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Nigerians Lament Current Realities
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Tales of Woes Over Failed Promises
By SAMUEL DIALA with UKANDI ODEY, SAMUEL UHUEGBU, DAVID OWEI, SEGUN AYINDE and UDEME UTIP
There is palpable fear in the land. Everywhere you turn Nigerians, male or female, old and young, are heading into the future with such uncertainty about the country that even the Federal Government itself has had to cave to hard facts and data about the current state of affairs in taking the decision to suspend fuel subsidy removal as a first step to coming to grasp reality. Although the government later on Friday said that the removal of the subsidy on petrol would not be suspended, as earlier announced,saying the committee was only being expanded to accommodate representatives of the President-elect, uncertainty and confusion still surround the decision.
According to THEWILL investigation, the government, which had suspended the fuel subsidy removal in 2022, shortly after the passage of the Petroleum Industrial Act, PIA, into law in August 2021, had to agree to an encore on Thursday, April 26, 2023, when it was presented with the picture of a “high possibility of combustible social unrest, following the current tension over a disputed presidential poll preceded by a disruptive cashless policy, all of which the removal of subsidy could aggravate,” according to a dependable source.
The Government had been so certain about subsidy removal that it made a provision for it in the 2023 budget up to June, including the fact that PIA has a provision that requires deregulation of petroleum products eight months after the effective date of the removal of subsidy.
“Nigeria has huge challenges in basic things as little as investing in its people. The country has not done a lot and in terms of enabling private firms to grow and create jobs, that hasn’t happened and without these two things, it would never get out of the situation it finds itself presently.
“Nigeria is at a critical juncture. The basic message here is that Nigeria has huge potential and often you can see it from the impact of Nigerians in diaspora and the rest of the world as well as the potential you see within Nigeria right now,” the World Bank Country Director for Nigeria, Mr Shubham Chaudhuri, said at a roundtable with media leaders in Lagos, organised by the bank in collaboration with Agora Policy.
This deficit in investing in people and harnessing the potential of the country is a ticking time bomb.
THE SITUATION IN THE STATES
There is a virtual standstill in the states across the country in terms of providing answers to unresolved challenges of unemployment, rising poverty causing social disharmony and disease. Also, everything is virtually at a standstill in all the 36 states of the federation as the people await the inauguration of a new administration by May 29, 2023.
Generally, the cost of living has hit the roof, further pauperising the people who in many cases as workers are still being owed between three and six months’ salaries in states such as Plateau, Benue, Ondo and Abia, while in places like Ogun, salary deductions run into almost a year.
In states like Kaduna, Zamfara, Katsina, Plateau and Benue, insecurity, which abated during the 2023 General Election, has returned in full force.
Between April 13 and 16, for example, 35 persons were killed by terrorists in Atak’Njei and Runji communities in the Zango Kataf Local Government Area of Kaduna State. A week earlier on April 7, gunmen attacked Umogidi town in Benue State, killing 46 persons. These are farming communities, like many communities in the country, which unchecked attacks have kept from farming, thereby further deepening poverty, lack of production and trading in farm produce.
In Imo State, for example, where the capital city, Owerri, is rapidly developing in terms of infrastructures, the aesthetic look of its environment has marked it out as a unique entity. Interestingly, the rising costs of renting houses in the State is not only disturbing, but has become worrisome to the people.
Apart from the skyrocketed prices of building materials, which is even a new development, landlords have increased their houses’ rent by 70 percent without considering the fact that Imo is not an industrialised state.
In Enugu, Umuahia, Ebonyi, Onitsha, Awka, Aba, Obosi and Nnewi, a three- bedroom flat does not exceed N200,000.
It is on record that the outrageous fees charged by property owners are contributing to the rising level of hardship among the residents.
PAST CHALLENGES AS LESSONS
Nigerians witnessed first- hand the problems associated with lack of fuel as it happened during the recent scarcity, which the regime of fuel subsidy removal may unleash on them if the necessary cushions or alternatives, such as new or repaired refineries, are unavailable: increased cost of goods and services due to high cost of transportation; unemployment due to increased cost of production leading to lay-offs by non-profitable companies and reduction in foreign direct investment.
So far, government policies are yet to stimulate growth and development.
THE CASUALTIES
Although the government has rolled out policies to address the challenges, such initiatives are either misapplied or sabotaged, thus rendering them ineffective. Being a public sector-driven economy, policy misapplication has wide-range effects with lasting impacts.
