BY BRIGHT JACOB
It is exactly 56 days after the President of Nigeria, Bola Tinubu, removed subsidy on the supply of petroleum products, a major policy previous administrations in the country shied away from implementing.
Since the removal, however, it has been a mixed bag of emotion for Nigerians who have either applauded the decision or straight out berated the government’s demonstration of gross insensitivity.
Tinubu removed the subsidy on May 29 when he gave his inauguration speech after he was sworn-in by the Chief Justice of Nigeria, Olukayode Ariwoola, as president.
The announcement triggered an increase in the pump price of petrol, leading to a tripling in price of the commodity as well as creating a domino effect which made the prices of other goods and services, as well as transportation, to follow suit.
Several critics of the government claimed that the government had bungled the subsidy removal and that it was a prima facie evidence Nigeria was not in good hands. Some shredded the ruling party, the All Progressives Congress, labeling its members as “misfits” in government.
Defiant, Tinubu had explained to Nigerians that subsidy had allowed the giant of Africa to become “Father Xmas” to neighbouring countries, where Nigeria’s subsidized fuel was smuggled into and sold in countries where their respective governments had before now removed subsidy on their fuel supply.
According to Tinubu, this had enriched a few persons and it was time the government put a stop to it.
Characteristically, one of the advantages of subsidy removal successive administrations had always advanced was that it would enable the government to save money, thereby encouraging resources to be focused on critical sectors like healthcare, education and infrastructure.
Those in authority had also argued that money that would have been pumped into subsidy would be used to impact citizens directly.
It wouldn’t take long before Nigerians began to grasp the full enormity of the subsidy project after figures related to it began to pop up. And who better to give these figures than the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari.
“These recent increases in the price of petrol were expected. They always happen each time a subsidy is removed. But there’s hope for this country”
In February this year, during a parley with oil sector operators, Kyari had stated that the government was spending over N400 billion on subsidies every month.
After Kyari’s revelation, Nigerians had a rough estimate of what subsidy had been gulping through the years. It was humongous and commentaries began to centre on the administration of former President Goodluck Jonathan, who tried to remove subsidy in 2014, but was resisted by Nigerians and the then-opposition party, the APC, which itself eventually came to power in 2015 and also decided it was time to remove the vexing issue.
Of course, the APC, too, had kissed its own measure of reality in government and knew subsidy had to go. The erstwhile administration of President Muhammadu Buhari took the initiative, detailing through the former Minister of Finance, Zainab Ahmed, that by June this year, Nigerians would bid subsidy farewell.
However, Nigerians had a rude awakening after they were told by Tinubu that there was no budgetary allocation for subsidy after June. The president’s advisers likely thought it wise he told Nigerians, during his inauguration, that the subsidy would be scrapped, with immediate effect.
Now, perhaps, the dividends of subsidy removal may already be upon Nigerians after Tinubu’s Senior Special Adviser, Media and Publicity to the President, Temitope Ajayi, last week, rolled out drums to announce one such dividend the removal had yielded.
In a statement, Ajayi said almost N2 trillion in revenue would be shared by the Federation Account Allocation Committee for the month of July.
He said the figure was “unprecedented”. Ajayi also said it was “an immediate and major benefit of fuel subsidy removal.”
Ajayi equally noted that going forward, state governments and their counterparts in the local governments would now be more empowered, and that the two tiers of government should come under more scrutiny.
He said, “That FAAC will share almost N2 trillion in July, the first time in history, as revenue for the three tiers of government, is an immediate and major benefit of fuel subsidy removal.
“This money that would have been frittered away, in a month, via fuel subsidy will now go into the coffers of the government to improve living conditions of the people. What this means is that there will now be more money available for real development.
“States and Local Governments will have enough money to pay salaries of workers and pensioners. Governments at all levels will become more solvent, be in a stronger financial position to easily pay new minimum wage and fund development in critical sectors especially in education, healthcare and public transportation.
“Going forward, we should begin to focus attention on our states and local governments to demand more accountability and transparency in the use of public funds. The real governance impact should be at the State and local levels,” the statement ended.
