Search
Close this search box.
The-panafrica-Final

In Nigeria, long-awaited reforms may tip citizens off the cliff

Moshood Abiola: “Let the poor breath, don’t suffocate them”
1079
Facebook
Twitter
Pinterest
WhatsApp

Reforms may secure future growth. But if they are pushed too hard, they may also trigger economic shocks and social dislocations – therein lies the conundrum of economic reforms.

Perhaps, for fear of social uprisings, the Buhari administration loathed reforms and preferred to stick to the routines. This layback approach to governance left in its trails heaps of fiscal burdens, from mounting public debts to tattered finances.

Nothing captures the burden bequeathed on the current administration more than the unsustainable cost of servicing the sovereign debts. For the first time, the proportion of public revenue that was spent to service the Federal Government’s debt exceeded 80 per cent in 2021. The 2022 full-year budget performance is not ready but the debt service to revenue ratio in the first three quarters was 99 per cent.

The World Bank said the figure could soar to 160 per cent in 2027. The projection, suggesting the government will need to borrow an additional 60 per cent of its retained earning if all it exists for was servicing its existing loans has raised concern about the country’s fiscal sustainability. But beyond the prognosis, the country may have been playing around the cliff for a while. For instance, over 50 per cent of the N21.83 trillion estimated expenditure for 2023 is to be funded with fresh borrowings. The parliament, on the eve of the regime change, hurriedly amended the provision of the Central Bank of Nigeria (CBN) Act that caps allowable budget supports from the apex bank to five per cent of the previous year’s revenue. The window had been flagrantly and serially abused with the government currently sitting on an accumulated N23.72 trillion owed to the CBN.

The World Bank, International Monetary Fund (IMF), Fitch as well as their local supporters have warned that only bold and broad economic reforms would halt the country’s fiscal hemorrhage and pull the country from the edge. At several instances, Buhari faulted the West’s calls for reforms and insisted that Nigeria “operates an economic model that serves” its peculiarities.

At different occasions, he told pro-market economists and the Bretton Woods groups that subsidy removal was not feasible considering the country’s economic peculiarities. To sustain subsidy payment, which was seen as a major drain on the public finances, the ex-president suspended the implementation of the Petroleum Industry Act (PIA), a piece of legislation that outlawed social safety and lays the foundation for liberal fiscal framework.

Tinubu’s bold decision  

But President Bola Tinubu, who had promised to ditch the subsidy programme during his campaign, braved the odds on his first day in office and declared its end most controversially. In a matter of hours, the price of this essential commodity shot up by about 170 per cent. Transport fares also increased by as much as 200 per cent in some states, including Lagos, the commercial hub of the country, with millions of people resorting to trekking. Some state governments have reduced the number of work days for civil servants or embarked on other knee-jerk decisions. How these would affect the efficiency of the civil service is a major debate as the country weighs the consequences of the fuel subsidy removal.

But the bigger challenge is how the reform would affect the socio-economic status of the citizens. Last year, the National Bureau of Statistics (NBS) pegged the number of multidimensionally poor Nigerians at 13 million or 63 per cent of the population. The situation could be complicated by the sharp increase in the price of fuel, experts have warned. The Nigeria Development Update (NDU) report says the decision could make as many as 7.1 million Nigerians poorer if adequate palliatives are not administered.

To cushion the effect of the expected fuel price hike, Buhari had procured $800 loan from the International Development Association (IDA) – a facility the government said would be ready for monthly cash transfer to 10.1 million poorest households as soon as a requested parliamentary approval was secured. The organised labour and other stakeholders kicked against the planned disbursement (N5000 or $7 monthly stipend per household), which they deemed ridiculously low, and urged the government to rather spend money, which would be repaid in 2063, on critical infrastructure.

The sincerity question

The new administration had been silent about the palliative plan until last two weeks ago when it disclose that it would proceed with the cash transfer plan except that it would raise the threshold to N8,000 ($11) per household. Again, there was an uproar, with critics questioning Tinubu’s sincerity when he told the citizens during June 12 Holidays that “I feel your pains.  The amount, which can only buy a 10kiligramme bag of rice is considered a mockery of the palliative Nigerians expect.

In that speech, the President seemed to echo the socio-economic philosophy of Moshood Abiola that was caught in a trending video – “let the poor breath, don’t suffocate them”.

But the reforms seem to be suffocating and strangulating millions of poor Nigerians. A month after the initial hike in the pump prices of fuel, the retail prices were raised by another 15 per cent across the country two weeks ago.

Indeed, fuel subsidy is gone. The most important education subsidy is also going. In recent weeks, the hitherto tuition-free public universities have introduced fees while some parents will need to cough out several million to train a child through university education. Besides, fees of the federal government colleges (FGCs), which focus on providing basic education to Nigerian kids whose parents cannot afford the cut-throat private schools, have been raised by over 50 per cent since Tinubu assumed office. These leave many Nigerians asking: “Why do we pay taxes while we are charged commercial prices for supposed social services?”

Leave a Reply

Your email address will not be published. Required fields are marked *

Support The Pan African Review.

Your financial support ensures that the Pan-African Review initiative achieves sustainability and that its mission is shielded from manipulation. Most importantly, it allows us to bring high-quality content free of charge to those who may not be in a position to afford it.

You Might Also Like