Abubakar Atiku Alkali
It’s in the news that the IMF is pressurising Nigeria to further devalue its currency. It’s equally in the news that former CBN governor and HRH the Emir of Kano has advised the FGN to withdraw petroleum subsidy, devalue the Naira and raise VAT! With due reverence to the Emir, I personally find these pills unbearably bitter to swallow. I defer to the fact that he’s unquestionably sagacious in matters of finance and economics – I know nothing about either – thus, my arguments may be impressionistic, but I’m sure I know more than the Emir does, how agonisingly painful it would be for the ordinary Nigerian when such policies are implemented. Therefore, even if no one will ever read this, my conscience would have been satisfied that as a Nigerian – one of the potential bearers of the burden of these unfriendly policies, I have cried out.
Concerning fuel subsidy removal, I still recall what the Emir said at a debate on this very topic when he was the CBN governor. He said he supported the removal of “rent” but not that of subsidy. At yet another forum, His Highness the Emir as CBN governor said that a significant part of what was indeed being paid out as subsidy was nothing but money paid fraudulently to people who never imported any petroleum products into the country. He said Nigeria paid N291 billion in subsidies in 2009 and by 2011 the figure had jumped to N2.7 trillion! One may therefore wish to know how much the Buhari government has so far paid as petroleum subsidy if any submission for its removal is to be justified.
The president had argued a number of times before coming to office that there was nothing like petroleum subsidy. Has he just realised that there is indeed subsidy and that it has to be paid? Wouldn’t it be better to go ahead with the plans of making our refineries operate at full capacity thereby foreclosing the need for fuel importation and the consequent subsidy payment?
A number of times, the proponents of subsidy removal base their arguments on a defective comparison between the pump price of petroleum products in Nigeria and other (particularly developed) countries. What they fail to compare or intentionally choose to ignore, is the standard of living in Nigeria and the countries with which the comparison is made. If a litre of petrol costs £1.09 in the UK, which is nearly equivalent to N333.00, that alone cannot be a plausible justification for subsidy removal. Minimum wage in the UK is around £1000.00 which is approximately N305, 000.00 at the prevailing exchange rate. Can the Nigerian government pay this amount if it withdraws subsidy? Our minimum wage, won after maximum rage is N18, 500.00; a mere 6.06% of what the UK pays. So where’s the basis for comparison?
In addition, these countries have efficient, adequate and affordable public transport system so that owning a car is a luxury and not an absolute necessity that it is in Nigeria. Many Nigerians leave their homes as early as 5:00 a.m. so as to reach their offices by 8:00 a.m. and closing from work at 4:00 p.m. or 5:00 p.m. as the case may be, they get home at 10:00 p.m. or much later.
I similarly find the call for an upward review of VAT disturbing. Taxes in developed countries are high but their citizens enjoy a number of benefits which are commensurate to the amount of tax they pay. In most of these countries, education is free (please no one should tell me that education is also free in some states in Nigeria because you won’t take your kids to those schools!). They also enjoy – except for a few specialised services – free medical care. I was a beneficiary while in Edinburgh even as a non-citizen.
In those countries, people can afford decent meals. A governess can eat what a governor eats because prices are stable no matter the season or occasion. In Nigeria, it is only on festive occasions when prices typically quadruple that some of us are able to borrow and have some chicken parts in our meals and drink some juice! Most Nigerians eat only to survive and many hardly eat more than twice in a day!
Turning the deadliest pill – devaluation, I’m of the opinion that there’s no value remaining in the Naira that can be taken away anymore. I think the only option is to discard it and embrace a foreign currency. I still can’t conceive of the wisdom in devaluation. Nigeria has been devaluing since 1986 – that’s as much as I can remember – but the only visible result has been the continued pauperisation of the ordinary Nigerian and the proliferation of parvenu bureaucrats.
If devaluation is meant to attract foreign investment, we should know by now after experimenting with it for close to 30 years, if it is effective. No foreign investor would come only to be abducted by militants or killed in a Boko Haram suicide attack. Security therefore, more than devaluation, is the impetus for inducing foreign investment. And which foreigner will invest in an economy in which indigenous entrepreneurs cannot invest? Money has been made very cheap to the banks: with interest on savings under 4%, there’s no incentive for savings while cost of borrowing is very high – over 25%!
Rather than inviting the needed foreign capital, devaluation has only helped in overpopulating our labour market as SME’s could no longer import the required equipment and machinery and are thus forced to close down and lay off their personnel. That’s why the Nigerian economy has always been state-driven.
If devaluation is meant to bring more cash in Naira to the country through our export earnings, it is correspondingly going to deplete our foreign reserve through the settlement of high import bills as our country is import-dependent. Either way therefore, devaluation can never be in the interest of Nigeria and Nigerians.
This IMF lycanthrope has lived with us long enough without results; hence, it is high time it left us alone. Why cling on to a counter-productive policy? I want to believe that what we need is not the IMF but maybe the FBI to help us recover our stolen money that is stashed away in foreign banks. If that’s done, Nigeria may even become the West African IMF.