A legal practitioner, Ejike Nwuzor, while reacting to some of the gains of subsidy removal said, “These recent increases in the price of petrol were expected. They always happen each time a subsidy is removed. But there’s hope for this country.
“From the news making the rounds, revenue has increased considerably. What this means is that there will soon be a revival in this country. Most sectors will soon be revitalised.
“So, yes, everything will be hard at first, but we will prevail at last.
“And I agree with Ajayi, the president’s aide. This is the time, more than ever, to beam the searchlight on our state governors and local government chairpersons. Those guys there will be handling so much money now and their tiers of government are the ones that touch the common man the most.
“Because of this, I urge state assemblies to wake up to their responsibility. It is true everyone is saying state governors must be carefully monitored now, but who can do this better than members of state houses of assembly? My advice to these Assembly men and women is that they must not sacrifice the collective destiny of their people on the altar of greed.
“In fact, they must not allow themselves to be bought by any governor or local government chairman. We want accountability now, and we will hold them responsible if none is given.
“And while they are at all that, the issue of local government autonomy should be revisited once again,” Nwuzor concluded.
The price of fuel has reached its highest level ever after the subsidy was removed. From N187 per litre pre-May 29, it rose to about N500 per litre after Tinubu did away with it. And less than two months after he was sworn-in, it jumped to N618 per litre.
Experts had said market forces, including the floating of the naira against the dollar by the Federal Government, could be likely culprits if there was an increase in the price of fuel, a situation they warned would be inevitable.
Of course, higher fuel prices will, naturally, necessitate a higher inflation rate which hit about 22.7 percent in Africa’s biggest economy.
Economic activity was also dealt a massive blow as fewer cars have been spotted on Nigerian roads, leading to a disclosure by the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Farouk Ahmed, of petrol consumption falling to 46.38 million litres per day in June from the 65 million litres average daily consumption before petrol subsidy removal, representing a 35 percent decrease.
Expectedly, income was also impacted and the government in a bid to cushion the effect of the subsidy removal had planned to disburse N8, 000 to about 12 million of the poorest households in the country for six months.
After the backlash generated against the plan, the government stayed action, and instead promised to review the move.
Tinubu’s Special Adviser on Special Duties, Communications and Strategy, Dele Alake, said the government would also unveil “the whole gamut” of the palliatives, with the immediate release of fertilisers and grains to farmers and households, respectively, in Nigeria.
Importantly, too, the national social transfer register used during Buhari’s administration was dumped by the National Economic Council, presided by Vice President Kashim Shettima, who said the register lacks credibility. The council opted for a new one to be developed by each state of the federation.
Businesses, too, have also not been spared. Operating costs have increased and Nigeria’s perennial epileptic power supply has taken a nosedive, too. Some of these businesses have directed their employees to work from home, a strategy employed to combat soaring costs.
Schools, especially government-owned ones, have not been spared, either. In some states, students attend school thrice a week and yet it seems the government doesn’t have the hydrant needed to quench the economic fire subsidy removal has ignited.
Sharing his thoughts with The Point about this, an Ogun state-based political analyst and businessman, Muyiwa Bello, said, “It is true that Nigerians are some of the most resilient people on God’s green earth, but for how long will they continue to languish in hardship?
“I believe that while the people in government are still putting on their thinking cap, they should ensure that palliatives get to the right people who need them.
“Thank God the old register that would have been used for disbursements has been discarded. From the first day, I knew that list was fishy….but don’t ask me how,” he said.
Continuing, Bello said, “Some people have been calling for protests. But remember that people will most likely only revolt when there’s no sincerity on the part of government to address their struggles.
“Let’s give the government a little bit of time. I believe they will eventually meet the expectations of the people,” he said.
Nigerians devise survival strategies
Investigations also revealed that in the wake of fuel subsidy removal, private car owners in Nigeria are increasingly turning their vehicles to car business services as a means to offset rising fuel costs.
An IT officer who works at Ikeja and lives at Egbeda, Akinolu Akinola, said he now charges his neighbours for transporting them to work to and fro, a development that only occurred post petrol subsidy removal.
