NLC: Why We Suspended Planned Nationwide Strike over Subsidy

•Accuses FG of weaponising ex-parte injunctions against workers 

•KPMG report predicts 30% inflation rate, seeks cushioning measures

•Advises FG to implement Oronsaye report 

•NESG advises government to mobilise public support via citizen education

Onyebuchi Ezigbo, Emmanuel Addeh in Abuja and Dike Onwuamaeze in Lagos

Nigeria Labour Congress (NLC), yesterday, gave reasons why it agreed with the federal government to suspend the strike scheduled to commence today. NLC said it took into account a restraining court injunction procured by the government to stop the proposed nationwide strike.

The union accused the federal government of exploiting ex-parte injunctions to silence workers.  

NLC’s explanation came as KPMG, a multinational audit, tax and advisory services firm, yesterday, predicted that the current withdrawal of petrol subsidy in Nigeria could see the inflation rate climb to 30 per cent from June. It recommended that measures be put in place to mitigate the effect of the new policy. 

In a similar vein, Nigerian Economic Summit Group (NESG), yesterday, advised the federal government to overcome resistance to its laudable removal of petrol subsidy by effective communication of the benefits and mitigation strategies in place to cushion its adverse effect.

The planned indefinite nationwide strike action, previously scheduled to commence today, to protest last week’s withdrawal of fuel subsidy by the federal government was on Monday night called off by both NLC and Trade Union Congress (TUC). Stopping the planned industrial action was one of the seven-point resolutions reached at the end of a negotiation meeting between the federal government, TUC, and NLC.

Justice Anuwe had on Monday stopped the planned nationwide strike. The order of the court was sequel to an application by the federal government, which was hinged on the heavy impact the strike would have on all aspects of the economy.

Removal of petrol subsidy was one of the highlights of President Bola Tinubu’s inaugural address on May 29. The announcement of an end to the fuel subsidy regime was followed by increase in petrol price by the Nigerian National Petroleum Company (NNPC) Limited.

The price hike elicited quick reactions from both NLC and TUC, which accused the government of failing to engage in necessary consultations before removing the fuel subsidy.

In a communiqué issued after an emergency National Executive Committee (NEC) meeting of the congress, summoned to discuss the outcome of the dialogue with the federal government on the petroleum products price hike, NLC said it took into account the restraining court injunction.

The communiqué signed by NLC President, Joe Ajaero, and General Secretary, Emma Ugboaja, said NLC suspended the strike to demonstrate to the federal government the need to comply with the laws of the land.

It also stated that it considered the willingness of the government to dialogue on the issues, the general mood of the nation after the last elections, and the need to pursue national stability.

The NLC explained in the communiqué, “Taking into account that the federal government has procured a court injunction restraining Congress from proceeding with the proposed nationwide strike, as the NEC-in-session had ordered to begin, Wednesday, the 7th of June, 2023;

“Recognising the willingness of government for continuous engagement through dialogue and to offer reasonable palliatives in due course to cushion the effect of its policies and some levels of understanding reached.

“Considering the mood of the socio-polity after last elections and the need to pursue national stability and, consequently, the NEC-in-session resolved as follows:

“To commend and applaud the diligence of the Congress’ leadership in carrying out the assignment given to it by NEC.

“To demonstrate to the federal government the need to comply with the laws of the land, especially as it concerns obedience to the rulings of the courts and their brazen disregard to the 2023 Appropriation Act.

“To, therefore, support and accept the decision of the leadership of Congress to suspend the proposed strike action in compliance with the flawed rulings of the NIC and also allow negotiations to flow freely and enable final agreement during or after the 19th June, 2023 negotiation round with the federal government.”

NLC, however, disapproved the ruling of the National Industrial Court (NIC), describing it as continuous weaponisation of the instrument of ex-parte injunction in favour of government against the interest of Nigerian workers. It said the action of the industrial court was in defiance of the position of the Supreme Court on the use of ex-parte injunction.

“All Affiliates and State Councils of Congress are hereby directed to suspend further action and mobilisation until the outcome of the final negotiations,” NLC said.

It urged its branches and affiliate unions to remain vigilant and be on stand-by, in case there was need to continue the strike.

KPMG Report Predicts 30% Inflation Rate, Seeks Cushioning Measures

Meanwhile, in a policy brief released by KPMG, the organisation projected that inflation rate would decline from 2024. It also noted that from experience, the general rise in prices of goods and services would not markedly impact food and transportation costs.

