let us put our money in the hands of rich private people and you will get good prices along the way.
The law of economics doesn’t have a brother or sister. Once the person is in the capitalist world and he is trying to maximise his profit, he will sell anything to his own mother at any price. So, the price mechanism is just a small part of developmental economics.
In view of the increment in the fuel pump price, some people are now suggesting a choice of compressed gas as an alternative, what do you think?
Those are microeconomic decisions with individual firms to make a decision about because a government that cannot guarantee the price of petrol and take a policy decision and says it is not its responsibility to guarantee petroleum prices, such government cannot guarantee CNG or LNG. I think what government needs to do is to foster energy production by lowering costs for everybody including finance cost, infrastructure cost, freight cost and regulatory cost.
Talking about drastic steps, apart from the N8000 palliative, what steps would you suggest the government could take?
We should stop misusing the word, palliative. The N8000 palliative is from the existing 2023 budget. The carryover is the by-product of plans the former President Buhari administration left behind as to how they would manage the subsidy removal.
Even this $800m from the World Bank was negotiated by the past government. Policy watchers shouldn’t behave as if they didn’t know that it was in the offing. It appears the government is not aware of what we called monetary neutrality.
When you have no food, no means of transportation and no medical care, throwing money is not going to increase the number of service providers. It is not going to increase the value of real goods in the market.
The N8000 would give room for wastage. When the money gets to the beneficiaries, it is useless to them in real terms. In the end, it may cause a bit of inflation.
The Nigerian elites are behaving as if there are no alternatives to subsidy removal. The subsidy has gone. I don’t agree with it though, but it is a policy of the government and it appears every mainstream political party and analyst agreed to that bad policy.
But if you want to continue along that path, what you do is delink the people from the value chain of petrol. And the way to do this, for example, from the transportation and logistics point of view, you make sure that the price of petrol does not impact the ability of people to commute.
That is why you see cities in Europe, America and around the world; common people don’t feel the negative effects when the price of petroleum is adjusted upward or downward because their government has provided public transportation that has been delinking from that. The common people are the easiest to take off that line.
You said there could be further dislocation in the prices of petrol if there is further dislocation in the price of crude oil and depreciation of the naira?
There are three factors affecting it and none of them is accidental. It is the by-product of our politics. We are either importing as we are importing now, or we are preparing the market in continuation of importation, meaning even if you are producing petroleum in Lagos, or Port-Harcourt or Akwa Ibom or Kaduna, the intention of the policymakers is that just we don’t regulate the price of telephone, shoes or clothing or anything you buy in the market, you just follow what goes on in the international market.
That is the policy position taken by APC, PDP and the Labour Party, that is the mainstream right-wing parties in Nigeria.
They are leaving the naira to what they called market forces and the market is regulated by foreign currency. Unfortunately, most of the things people need in their lives are controlled by government policy but politics controls who goes into government.
If your well-being, sustainability, cost of living, employment, purchasing power, ability to preserve the fruit of your labour to live in peace, all are implicated by government decisions. Therefore, they should be the ones to dictate your politics. These are the things you should consider when you are in politics.
Are you implying that the unification of the foreign exchange market and removal of the fuel subsidy by Tinubu’s administration is geared towards helping the friends of the government?
Is that not obvious? I am not saying it pejoratively. In economics, everything is about choice. There are many alternative routes to development.
Nigeria is a resource-rich country. I am not saying that because of her population, I am saying it because of the quality of people we have. Nigeria is rich in manpower. I think it is not too late for the government, starting with President Bola Tinubu and others to rethink and have a backup plan because I have a feeling and I am saying this with all sense of responsibility that if they go the way they are going, they will fail woefully.
This is not because the government hate the people but because they are adopting models that never worked. In the past two months, more people have fallen into the poverty circle. This will surprise President Tinubu himself because his government is yet to succeed in lifting five people out of poverty.
The subsidy is one out of about 2,000 programmes that require spending government money. If you are looking at the top 100 money wasters, subsidy for petrol is not one of them.
The running costs of the National Assembly, the presidency and the military are major wasters of government money. We need the military but not the waste that is there.
The third is the management and funding of the JV (Joint Venture) and production-sharing contract. The fiscal management of taxation, and the waivers they give and the way we subsidise foreign exchange.
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