“Prior to the fuel subsidy removal, I used to transport four of my neighbors without charging them,” Akinola explained.
“However, since the price increased, I now charge N700 per person for each trip,” he said
Akinola said this change was necessitated by the increase in his weekly fuel expenses.
He revealed that his fuel costs nearly doubled from N20, 000 to almost N40, 000, prompting him to charge his neighbors N1, 400 for round trips that would cost them N2, 000.
By doing so, he said he can generate N28, 000 weekly, covering over half of his fuel budget.
He said that the development was a result of the significant change in the amount of fuel he purchased weekly.
“I went from buying N20, 000 fuels per week to buying almost N40, 000 weekly, to not carry the weight of this alone I charged my neighbors N1, 400 to and fro for a trip that will cost them N2, 000. By doing this I make N28, 000 weekly covering more than half my fuel budget,” he said.
Another trader at CMS, Chigozie Ejikem, a dealer in women’s wares in a store along CMS utilizes his Sienna vehicle to transport people to and from work.
“I have an eight-seater passenger vehicle, in the morning I carry people from Orile to CMS for N300 and charge N500 in the evening, and on days where I’m lucky I get chartered to carry goods to my route and get paid more,” he said.
Ejikem said that if it wasn’t for the money he earns from transporting people, he would have stopped using his car for commuting to work.
While already prevalent in several developed countries, carpooling is slowly gaining momentum in Nigeria.
One of the primary concerns surrounding carpooling among Nigerians is safety, leading to the emergence of various carpooling apps such as Mobiride, Driveinhud, and Jekalo.
Carpooling, also known as car-sharing, ride-sharing, and lift-sharing, is the practice of sharing car journeys to reduce the need for individual trips. It offers cost savings for car owners and provides a convenient alternative to public transport for commuters.
These apps facilitate the creation of trips by car owners in their preferred direction, allowing others to join and share the costs. Furthermore, they connect non-car owners who are located in the same area and heading towards similar destinations, enabling them to book a taxi together.
Morakinyo Lanre spoke of the different means Nigerians are trying to cope with increased fuel prices, “Nigerian adults are now lapping themselves inside public transport over a hike in transport fare.”
Since the hike in price, several Nigerians have sought ways to cut costs, especially transportation costs, employees’ requests for remote work are surging, and several others carpool with their colleagues.
For him, disbursing palliatives in the form of cash or increased salaries may not benefit the Nigerian economy as it will lead to higher inflation.
“I do not believe that palliatives should be in the form of money, or increase in salaries because this will in turn increase inflation rate.
“But we can push these interventions to fund quality education, especially at the primary and secondary levels. This will remove much burden from parents.
“We should also use the money to fund health care, empower our hospitals to offer free health care services for certain ailments. This way, Nigerians do not spend so much on health care.
“These things happen in other countries, if we share money, they will not have lasting impact. But by making social amenities available and affordable, people will not have to spend so much of their income,” he said.
Citizens identify nine areas worsening cost of living crisis
Inflation, which serves as a measure of consumer prices, has more than doubled over the last eight years, worsening the living conditions of cash strapped consumers in Nigeria.
According to the National Bureau of Statistics, Nigeria has been having double digit inflation since February 2016 at 11.38 percent.
And since then, it remained in double-digit territory at 22.41 percent in May 2023, one of the highest in the world.
Before inflation accelerated to the painful double digit, it was previously in that territory in December 2012 (12 percent).
“When Buhari assumed office at the end of May 2015, annual inflation averaged 9.01 percent. By the end of his first full year in office, it had surged to 15.68 percent,” said Ikemesit Effiong, head of research at SBM Intelligence.
“Except for slight dips in 2018 and 2019, inflation has always risen under the Buhari administration,” he said.
He stated that globally COVID-19 and renewed geopolitical competition created a cost of living crisis.
“For Nigerians, who have had to navigate soaring insecurity, border closures, a yawning infrastructure gap, currency volatility, hollowed out domestic manufacturing and the unsustainable seasonality of food produce to name a few, the Buhari years were the long cost of living emergency,” he said.