 Whether one-off or gradual, the report stated that the removal of fuel subsidies would result in a temporary increase in inflation, which was at 22.22 per cent, as at April 2023. It said its prediction aligned with the World Bank projection that a one-off adjustment would lead to higher inflation in 2023 and 2024, and lower thereafter.

KPMG stated in the report, “Our internal macro model also supports the World Bank’s findings with a forecast of an increase of about six per cent over June 2023 inflation rate to bring it to about 30 per cent.

“In mid-2024, however, all other things remaining constant, and as year-on-year base effects kick in, the pace of inflation will drop significantly, though overall prices of goods and services will remain elevated.”

However, as inflation was already high and sure to increase, the report forecasted that more Nigerians would be pushed into poverty, unless compensating measures to shield them, at least partially, from the price shock were put in place.

KPMG hinged the length of the inflationary trend on a number of factors, including the extent to which some of the inflationary impacts of increases in petrol prices had already been incorporated since the effective market price was already above the officially regulated price in many parts of the country.

Besides, it explained that the “pass-through” from increases in petrol prices to transport and food prices, from previous experiences, when fuel prices were increased, significantly suggested it was likely to be limited.

According to the firm, the capacity of the Central Bank of Nigeria (CBN) to manage inflationary pressures through effective monetary policy would be a major factor in halting the inflationary pressures.

However, KPMG stated that the CBN, like monetary authorities the world-over, was struggling to contain runaway inflation while there were legitimate questions regarding the efficacy of interest rate hikes to contain inflation given the significant supply-side and geopolitical drivers.

These drivers, it said, ranged from China’s erratic recovery from COVID-19 to the multifaceted impact of the Russia-Ukraine war.

It stated, “However, for gradual or immediate deregulation to be effective, several conditions will have to be met, vis-a-vis establishing a robust and sustainable market for eligible importers to access, on a non-discriminatory basis, sufficient supply foreign exchange liquidity at the same rate for all eligible fuel suppliers.

“This will require significant and far-reaching reforms to CBN’s current approach to foreign exchange management to enhance supply of FX and bring down the parallel market rate.”

In addition, KPMG noted that communicating the removal of fuel subsidies to the Nigerian public would be an important aspect of the process. It maintained that it was important to provide clear and transparent information to Nigerians about the rationale for the removal of subsidies.

The expected benefits as well as the compensatory measures that will be put in place to cushion the effect on the poor and vulnerable, KPMG advised, should be properly communicated.

The global financial services provider stressed, “Adequate communication with stakeholders is crucial to ensure that the rationale for subsidy removal is well understood and to manage public expectations. In the past, inadequate communication has led to widespread public protests and unrest.

“To effectively communicate the subsidy removal, the government can use a range of communication channels, including social media, print and electronic media, town hall meetings, and community outreach programmes.”

The organisation said reducing the cost of governance, increasing public trust and strengthening the social contract between citizens and state will go a long way in engaging Nigerians to support the subsidy removal reforms of the President Bola Tinubu government.

It said a critical lesson to learn from Nigeria’s past experiences with fuel subsidy removal related to the presence or absence of political will. In the past, it said implementation had been hindered by corruption, inefficiencies, disinformation, as well as opposition from interests and lobbyist groups.

KPMG cautioned that the removal of subsidies on petrol in Nigeria remained a complex issue that required careful consideration in terms of its potential economic, social, and political impacts.

While subsidies provided some benefits, it argued that they had also been a significant drain on the country’s resources and had contributed to inefficiencies and corruption.

Furthermore, the organisation said a robust coordination with the states as well as with the fiscal authorities and CBN in managing the monetary aspects of deregulation and subsidy removal was key.

Without foreign exchange reforms, and an elimination of the gap between the official and parallel exchange rate, KPMG argued that the reforms would not work.

“To minimise the negative impacts of subsidy removal, there is a need for a set of coordinated actions that consider the inflationary impact, potential social unrest, and the need for compensating measures to cushion the poor,” the firm said.

It suggested that one of the ways could be to increase the minimum wage to lessen the effect of the subsidy removal on the purchasing power of consumers.

However, KPMG said while some of the measures could further worsen inflation that it was intended to resolve by stimulating money supply further, the use of alternatives to money supply boosting actions, such as transport vouchers for the rural and urban poor, and tax cuts for the middle class, could be effective.

“The benefit of this is that it has limiting effects on money supply while at the same time cushioning the negative impact on purchasing power,” it said.