One of the major casualties of poor economic management is the private sector, the engine of the economy, which is being overstretched amid multiple taxes, poor infrastructure and lack of ease of doing business. They bear the brunt of the government’s lack of effective priorities yet remain at the receiving end of harsh policies.
In the 2022 Finance Act, which has been touted with an ambitious plan to bring “all sectors of the economy into the tax net,” the tax segments have been expanded. There is Capital Gains Tax from digital assets, Cable Undertakings and the Lottery and Gaming Businesses taxes.
These join a long list of other taxes from stamp duties, companies’ income tax excise duties on tobacco, alcohol, carbonated drinks, and luxury items, as well as the value added tax on social media adverts and electronic transfer levies.
People are wondering about the rationale in imposing more taxes on businesses that are yet to recover from the effects of COVID-19 which occurred at the heels of the 15-month land border closure.
The small and struggling businesses are subjected to other streams of taxes at the state and local government levels. This has a direct impact on profitability and employment amid rising inflation, which triggers high cost of doing business generally. Findings showed that some micro, small and medium enterprises (MSMEs) have closed shop due to their inability to cope with the challenging environment.
“By the time you pay all these taxes, both official and unofficial, and provide your own water borehole, generate your own electricity, pay for security and street maintenance levies, you have nothing left to run your business,” said Agnes Akannor, a canteen operator in the Ikeja area of Lagos, whose business closed down in March 2023.
The fate of large companies is not different. Despite the potential to take millions of people out of the labour market and their role in boosting the government’s tax revenue, the firms are bedeviled by major problems that have continued to stall industrialisation in Africa’s largest economy.
Under the Muhammadu Buhari Administration, problems such as foreign exchange scarcity, high borrowing cost, multiple taxation, and shrink in capacity utilisation have plagued manufacturing and consumer goods companies, in particular.
That has resulted in some consumer goods firms cutting down on their operations and restoring some of their brands in order to cope with the harsh economic situation. Some firms are relocating to neighbouring countries or ceding the production of their products to other locations of their businesses. This has effects on employment, capacity utilization and tax revenue.
The World Bank in November 2022 reiterated its call for urgent reforms to reset the Nigerian economy and address its myriad of economic challenges, saying the country is presently at a critical juncture.
The multilateral institutions had urged Nigeria to dump the cancerous fuel subsidy, which had eaten into the fabrics of the nation’s economic life, with the result that Nigeria spent $10 billion on oil subsidy in 2022. This is equivalent to N4.7 trillion at the interbank exchange rate of N462 to a dollar. It budgeted N3.3 trillion to cover fuel subsidy payment for the first six months of 2023.
After losing N2.3 trillion revenue to oil theft in 12 months, Nigeria, Africa’s largest economy, has secured a $800 million facility from the World Bank to cushion the effects of the planned oil subsidy removal on the “most vulnerable”, poor Nigerians.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, said that the $800 million World Bank facility was the first tranche of the palliatives to be disbursed through cash transfers to about 50 million Nigerians, who belong to the most vulnerable category of the society.
The $800 million World Bank palliative package had drawn flak from experts who expressed the concern that it would worsen the country’s economic woes with a huge debt profile, and that its implementation efficacy is doubtful.
The experts argued that the share of the subsidy palliative for those it is meant for is infinitesimal and would offer literally little or no real benefits compared to the huge pains the subsidy removal will impose on the citizens.
“At an exchange rate of N500 to $1, this translates to N 400 billion. If you divide N400 billion by 50 million Nigerians, we are talking of N8,000. What will N8,000 do for an average Nigerian, if we remove subsidy and the price of PMS from that N185 per litre that it is today to N450-N500 per litre? How will that justify the impact of the subsidy removal on the person?” queried Nnaemeka Obiaraeri, an investment expert and Managing Director/CEO, Taurus Oil & Gas Limited.
Prof Bongo Adi of Pan African University, Lagos observed that inflation is the greatest evil confronting the masses at the moment. He warned that additional borrowings would worsen the situation.
Prof Adi suggested that governments work through value chains in agriculture and trading that have direct links with the poor. He said subsidies should be directed towards food and medicare.
“Any other means other than these will be considered part of the same corruption syndicate that Buhari’s government has nurtured over the past eight years,” Prof Adi told THEWILL in a note.
