By Tony Navah Okonmah
Again, the Nigerian policymakers got it all wrong. The reason for the removal of the fuel subsidy does not make sense. It is not the solution to Nigeria’s economic recovery.
For many years, the IMF and the World Bank have been calling on the country to adopt a flexible exchange rate which to them can open up the economy. Indeed, the Nigerian economy needs opening up. A major challenge for the Nigerian economy is driven largely by external terms of trade shocks and the country’s over-reliance on oil export earnings.
The government may argue that this is one of the reasons that necessitated the removal of the fuel subsidy but any argument in this direction is flawed seriously. Also, the government may tell us that they are now listening to the advice of the IMF and World Bank on the issue of a flexible exchange, but the truth remains that removal of fuel subsidy at this time is wrong and not the first step in any direction towards opening up the economy.
It can only impose more hardship on the already seriously economically downtrodden masses. It will cripple further a seriously ill economy. It will spook a fragile financial system and send shocks throughout a volatile industry. The removal of fuel subsidy at this time is a very bad decision.
The government failed to first establish a structure that supports a flexible exchange rate which it is gradually but secretly trying to achieve. Again, this is the problem with the Nigerian government. Lack of transparency and dishonesty has always plagued successive Nigerian governments. I do not see what they are trying to hide from the public and can’t understand why the government can’t give enough explanations to their actions. They leave the uninformed public with no choice but to vent anarchy and chaos.
In order not to digress from the point, the government failed to establish a structure for a sustainable fuel subsidy removal. The structure should first address the issue of spiralling youth unemployment (one of McDemott’s six growth drivers and index that listed Nigeria among the next eleven emerging economies was its population of young people.
These youths are already wasting away their useful lives because of lack of employment). The structure must also address the high cost of living and cost of food products. The structure should address the problem of poor infrastructure – lack of electricity, no good roads, lack of potable water, shortage of quality habitable accommodations etc.
Removal of fuel
subsidy does not in any way at this time impact positively on the Nigerian economy. I think it is a good intention but poorly executed.
*Okonmah Tony, a financial adviser wrote from London.