In addition to demonstrating very clear and unambiguous transparency in the process, the government, the organisation said, will also have to demonstrate that as much as it is rightly asking the public to tighten its belt and expect temporal inconveniences, it also must be seen to be cutting wasteful expenditure and reducing the rising costs of running government.

KPMG also insisted that the government must have the courage and political will needed to fully implement the Orosanye report, which was estimated to save the government N1.3 trillion.

NESG Advises FG to Mobilise Public Support Via Citizen Education

NESG advised the federal government to tackle resistance to its laudable removal of petrol subsidy through effective communication of the policy’s benefits and mitigation strategies to cushion its adverse impact.

The group shared its views yesterday, in a statement on the removal of petrol subsidy by President Bola Ahmed Tinubu, titled, “Citizen Education/Engagement Strategy Document: Understanding Fuel Subsidy Removal and its Economic and Social Impact.”

Still on subsidy, the House of Representatives, yesterday, commended the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) for accepting to continue to dialogue with the federal government, against their earlier planned strike over the removal of petrol subsidy.

NESG stated that the government could foster a sense of shared responsibility among Nigerians and work towards sustainable energy policies that benefit society as a whole through transparency, public consultation, and targeted support programmes.

The NESG said, “The government should actively engage in transparent communication, providing clear and accessible information about the reasons behind subsidy removal, the expected impact, and the strategies in place to mitigate adverse effects. This promotes trust, understanding, and informed decision-making among citizens.”

It added, “The government can organise public consultations, town hall meetings, and online surveys to gather feedback and insights from citizens. This ensures that their concerns, suggestions, and experiences are considered, fostering a sense of ownership and inclusivity in the decision-making process.”

According to NESG, “The government can design and implement social protection programmes, such as cash transfers, subsidies for basic needs, or employment opportunities, specifically tailored to support low-income households and other vulnerable groups. This ensures that subsidy removal’s impact is cushioned and no one is left behind.”

It further suggested that the government should utilise various communication channels, including traditional media, social media platforms, public forums, and informative websites, to reach a wider audience and ensure that information was accessible and easily understandable.

NESG said the key stakeholders the government should reach out to included citizens, civil society organisations, businesses, industry associations, and the academia. “Engaging these stakeholders through targeted consultations, partnerships, and collaborative initiatives helps gather diverse perspectives and fosters a sense of shared responsibility,” it said.

It also enjoined the government to implement various social intervention programmes that could mitigate the effect of fuel subsidy removal on the people. 

NESG identified these interventions as cash transfer programs, employment generation initiatives, investment in public transportation infrastructure, subsidised fare programmes, and support for Small and Medium Enterprises (SMEs).

NESG said targeted cash transfer programmes would provide financial assistance directly to low-income households or individuals affected by the removal of fuel subsidies, adding, “These cash transfers can help alleviate the increased transportation costs and basic necessities.”

NESG stated, “By promoting employment, the government can mitigate the impact of subsidy removal by improving income levels and reducing unemployment rates” while “increased investment in public transportation infrastructure can help mitigate the impact of fuel subsidy removal by providing more affordable transportation alternatives for the public.”

Subsidised fare programmes, according to the NESG, would involve offering reduced transportation fares, “such as discounted bus or train tickets, to lessen the financial burden on commuters affected by fuel subsidy removal and ensure that transportation remains accessible and affordable.”

NESG also said, “The government can provide financial assistance, tax incentives, and business development support to SMEs affected by increased operational costs due to fuel subsidy removal. This helps sustain their businesses and promotes economic resilience.

“When implemented strategically and accompanied by effective monitoring and evaluation mechanisms, these social intervention programmes can help cushion the impact of fuel subsidy removal on the people and ensure a more equitable transition.”

NESG added, “The immediate removal of fuel subsidies may cause a temporary rise in inflation, the long-term effects are typically mitigated by improved economic stability, increased investment opportunities, and a more efficient allocation of resources.”  

It, however, argued that the removal of subsidy could provide incentives for the development of alternative energy sources and reduce government debt, improve economic efficiency, promote environmental sustainability, and create a more equitable distribution of resources.

Similarly, according to the NESG, “Businesses and industries that rely heavily on fuel may face higher operational costs, potentially impacting their cost of production and profitability.

“However, removing subsidies can also drive innovation, encourage energy efficiency, and create opportunities for investment in alternative energy sectors.”