Will palliatives compensate for inflation impacts?

Sopuruchi Onwuka

Federal government says the Central Bank of Nigeria (CBN) will begin distribution of grains and fertilizer from Monday as part of the efforts to cushion the impact of fuel subsidy removal and the associated jumps in the prices of goods and services in the country. But players in the private sector decry the move as mindless.

According to the office of the Vice President, the plan also comes with salary increase for civil servants and public sector workers in the country, raising questions over the fate of the workers and struggling enterprises in the private sector.

The Oracle Today quotes the Organized Private Sector (OPS) as saying that civil servants and public sector workers account for insignificant 12 percent of breadwinners in Nigeria’s 213 million population.

Speakers at the last Lagos State Employment Summit agreed that the private sector account for over 90 percent skilled and semi skilled employment in the country. They lament that the rising operating cost associated with infrastructural deficits and cost of self electricity generation make new business start ups economically and commercially unviable.

The Oracle Today reports that electricity is the biggest factor production in Nigeria, supporting almost all the micro, small, medium and large enterprises that mass up the nation’s economy. Insufficient supply of electricity and the pressure on businesses for self generation build massive operating cost and drain revenue margins.

Nigeria currently has installed electricity generation capacity of about 13,000 megawatts (MW), available capacity of about 9,000 MW, transmission capacity of 5000 MW and paltry 4000 MW of distribution capacity. Access to grid electricity supply is 55 percent.

Managing Director of Seplat Petroleum, Mr Roger Brown, told The Oracle Today that actual consumption of the 55 percent of Nigerians with access to grid supply is 25,000 MW. He said that apart from the 4000 MW that comes irregularly from the grid, Nigerians consume additional 30,000 MW from self generation.

The Oracle Today reports that self power generation in Nigeria is fired with petrol and diesel, the prices of which have kept jumping with the removal of subsidy. The situation has subsequently escalated the cost of running businesses in the country.

According to the Lagos Employment Agency, over 90 percent of small business upstarts in the country suffer early attrition due to high cost environment mostly associated with acute energy deficit and high cost of alternative sources of supply.

Business pundits therefore opine that government’s plans to distribute grains and fertilizer and raise salaries of government workers are mere window dressing to confuse Nigerians about the prevailing adversities trailing fuel subsidy removal and the attendant worsening cost of living crisis in the country.

There are also questions about the role of the CBN in distribution of grain and fertilizer as demanded by the Vice President and the governors.

More criticisms hit the antithesis of removing commodity based fuel subsidy and replacing it with various social palliative measures that are supported with interest yielding loans from multilateral credit agencies.

Last week, the Senate approved a request by President Bola Tinubu to borrow $800 million from the World Bank to help address rising fuel prices after stopping a popular but costly petrol subsidy in May.

Nigerian petrol prices reached N617 per litre on Tuesday, the highest ever. The subsidy had kept prices cheap for decades but became increasingly expensive, costing the government $10 billion last year.

Programmes by the government to deploy natural gas mass transit powered, set up autogas conversion plants and support electric buses and cars with charging infrastructure across the country are yet to be funded, according to the Nigerian Gas Expansion Programme (NGEP) office.

Enthroned by one of the most inept and corrupt administrations of the federal government through an election that is openly marred by irregularities condemned by the international community, President Tinubu is left with little option than to embark on reforms to tackle contend with debts bequeathed by his benefactor, former President Muhammadu Buhari.

The labour unions had held former President Buhari down with the demand for rehabilitation of the nation’s refineries as the precondition for subsidy removal, but the administration of President Tinubu did not understudy the situation on ground before declaring fuel subsidy removal in his inauguration speech, an advantage optimized by the Nigerian National Petroleum Company (NNPC) Limited which is accused of wasting billions of dollars in vain refinery rehabilitation.

Nigeria, Africa’s largest oil producer, imports almost all its refined fuel due to inadequate refining capacity and neglect of existing refineries.

Arriving to meet empty treasuries and mounting debts, power hungry Tinubu is confronted with unavoidable economic reforms that now pitch him against impoverished population over 213 million of mainly angry youths.

And his prompt and hasty removal of the fuel subsidy indicates the desperation to lay his hands on available cash after rumours of hefty bribes that slanted the electoral rules t produce him as president.

Labour unions have criticized government’s ending of the fuel subsidy without measures to mitigate rising prices. Inflation which has been in double-digits since 2016 has climbed further to 22.79% in June.