The Director General of Lagos State Chamber of Commerce and Industry, Chinyere Almona, added that the inflation rate at 22.41 percent is the highest in about 17 years, with significant and worrisome impacts on both the household and business sectors.
“Apart from eroding purchasing power, it has led to inventory stockpiles. If left unchecked, the high inflation may further constrain production, lead to a steeper rise in poverty figures, frustrate economic growth, and lead to higher unemployment and non-competitive exports, especially in the sub-region,” she said.
Incomes which have declined to $2, 065.7 in 2021 from $2,679.6 in 2015, data from the World Bank show and a continuous spike in prices are reducing the ability of Nigerians to afford some of the basic necessities of life such as food, water, shelter, and clothing.
All these have contributed to an increase in poor people to 95 million in 2022 from 70 million in 2016, according to the World Bank.
“The minimum wage which was $82 in 2019 had dropped to $26. Consumer price inflation had heightened, making it one of the highest in the world,” it said in its latest Nigeria Development Update report.
Last year, the NBS put the number of Nigerians living in multidimensional poverty at 133 million, compared to 82.9 million considered poor in 2019 by national standards.
When people cannot meet basic necessities of life, they will resort to social vices such as kidnapping, which is now a new business in Nigeria, a senior analyst at Afrinvest Securities Limited, Damilare Asimiyu said.
Staple foods
The country’s surging inflation has made staple food (everyday meals) to become less accessible and unaffordable for people especially at the lower income levels.
Analysis of the NBS’s selected food prices report across the 36 states in the country show that the average price for one kilogram (kg) of yam tuber rose by 298.4 percent to N444.6 in April 2023 from N111.6 in January 2016, one kg of rice imported loose rose by 274.3 percent to N781.5 from N208.8 and one kg of garri white sold loose grew by 207.5 percent to N362.5.
A piece of egg rose by 198 percent to N88.2 percent, one bottle of evaporated canned milk increased by 187.6 percent to N378.8, one kg of beans sold loose grew by 158.7 percent to N615.7, one kilogram of frozen chicken rose by 155.5 to N2,853.2 and a 500g sliced bread rose by 138.9 percent to N577.4.
Food inflation, which constitutes more than 50 percent of the headline inflation, has more than doubled from 9.78 percent in May 2015 to 24.82 percent in May 2023.
The higher inflation in 2022 is estimated to have pushed an additional five million Nigerians into poverty between January and September 2022, mainly through higher prices of local staples- rice, bread, yam, and wheat, especially in non-rural areas, according to the World Bank.
Cloths
As inflation cuts down on real wages, a growing number of people are now opting for second-hand items, clothes that have been previously owned, as alternatives to new clothes.
A single mother and civil servant, Bimbo Adelabi, said that second-hand items are cheaper alternatives for a lot of struggling Nigerians.
“Everything is expensive in Nigeria now, especially food. With food, there are no alternatives, but for clothes, I can buy second-hand items that are of quality,” she said.
“This is why markets like Yaba, Aswani, and Katangua will keep thriving. They afford the average Nigerian’s clothes and other second-hand items,” Adelabi said.
Thrift clothes are now sold between N1, 500 and N5, 000 per piece.
“Who will give you trousers for N1,500,” Emmanuel Ejima asked, saying, “That was the price like four years ago, now it is N4,000,” indicating a 100-percent increase.
House rent
House rent, mostly in the mainland areas of Lagos where the middle- and low-income earners reside, has gone up by more than 100 percent in almost eight years.
The average price of two bedroom flats for rent in Ikeja, Surulere, Ilupeju and Gbagada ranges from N1.5 million – N2 million per annum from N350, 000- N500, 000. A three bedroom flat for rent which was sold around N600, 000- N700, 000 is now N3.0 million- N3.5 million.
