…By Roland Peterson for TDPel Media.
Nigeria’s newly elected President, Bola Tinubu, delivered a national address on June 12th, 2023, urging Nigerians to accept short-term sacrifices following his government’s decision to eliminate the long-standing fuel subsidy.
This measure has resulted in a significant increase in petrol, transport, and food prices.
Tinubu, elected after a highly contested vote in February, emphasized the need to end the fuel subsidy, which has been a massive drain on the government’s finances, foreign exchange, and has contributed to growing debt.
Although Nigeria is one of Africa’s leading oil producers, it has limited refining capacity.
Impact of Removing Fuel Subsidy:
For decades, Nigeria has traded crude oil for gasoline, which it then subsidizes, leading to substantial revenue loss, foreign exchange depletion, and mounting debt.
Tinubu’s decision to end the subsidy has caused petrol prices to triple, resulting in higher transport costs and a ripple effect on food prices and electricity.
Many Nigerians rely on petrol-run generators for power, exacerbating the impact.
In his address on Nigeria’s Democracy Day, Tinubu acknowledged the painful necessity of discontinuing the subsidies for the country’s economic well-being.
Promise of Future Investments:
Tinubu assured the Nigerian people that their sacrifices would not be in vain.
He expressed gratitude for their trust and belief in his government and pledged substantial investments in transportation infrastructure, education, regular power supply, healthcare, and other public utilities.
Despite Nigeria being Africa’s largest economy, citizens already face challenges such as inflation of around 20%, intermittent fuel shortages, and an unstable national power supply, forcing many to rely on generators.
Expert Opinions and Criticism:
While experts agree that removing the subsidies was a long-overdue move, critics argue that the government has not implemented sufficient measures to mitigate the inflationary impact.
The removal of subsidies resulted in a steep rise in petrol prices, increasing from 190 nairas per liter to approximately 540 naira ($1.20) per liter.
Additionally, Tinubu’s government recently dismissed the central bank chief, who was subsequently arrested by the DSS domestic security and intelligence service as part of an investigation into his role.
The central bank director had faced criticism for implementing former President Muhammadu Buhari’s cash swap policy, which led to a severe shortage of physical currency earlier in the year.
Tinubu’s Monetary Policy Plans:
President Tinubu, a former governor of Lagos and businessman, criticized the current state of the central bank in his inaugural address, calling for a thorough overhaul of monetary policy.
He advocated for a unified exchange rate to stimulate investment and expressed dissatisfaction with the multiple currency exchange system, tight controls on accessing foreign currency, and the government’s debt program.
Conclusion:
President Bola Tinubu’s decision to end Nigeria’s fuel subsidy has sparked a significant increase in petrol, transport, and food prices.
While recognizing the short-term sacrifices required, Tinubu promised the Nigerian people substantial investments in various sectors.
However, critics argue that additional measures are necessary to mitigate the inflationary impact.
Tinubu also highlighted the need for a comprehensive revamp of the monetary policy, including a unified exchange rate, to stimulate investment and economic growth.