BETWEEN COMMON SENSE AND POPULISM 

SEUN AWOGBENLE argues the need to cushion the impact of oil prices on the most vulnerable in society 

Look, make no mistake about it, we are currently in a fight for the soul of our nation. The contest is between those of us on the right of the argument who are opposed to the reversal of fuel subsidy and those on the left who are looking to take the country back to the biblical Egypt. But to reduce the argument to merely ideological would be to miss the point; it is more roundly a contestation between common sense and dangerous populism.

I have always believed that in building a nation there must be issues that are outside the remit of politics, irrespective of where you belong on the political spectrum. But I am also under no illusion about the divisive nature of politics, so while it is okay to diverge on the approach to development, there are times when national interest must trump personal ambition or the visceral quest for power and put the nation first.

And there is no issue that mirrors this situation more accurately than the dangerous refrain by some opposition figures to take Nigeria back to the ruinous fuel subsidy regime. The real danger is not just in them saying it as an attempt to poll better or sway voters to their side. When you consider the relentless determination with which they are defending this reckless proposal, one begins to wonder if they truly mean it or if it is only drama taken too far.

But the more important points that those of us who are pro-subsidy removal have made time and again is that based on our realities in May 2023, the country could not afford to continue with fuel subsidies. The subsidies had created a major hole in our public finance that was crowding out essential investments in the sectors that could support growth, and we were only bidding our time before an economic apocalypse.

Secondly, neither of the candidates that are advancing this reckless economic proposal have answered the more important question of how they intend to fund the plan. But we know that to return fuel prices to pre-reform levels would cost an estimated N20 trillion. When they are confronted with the folly and harsh realities of their plan, they are exposed as mere fantasists who are out to say just anything, even if it meant deception.

One of the political parties, for example, is proposing a producer-based subsidy. But they should know if they had done enough rigour that the country does not even have enough barrels to meet the demand of local refiners; there are legacy obligations under the previous subsidy arrangements that would make it impossible. But even if we did, are they planning to sell the barrels at less than market price, and if they did, what is going to happen to the states and local governments whose obligations have gone up with higher minimum wages and capital projects?

Fuel subsidies follow the foreign exchange; to return fuel subsidies would be to also return the country to the days of pegging foreign exchange, and that would in effect undo all the gains we have made under current reforms. The investment climate would instantly become unstable; business would become unattractive, and some of the investment we have managed to attract, both in portfolio and direct investments, could begin to dry up. So, in reality, the most important gain from the reform is that it has helped to rebuild our economic foundations, which is a condition that is necessary for investment, productivity, and growth.  

However, with global oil prices likely to remain elevated as a result of the tensions in the Middle East, I am in no doubt that the government must intervene to ease pressures on individuals and households. I therefore support whatever effort government can muster to ensure that families are protected against the current global shock. But beyond price modulation or NNPC discount, as it has been described, the government must go further to provide targeted support and direct relief to the most vulnerable in society to cushion the impact of the oil prices.

The cost of food items and transportation are the two areas that have impacted household income the most. These are the areas where the government must double its intervention to ensure that food is not priced out of the reach of the ordinary people.

There is still a lot of work to be done, but we can also admit that the work has started. The next phase of growth must include how to ensure that the macro gains are able to translate into more direct benefit for the people, and that means we must stay the course on current reforms, improve productivity, and target growth at double digits.

 Awogbenle, a development economist and founder of Policraft, writes from the United Kingdom. He can be reached via seunawogbenle@gmail.com

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