“The average price of two bedroom flats for rent in Ikeja, Surulere, Ilupeju and Gbagada ranges from N1.5 million – N2 million per annum from N350, 000- N500, 000. A three bedroom flat for rent which was sold for around N600, 000 – N700, 000 is now N3.0 million- N3.5 million”
Cars
Just like second hand clothes, the high cost of foreign exchange, which was N192/$ in 2015 to N755/$ at current official rate, has reduced the ability of most middle-class Nigerians to buy brand new cars, making them go for cheaper used ones (often called Tokunbo).
But even at that, the prices of used cars have increased significantly due to scarcity of salvaged cars and the increased cost of shipping due to the COVID-19 disruptions.
The price of a foreign used Volkswagen Golf which used to be N400, 000-N450,000 in 2015/16 is now N2.4 million- N2.6 million and a foreign used Toyota Camry is now sold for N3.5 million to N3.7 million from N750,000-N850,000.
Transport fare
Food and transportation take about 65 percent of a person’s income. But with average retail petrol prices up to N500.1 per litre in May 2023 from N118.4 in May 2015, transport cost has eaten deeper into the pockets of people.
According to the NBS, Nigeria’s total transport expenditure had increased by 214 percent to N2.59 trillion in 2019/2020 from N823.24 billion in 2009.
The average fare paid by commuters for bus journeys within the city per drop increased by 334.1 percent to N648.2 in March 2023 from N149.3 in December 2016.
In air travel, the average fare paid by air passengers for specified routes single journey rose by 143.1 percent to N74, 755.4 in March 2023 from N30, 747.71 in December 2016.
Health services and drugs
Most of the equipment and drugs used in Nigerian hospitals are imported, making the cost of providing healthcare services expensive.
For example, Panadol used to sell for as low as N60 but now costs N150 and Amatem Forte, a malaria drug is sold for N2, 000 from N900.
School fees
The University of Lagos has announced new tuition fees for undergraduate students in the institution, through information sent to the students’ portal on July 21.
A statement dated July 20, 2023, by the Senior Staff Association of Nigerian Universities; UNILAG branch following a meeting with the top management staff confirmed the institution’s decision.
Students of the institution previously paid N19, 000 but the management has fixed new fees at N190, 250 for students studying medicine while for courses that require laboratory and studio, students are to pay N140, 250.
Low savings
The current socio-economic indicators such as elevated poverty levels, rising inflation, high unemployment, low incomes and weak purchasing power are affecting people’s ability to save.
A recent World Bank’s Global Findex Database shows the percentage of the adult population (15 years and above) who saved at a financial institution reduced to 17.7 percent in 2021, the lowest in 10 years, from 23.6 percent in 2011.
When compared with other sub-Saharan African countries, Nigeria’s 17.7 percent is lower than South Africa (37.2 percent), Namibia (33.7 percent), Mauritius (28.9 percent), Kenya (21.5 percent) and Ghana (21.1 percent).
A young man in his early 30s, Edet Akpan, said his level of savings compared to 2015 has reduced.
“I am still saving but not as massive as pre-2015 levels because of the level of inflation, currency devaluation and the financial support I give to my family, friends and colleagues who have been adversely affected by the economic crisis,” Akpan said.
Low and stagnant minimum wage
In Nigeria, the minimum cost of living is above the minimum wage due to high inflation rates, according to Picodi.com, an e-commerce platform.
“The minimum cost of healthy living for an adult per month at the beginning of 2022 stood at N40, 980 in Nigeria,” it said.
The country’s monthly minimum wage for federal workers has been stagnant since 2019 at N30, 000 from N18, 000.
An economics lecturer at Western Delta University, Oghara, Felix Ashakah said Nigeria’s minimum wage is less than the minimum cost of healthy living by 36.60 percent.
“The difference indicates that many Nigerians are malnourished and poor,” he said.
He added that the high prices of food items have eroded the income of the people.
“The salaries of many workers have not increased to match increases in prices. Many individuals and families need financial help to augment their meagre income.”
The real value of the national minimum wage, currently set at N30, 000, has dropped by 40 percent and is lower than when it was reviewed up from N18, 000 by Aso Rock in 2019, according to Effiong of SBM.
