Professor of Economic History, Terhemba Wuam, of the Department of History, Kaduna State University, speaks with our Northern Bureau Chief, MUHAMMAD SABIU on current hardship fuelled by removal of fuel subsidy, salaries NASS members and Naira can regain its value.
Since the removal of fuel subsidy, do you think the end has justify the means?
Thank you very much. Since day one when President Bola Tinubu removed fuel subsidy, for him, he had fulfilled one of his campaign promises. Remember during the presidential campaign, he had said he would remove fuel subsidy if he became president and he kept faith to his promise. Indeed, successive governments had been telling Nigerians the way they were spending billions on fuel subsidy rather than on infrastructure. So the consideration was it was better for the Nigerian consumers to pay for fuel rather than government to continue subsidising it. As it were, subsidy was gradually becoming unsustainable. And for advocates of fuel subsidy removal like myself, we feel without removing fuel subsidy, Nigeria cannot be in the position to do a lot of things.
Our refineries are not working. We can’t maintain them when they’re selling at a loss. So fuel subsidy was distorting economic policies in the energy sector. Removing it and asking Nigerians to pay more was going to help reshape Nigeria’s economy and put it on a more capitalistic orientation whereby people pay for the value of products and services that will make economic planning more logical for individuals and for the government. In theory, that was what happened.
Yes, removing the subsidy suddenly brought shocks to Nigerians as we never envisaged it when the president announced its removal, but if we are able to overcome and manage these shocks, the country will eventually be better for it. The president took two fundamental decisions: one was the removal of fuel subsidy and the other was reunification of the exchange rate. Instead of having dual exchange rates (official and black market), we now have one single exchange rate. Instead of government to be spending on the naira to regain its value, the naira now has to find its value and this has made the naira to jump from the official rate of over N400 to unofficial black market rate of N800 now to something on the range of N1,500 or N1,600. So invariably, these are going to have implications for the nation’s economy. That is why we have inflation, rise in prices, among others.
What areas specifically would you advise the federal government to concentrate on because as it is the removal of fuel subsidy has put a lot of burden on Nigerians?
The way the government was going, they are trying to bring the value of the naira back from what it used to be. If not for some of these bold steps the government had taken, it was only a matter of time, this government could have collapsed due to fiscal and monetary pressures.
As it is now, the solution is for government to find ways to let Nigerians know that they have to be more productive in all sectors. For instance, industries have to grow; services have to grow; agriculture has to grow; exports have to grow for the value of the naira to rise. We have to be selling things in dollars outside what we consume. But are we doing that? They are a lot of opportunities and what we as a people can sell to the Western world, or sell to China apart from oil, because now we are depending on oil for a large part of our foreign exchange. Can we take steps to ensure that if we produce XYZ of agricultural products this year, we double it next year? There is unemployment in the country; can we provide security in the rural areas for the youths to farm; can we ensure that our farmers are more productive. Can we put more resources in education to ensure we produce quality graduates who can create jobs, who can work in industries and who can be more entrepreneurial? As it is now, our productivity is quite low and there is no way the Nigerian economy can provide subsidy for 200 million people or even give Nigerians a good life.
What Nigerians and government should be doing is to see how the GDP, which is less than $500bn, can rise to $2trillion in the next 10 to 15 years. The solution to this crisis is just one and that is productivity, for Nigerians to take independent actions and be economic actors both within Nigeria and the world stage. If that is not done, then relying on government will not solve anything. Nigerians have been relying on government too much and this government we are relying on is not capable of giving us the services we think it can give because the government is broke.
And the government should communicate that message better, that look, some of the things you expect us to do, we can’t do it. We are supposed to be taxing you more so that we can get resources to provide services. You know in the West, they run their government by taxing people and people have agreed and know it is the duty of government to provide all these social amenities.
So government has to involve the people, communicate with the people that, look you are the economic agents. From the direction this government is going, it is going towards capitalism and in the capital system, it is the people who are the productive agents not the government. The people produce more and the government takes from them, uses that money to provide infrastructure, quality education, and make the people to be more productive.
So the solution out of this economic quagmire is to make Nigerians to be more productive. If you have a company and you are producing 10 bags of pure water you have to increase it to 20 bags. If you have a company and you are producing products, you have to increase your productivity. So it is only increase in productivity that will lead to increased wealth in Nigeria.