According to the Chairman, Shell Companies in Nigeria, Dr. Osagie Okubor, Nigeria lost an opportunity to produce and sell about 65,700,000 barrels of oil in the last one year due to issues related to pipeline vandalism and the resultant oil theft that the government showed lack of capacity to contain.
This translates to about N2.3 trillion loss in oil revenue based on the prevailing official exchange rate and average oil price in the international market.
The Nigerian National Petroleum Corporation Limited (NNPCL) had disclosed in January that it spent 4.39 trillion Naira ($9.7 billion) on petrol subsidy in 2022, a cost it blamed for dwindling public finances. The Federal Government budgeted N3.36 trillion ($7.5 billion) to spend on petrol subsidy until mid-2023 when the subsidy is planned to be scrapped.
Nigeria’s current total public debt of N70 trillion Naira, if shared among the current population of 220.2 million people, places a debt burden of N317,850 on each citizen, according to data compiled by THEWILL. The 774 local government areas of the country will also be liable to N90.5 billion each as their share of the total public debt.
The N70 trillion public debt is made up of N46.25 trillion of the federal and state governments, and N23,70 trillion borrowed by the federal government from the Central Bank of Nigeria (CBN) through ways and means. The current estimated population of Nigeria is 220,229,992 based on Worldometer elaboration of the latest United Nations data.
In a country where 133 million people live in multidimensional poverty and earn less than $2 per day, the impact of the debt burden is crippling.
Ten years ago, Nigeria earned $62.9 billion (about N12.5 trillion at that time) as revenue from the oil and gas sector, with daily oil production hovering between 1.8 and 2 million barrels per day in 2012. Nigeria’s crude oil production has declined to an average of 1.3 million barrels per day, meaning that oil revenue has dropped significantly. The implications are obvious – shrink in government revenue with ripple effects on the wider economy.
A THREATENED GENERATION
According to the NBS Labour Force Report, unemployment among young Nigerians (15-34 years) stood at 21.72 million or 42.5 per cent of the estimated 29.94 million young Nigerians in the labour force.
The NBS in its last report said that the national unemployment rate stood at 33.5 per cent as at December 2022, and is projected by global consulting firm, KMG, to have reached 40.6 per cent in 2023 With youth population estimated at 60 percent of Nigeria’s total population of about 215 million, it means that about 45 million Nigerian youths are jobless.
GOVERNMENT DOING MUCH BUT GETTING TOO LITTLE RESULT
President Buhari has spent N3.5 trillion on social intervention and poverty alleviation programmes since 2015. These include the National Social Investment programme, N-Power, Conditional Cash Transfer, Government Enterprise and Empowerment programme, TraderMoney, MarketMoney and FarmerMoni all arms of GEEP.
But with the NNPCL making zero remittance to FAAC, the Federal, State and Local governments have relied on tax and other non-oil revenue sources to buoy government revenue.
Nigeria’s total annual upstream capital expenditure decreased by 74 percent from $27 billion in 2014 to less than $6 billion in 2022, according to Oilprice.com.
Oilprice.com, a leading energy news site, recently revealed that Nigeria’s yearly capital expenditure in the upstream arm of the oil sector decreased by over 70 percent within the nearly eight years of Muhammadu Buhari-led government.
The energy news platform said competition from regional peers contributed to the decrease in the proportion of the overall upstream investment attracted by Nigeria.
“The oil and gas production in Nigeria is being severely impacted by the Western ESG (Environmental, Social and Government) strategies that are forcing IOCs to reconsider their upstream and downstream operations worldwide, resulting in major reshuffling and divestments of assets.
The report stated that Nigeria, one of OPEC’s leading oil producers, has already seen $21 billion worth of assets divested, putting its future in jeopardy.
Nigeria Spent 96.3 per cent of the 2022 Revenue To Service Debt – World Bank. According to the report, Nigeria’s fiscal position deteriorated in 2022, leaving the cost of the petrol subsidy to increase from 0.7 percent to 2.3 percent of GDP. The World Bank says Nigeria spent 96.3 percent of its 2022 revenue on servicing its debts.
“There is no way an economy in such a quagmire can generate jobs, improve people’s living standard and guarantee a stable future. This is why we should be worried about the ‘mess’ Buhari is leaving behind,” said a top banker on the point of anonymity.
From what is happening, it is obvious that the country is faring worse, with the citizens facing a grim struggle to scrape a living. As a result, the life of an average citizen is severely challenged from all angles.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
