By Omoh Gabriel

The call by some state governors that the Federal Government should remove fuel subsidy and increase the allocation from the federation account to states to enable them pay the new minimum wage to say the least, is uncalled for. The call is for the very wrong reason. Yes, there is need for government to remove fuel subsidy in order to deal with the inefficiency and economic rent embedded in the distribution of the product in the country.

Such funds realised should be invested in social infrastructure that will aid economic production in the country. Investing the proceeds of the subsidy removal in the payment of salaries of few workers in the country out of a population of 150 million would amount to deception and throwing good money into the drain.

Are these governors elected to serve and cater for the interest of civil servants only? Are they not concerned about the larger population most of whom have no jobs?

*Petrol is not like other commodities that has easy substitutes

What these state governors should be targeting at this point in time is how to increase production and make more goods and services available to the populace at affodable prices.

Governors must learn that it is time for them to put on their thinking caps and begin the process of engineering a revolution in internally-generated revenue for their survival and relevance.

If in 2011, subsidy is removed to pay the increase in minimum wage, in the years to come how will the states cope with the payment of future wage increases? Removing subsidy to pay salaries and wages of civil servants will inflate the economy to the point that even the so-called workers the concerned state governors want to help will be worse off.

Petrol is not like other commodities that have easy substitutes that the average Nigerian can do away with. When they do not buy directly, the spiral effect of an increase has direct impact on them.

A five per cent rise in price of petrol may bring about close to 20 per cent increase in the cost of living of the citizenry. Such an increase will affect cost of production, transportation, whose operators will pass the cost to the final consumers. This, of course, will naturally result in the general increase in the prices of goods and services in the country.

Workers will naturally feel pauperised and impoverished which will trigger another round of demand for increase in wages. If, however, the money is spent on building infrastructure that aid production, there will be increased investment in the economy, increased production of goods and services, increase in agricultural output, which will result in decline in prices of goods and services that will make them affordable to all.

The general welfare of workers as well as that of the generality of Nigerians will be enhanced. This is elementary economics in which state governors needed to be schooled. In the first instance, how many civil servants are in the country that it would become so necessary to withdraw subsidy to pay them?

Already, the Central Bank of Nigeria’s hands are full with battles against inflation. At the June meeting of the bank’s monetary policy, it raised interest rate.

At the current interest rates, industries, small and medium scale enterprises cannot borrow from the banking system which is inimical to economic growth. Yet, Nigeria plans to become one of the leading 20 economies by 2020. Good dreams of course.

The reality staring the country in the face is that many Nigerian politicians at federal, state, and local government levels cannot see beyond the veil of money. They imagine that a given volume of money entails a given real wealth hence they loot in billions and hold same in cash abroad.

As a result, they do not perceive in any consequential sense the difference between the value that money can give now if deployed for the general good of the people and what value it will generate in the future given the persistent rise in the rate of inflation in the country.

This is why there is rising unemployment, decaying infrastructure, drop in capacity utilisation in industries, falling agricultural output, loss in the value of the naira, and a host of other economic malaise in the country.

Nigerian politicians mistake a high rate of growth of money income for a high rate of growth of real income and standard of living, even though this is not the case at all, and they had direct experience of it not being the case by the rate of inflation they had endured in the past.

What else explains the fact that with higher earnings from crude oil export, the country appears to be getting poorer and funding seemingly inadequate and governments have to run on huge deficit budget?

CBN, understanding the social implication of rising and persistent inflation, cautioned that if the CBN had made a commitment to exchange rate stability, there was a cost in moving away from that position.

Consequently, if the Monetary Policy Committee felt that the observed inflation level was not sustainable, then they must find an intelligent way to adjust.

It had emphasised that it was difficult to justify exchange rate depreciation where prices were high and the country was an import- dependent economy. CBN pointed to clear indications that a moderation in inflation was almost an aberration alluding to the global increase in energy and food prices and Nigeria’s vulnerability as an import-dependent nation that also imports oil.

If workers and the various tiers of governments in the country had factored in inflation effects on the value chain when making higher demands for revenue allocations and expectations, then obviously there could be a stable inflation-unemployment trade-off.