Removal of Fuel Subsidy, Change of Exchange Rate Trap Nigerians in Misery

By Ezinwanne Onwuka

Nigeria’s inflation rate stands at 24.8 per cent said to be linked to the stoppage of the payment of petrol subsidies and of the unification of the foreign exchange rates – reforms launched in the first two weeks that Bola Ahmed Tinubu started calling the shots as Nigeria’s elected president.

“Fuel subsidy gone.”

President Bola Ahmed Tinubu put an abrupt end to Nigeria’s fuel subsidy era on May 29, earning him accolades from the World Bank and the International Monetary Fund (IMF) which have been pushing for an end to the policy for years.

The announcement caused the price of petrol to jump from N195 ($0.25) per liter to N565 ($0.73) per liter in all 36 states of the federation and Abuja, the nation’s capital. In July, the price hit N617 ($0.80); and the country’s oil marketer Nigerian National Petroleum Company Limited (NNPCL) attributed the rise to “market forces.”

President Tinubu, in June, admitted that  scrapping the petrol subsidy would “impose an extra burden on the masses“, but noted that it was necessary to “save our country from going under.”

The subsidy had kept petrol prices cheap for decades but became increasingly costly – the government spent N7.6 trillion ($10 billion) last year – leading to wider budget deficits and multiplying government debt.

With the subsidy era gone, the World Bank said in June that the Nigerian government could still save up to N2 trillion ($2.6 billion) this year which would spiral to over N11 trillion ($14.3 billion) by the end of 2025.

“The Central Bank must work towards a unified exchange rate.”

In addition to scrapping the subsidy policy, Tinubu’s government also “floated the naira” by closing the gap between the official rates and the black-market rates of the foreign exchange market.

In response, the naira immediately fell 21 per cent against the dollar on the official market, Business Day noted.

The naira depreciated from N463/$1 to 755/$1 after the Central Bank of Nigeria  (CBN) directed commercial banks and forex dealers to trade forex at market-determined rates. This was in line with the President’s remark that the nation’s “monetary policy needs a thorough house cleaning.”

The reform immediately drove up the prices of imported goods and services, devastating small businesses and low-income households due to Nigeria’s import-dependent economy.

But defending his decision, Tinubu said it was in the best interest of the nation just like the removal of the petrol subsidy.

Nigerians bemoan policies

The petrol-price hike triggered an increase in the prices of goods, services, and transportation fares, causing the cost of living to skyrocket – an inescapable challenge for Nigerians, especially students, low-income households, and small businesses.

Gina, a young adult doing a one-year mandatory national service job, expressed frustration at the astronomical rise in the cost of commuting to Wuse in the Federal Capital Territory (FCT) from Masaka in Nasarawa State.

“I came out on Tuesday to board a vehicle to NYSC Secretariat, Wuse but the drivers were saying it is no longer N250 but N500,” she told TruthNigeria, “I just headed back home as the amount exceeded my budget.”

For Emmanuel, a tricycle, commonly known as “keke”, taxi driver in Abuja, President Tinubu does not have the interest of Nigerians at heart.

“That man (Tinubu) no like us at all (does not care about Nigerians),” he lamented in Pidgin English, “Na him talk say make the poor breath na the same him no wan allow the poor breath (He was the one who said that the poor should be allowed to ‘breath’ yet he is the cause of all these sufferings).”

Tinubu Rolls Out Palliatives

President Tinubu on August 17 bowed to pressure from lawmakers and labour unions to offer relief to Nigerians. He gave state governors and the Federal Capital Territory N5 billion each as a “temporary solution” to mitigate the impact of his double-barrelled reforms.

TruthNigeria learnt that the grant is to enable state governments to procure 100,000 bags of rice, 40,000 bags of maize and fertilizers to alleviate the effect of food shortage across the country.

The intervention was to complement the measures already taken by several state governments to lessen the severe impact of the policies on the citizens.

The President had earlier jettisoned his plan of paying N8,000 to 12 million families for six months after many Nigerians kicked against the proposal.

U.S. investors happy with Tinubu’s reforms

While Nigerians are lamenting, the Chargé d’Affaires for the U.S. Embassy in Nigeria, David Greene, said the economic policies of the new administration will strengthen the U.S.–Nigeria bilateral relation as many U.S. businesses and investors are ready to invest in Nigeria.

“This is a very exciting time in the U.S.-Nigeria bilateral relationship, especially on the economic front, with the Tinubu administration taking and undertaking some of the structural changes that we think will create the foundation for new influxes of U.S. capital investment and increase two-way trade with Nigeria, and we’re already seeing a renewed interest by U.S. businesses and investors as well as other international investors,” Greene said at the U.S. Department of Commerce-led Global Diversity Export Initiative Trade Mission to South Africa, Ghana, and Nigeria on August 15.

Ezinwanne Onwuka writes on politics, culture, and style for TruthNigeria from Abuja.