An Open Letter to the NLC: Rethinking Fuel Subsidy Reinvestments

PERSPECTIVE

Boye Jesse Yisa

On May 29 2023, the newly elected President of the Federal Republic of Nigeria, His Excellency Ahmed Tinubu, announced the removal of  fuel subsidies in the country (fuel subsidies have an amorphous history with military governments since 1973 through civilian rule paying fuel subsidies to licensed importers. In 2022, Reuters reported subsidy payments costing Nigeria $9.7 billion, an estimated 25% of the $38.9 billion national budget.  Though the fuel subsidies provided succor to the masses, experts from the World Bank and development financial institutions have posited that the subsidy benefits are captured by the elites and reduce public spending in relevant sectors like healthcare, education, tourism among others). In his speech, the President surprised Nigerians & the international community by boldly mentioning that ‘although no arrangements had been made by successive governments, it was important for the fuel subsidies to be removed’. The Nigerian Labor Congress (NLC) swiftly requested the immediate reversal of the subsidy removal, in addition to other demands to the government. While the aims of the NLC are noble, I believe a slightly different request would yield better results for the populace.

Reduce crude oil theft and ensure greater accountability: The NLC should advocate for greater transparency in the production and management of Nigeria’s largest foreign exchange earner – petroleum. Oil theft should be criminalized (see This Day article for details), oil production increased and a clear social compact developed on investing the savings from the subsidy removal. Although aspirational, the goal of this administration should be increasing sovereign wealth reserves, managed by the Nigeria Sovereign Investment Authority (NSIA), to rival that of other petroleum producing nations (link to top 10 wealth funds), investment in infrastructure projects that boost per capita productivity or placing the entire populace on a national stipend (as some ME nations do)!

Design & Implement a clear strategy for reinvesting subsidy savings: The state needs to agree on clear areas to invest funds that were spent on subsidies and demand greater accountability from implementing institutions. The real palliative for Nigerians will be a boost in national productivity that affects the disposable income of all. This strategy must identify short, medium & long term projects that ease the common suffering and boost productivity. Interventions in value-added agricultural production, modular oil refineries & gas plants, mass transit projects (especially water and rail), local steel plants, global outsourcing amongst others., would be a good starting point.

Provide robust and equitable social investments: From my conversations with people at the bottom of the income pyramid, transportation, food and energy are the expense areas most impacted by the subsidy removal. The NLC must advocate for a bouquet of solutions that are more encompassing than a 300% salary increase for labor. In light of the aforementioned, federal and state governments should provide:

Bus/train passes: Which reduce the transport cost for intra-city movement and on major economic corridors. This solution should cut across the gamut of civil servants, students, self-employed, traders, farmers etc.

Food stamps: To subsidize the food cost inflation (est. by the Nigerian Bureau of Statistics at ~24.82%, 2023 May) that has plagued Nigeria for some months now. While this is a heritage of the last administration, the current government can add a feather to its cap by attaining food sufficiency for Nigeria and affordability of staples.

Utility bills support: Especially because many lower income earners discontinued their employment because of the higher transport cost and might be forced to begin small businesses. Nigerians never fail to see the opportunity in mishap, so the government must ensure that people have the agency to continue their economic survival, from home.

Income buffers: The NLC made a good request for a 300% increase in wages for labour. In addition to this, a system to support persons outside the labour net should be designed e.g. income buffers for private sector workers & self-employed persons that have less than N10,000 in savings at the end of the month. Government interventions, at these times, shouldn’t be exclusively focused on the 12 million persons captured in the National Social Register.

There were claims by several stakeholders that the current National Social Register is either flawed or inaccurate (although lauded by the World Bank as being reliable). The current administration should involve critical stakeholders (including the NLC, state governments and traditional rulers) in designing and delivering this solution. Hopefully, the nation avoids a repeat of the looting of COVID – 19 palliatives.

Reduce cost of governance: To signify solidarity with the Nigerian people, in this difficult time. Nigerians are a patient and long-suffering people, but how much longer can we bear pain? Let’s see the leaders practice what they preach – lower official entitlement (not just salaries), shorter convoys, discontinued private air travel, not becoming stupendously rich after office, using public facilities (including hospitals, transport systems, education among others). While the comparative cost of governance, relative to the budget, might be small – these actions will demonstrate ‘noblesse oblige’, frugality and sincerity by the current administration.

In addition, the government should refrain from interventions that will reduce the disposable income of Nigerians including several taxes (e.g., vehicle proof of ownership levy), hike in electricity tariff among others. While His Excellency the President had a stellar performance as governor of Lagos state (1999 – 2007), he must realize that he is president of a country with one of the highest poverty rates (after clenching the title from India) and must make investments in human capital to change this narrative.

The President had mentioned that removing the subsidy is similar to birth pangs of a woman – momentary pain and following long lasting joy. Still, I must ask, how much longer can Nigerians suffer before the better days come?

It’s not too late for the government to provide answers to these questions: what systems are in place for a post oil subsidy Nigeria? How do we create shared prosperity for all?

I hope the NLC quickly reviews their demands to the Federal Government and the government, in turn, provides alternatives that promote the wellbeing & prosperity of Nigeria. 

•Yisa, Policy Analyst, wrote in from Abuja