Also, there are some sectors government is not paying attention to like the real estate. I recall that when President Tinubu was campaigning, he said that the real estate sector would be given some consideration. That was good. It is one of the economic drivers in the Western world. So government has to pay attention to this sector. There was a report I saw some years ago that the value of real estate sector in a country like Iran is around seven percent while that of Nigeria is just two percent of GDP. If you are able to raise the sector to 10 percent in the next 10 years, the value chain will be so huge for the economy. The youths in the urban centres who are hungry will get work in building houses. You will see that many will be involved in making doors, windows, blocks etc. It creates an entirely new economic ecosystem; towns will spring up; the economy will grow faster. There are several sectors government can cash in and Nigerians can be more productive.
You said government should encourage people to be more productive, but let us look at Aliko Dangote, he set up a refinery but he is not being encouraged. Do you think Nigerians will be willing to set up companies seeing how Dangote is being treated?
In the case of Dangote Refinery, selling the crude oil to him in Nigeria is better for Nigerians and Dangote, because you will be buying it in naira, not in dollars. He doesn’t need to source for foreign exchange to buy. That means if he is able to produce, the price will be much more stable for Nigerians to afford. We are living in a global economic system now and the oil sector is a global industry. Dangote has become part of that global economic industry. In the capitalist system that we are operating, nothing says that Dangote must source his crusade oil from only Nigeria. As an international businessman, what if Nigeria’s crude oil dries up? Will his refinery die? He could have factored that fact that he can get crude oil from anywhere in the world. Claiming that because Nigeria is producing crude oil, Dangote must source from Nigeria, from capitalist perceptive, is defective. In the US, for instance, they import crude oil and also refined oil, just as they export crude oil. In western Europe, their borders are free. For example, goods that France is producing will be exported to Germany. The same goods that Germany is producing will be exported to France. Both of them, for example, are producing cars; Peugeot cars will move from France to Germany likewise Mercedes Benz cars from Germany to France. You won’t say we are producing cars, don’t bring your car. The value chain is if Dangote is able to source for cheap crude oil from America, he can get it. If he can source for cheaper crude oil in Angola, let him go for it. He should not be tied to Nigeria’s crude oil. In the global context, if Nigeria is not giving him, he can’t get it from even Ghana.
The other aspect of my question is that would Nigerians be happy to invest seeing what Dangote is going through?
I don’t know the details of the feud between Dangote and the government. But because of its significant, it should not have been flying on the pages of newspapers rather it should have been handled internally. I don’t know the internal details like I said, I believe contracts have been entered by buyers of the crude ahead of time and so contractually Nigeria has an obligation to abide by the contractual agreements. The two parties should have handled the issue silently without becoming a public issue.
Nigerians have been reacting to the disclosure made by Senator Sumaila Kawu that he earns about N21million monthly salary and allowances. Based on the present economic crunch, what is your take on this?
The issue of emoluments of the members of the National Assembly is one that has agitated Nigerians for quite a long time. What I can say is there might be ignorance both on the part of public and the lawmakers on what they’re supposed to be doing with the resources that were made available to them. Many reports that I have seen will tell you that Nigerian lawmakers are the highest paid in the world, that they earned more than Americans lawmakers. However, I decided to investigate and discovered that that is not the true situation. In the US, a senator’s or House member’s salary is about $180,000 per annum. That is the salary. Now the budget or allocation to the office of every senator in The US is $3 million to $5 million. But in Nigeria, what people usually say is that Nigerian senators earn more than American senators because they combine both his salary and emoluments together. When you do that, you will discover that if a senator is claiming that his salary is N21million monthly and you multiply it by 12, it will give you N252million which is around $168,000, whereas the salary of an American senator alone is $180,000. The budget for a senator in a state like New York is $5million. If it is for a small state like Hawaii, where they are not up to one million, the budget for his office will be $3million. So the entire salary and budget for the office of a Nigerian senator at the exchange rate we are having now is less than $200,000. During the time of President Goodluck Jonathan, when the exchange rate was good, it was around $400,000. Again, people are confused; they look at a senator as an individual. A senator is not an individual; it is the office. And there are only 105 of them. If they’re doing what they’re supposed to do, realistically, that salary is not too much.
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