This is Time for Comprehensive Economic Reforms

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Patrick Okigbo III

As the Nigerian adage goes, the wind has exposed the fowl’s behind and it is not pretty. For years, high oil prices glossed over Nigeria’s poor economic choices but a reversal in fortune has put Nigeria’s vulnerability on global display. Will Nigeria’s leaders – in government, civil society, and the private sector – use this opportunity to drive the needed reforms? There is a compelling case for the removal of the fuel subsidies and to drain that cesspool of corruption. The question is; can Buhari do it?

No reform process is easy but some are easier than the others. A fuel subsidy reform, at this time, is not as difficult or complicated as, say, a public service reform. This is because the drop in crude oil prices means that the reform will have minimal impact on the poor.
The government must be commended for realising this fact. In March 2020, Petroleum Product Pricing Regulatory Authority (PPPRA) dropped the retail price of a litre of petrol from N145 to N125, in the first instance, and then to N123.50, in the second instance. This is a move in the right direction but it has, again, stopped short of a full reform. The gains will not be sustained. They were not sustained when a similar programme was tried in 2016.

While Nigerians are thankful for the reduction in price, the review looks arbitrary. How did PPPRA arrive at this figure? Why is PPPRA the only ones anointed enough to talk to the gods and then interpret the revelation for the rest of us? Why their pricing template is not made public for other experts and market players to chime in? Using the 2016 PPPRA template, Nextier Advisory calculated that the current pump price should be about N100. If this is correct, why are Nigerians paying an extra N23.50 per litre?

President Buhari, this is the time to act. As was the case in 2016, you have another golden opportunity to remove the fuel subsidy and rout those who have continued to profit from the subsidy at the detriment of the masses. Let market forces determine the price of fuel as it does the price of garri. The government should ensure that marketers do not collude to set prices.

The current state of the world economy provides the government with the opportunity to resolve many of its fundamental economic challenges. Most Nigerians appreciate that the country can’t continue stumbling its way to the future. It needs far-reaching reforms. Nigerians still see President Buhari as bold enough to make difficult choices. They would understand if the President calls for a “big bath”, or that concept in finance where all of the defective decisions and pulled together for a one-time write-off.

The opportunity for reform is now. Not tomorrow. Now! No one knows what the state of the world would be in the morning. President Buhari should outline the major reforms and communicate how he has decided to sequence them. He should invite comments from Nigerians who already know that the country can’t continue to prioritise fuel subsidy payments over investments in education, healthcare, infrastructure, or defence. Nigerians are waiting for this clarion call from President Buhari. He should see this as his opportunity to define his space amongst the constellation of leaders.

President Buhari, fear not. The labour unions are the only ones who would resist the reforms because of the potential loss of jobs at the government refineries. Counter their argument with evidence of the billions of dollars that have been spent on turn-around maintenance (TAM) of the refineries without any considerable success. There is no assurance that further spending on the refineries would make any difference. The government should be bold enough to propose a privatisation of the assets after putting in place a generous severance package for any staff who may lose their jobs.

The labour unions cannot argue about the negative impact on the masses if the reform is implemented now. The current low oil price regime means that there won’t be any increase in pump prices and so no increase in the cost of transportation for the poor. Fuel prices may go back up in the future but that will be after the world has defeated COVID-19 and opened up its doors. At that point, Nigeria can recommend a suite of palliative measures including but not limited to universal health coverage, conditional cash transfers, transportation vouchers, etc.

In conclusion, the current global challenges have presented an opportunity for President Buhari to provide a definitive solution to the perennial fuel subsidy. His ability to seize the moment could be what brings together his life’s work to its apogee. This could be that opportunity he has been looking for to strike one effective blow on corruption. Failure to address this problem could quicken the decline of this once-great nation. All eyes are now on President Buhari to see if you can rise to the occasion and do the needful. It would be a shame and a wasted opportunity if he doesn’t.

Okigbo III is founder and principal partner at Nextier