Foundation for Environmental Rights, Advocacy and Development, FENRAD, a pro-democracy and environmental rights advocacy group based in Abia State, is aware of the new policy of the federal government concerning a one-month moratorium given to sellers who inflate prices of commodities recently, as captured in a statement from the Executive Vice Chairman, Federal Competition and Consumer Protection Commission, FCCPC, Mr. Tunji Bello.
First, the Foundation, as a pro-poor group, is totally against profiteering, racketeering or any other unwholesome, underhanded or shady dealings by economic buccaneers, perpetrated against indigent Nigerians. Fleecing poor Nigerians or making profit off of desperate and panic-stricken citizens in time of inflation is wrong. But a situation where government policies drive inflation and yet the same government turns around and initiates a fiat targeting people whose market behavior is a mere reaction to inefficiencies of the regime beggars belief.
While FENRAD is aware of current price inflation and its impact on the macroeconomic landscape of Nigeria, focus has to be thrown to the policies of the day which birthed price conflict as against competitive pricing. It should be recalled that within his first three months in office President Tinubu ‘removed’ subsidy on petrol and floated the naira in an attempt to unify the foreign exchange windows. Before one year in office, the same president removed the subsidy on energy, negatively impacting the energy security in a petrol-dependent economy.
Nigeria’s economy, it cannot be argued, is dependent on petrol – whether the private or public sector. Removing subsidies on petrol and energy, without fixing the refineries or providing alternatives, took a toll on the wobbly economy, especially the transportation sector thereby creating price misalignment or disharmony. The knock-on effect was predicted by economists, that removing subsidies would affect every other critical sector.
With the current state of affairs, it became hard for sellers to keep afloat as the naira, unable to withstand the shocks in the volatile foreign exchange market, kept falling, meaning that importation of goods and services (where Nigeria lacks comparative advantage) for local consumption or as primary goods for raw materials nosedived. No seller, under the current regime, is sure of market realities. In August of 2024, the naira lost 35.53% value to the dollar.
In a bid to control inflation, the government has been adjusting the monetary policy rate (MPR). In fact, so far this year alone, the CBN Monetary Policy Committee (MPC) has reviewed the lending rate by increasing basis points. The latest of this exercise pegged the interest rate at 26.75%, a sharp increase by 50 basis points, albeit this could discourage businesses from borrowing. While floating the naira vis-à-vis the dollar was targeted at attracting foreign portfolio direct investment to increase capital inflow, the context did not suit the policy move. Also, while adjusting the monetary policy rate was targeted at reducing inflation, again, the context did not suit the policy move. Nigeria’s inflation should be addressed through robust policies, not reading poor market sellers the riot act when they are neither in control of the dollar nor petrol.
The Foundation calls on the federal government to, as a matter of urgency, review its policies and see what adjustments could be made beyond palliative handouts that can address hardships and price inflation.
Already, the subsidy-free regime (if it exists) is one with many opacities. First, the government claimed to have removed subsidy on petrol, but recent revelations, including those from government corporations and other actors in the midstream and downstream sector seem to suggest otherwise. In a recent presentation of the presentation of the NNPC’s 2023 audited reports, Umar Jiya, the Corporation’s chief financial officer, revealed that the government still subsidises petrol, maybe indirectly.
Subsidy is still not gone, contrary to the president’s inaugural fiat, the Foundation learns. But what it has kept questioning is, with subsidy still on, why are the poor suffering, does it mean the rich alone are enjoying the scheme?
For avoidance of doubt, while the federal government maintains that subsidy is gone, certain players in the petroleum sector, including those from Nigeria’s oil corporation, the NNPC, have made a startling revelation about subsidy not gone yet. From the Foundation’s findings, the landing cost of petrol is ₦1,200, yet the product is sold at the pump price of ₦600 or ₦700, leaving the question: what happens to the differential, and why aren’t the poor enjoying the same with the current price (₦1,000 upwards)?
Umar Jiya, the Corporation’s chief financial officer (NNPC) who spoke during the presentation of NNPC’s audited reports for 2023 business year stated that the federal government is still ordering the corporation to sell to marketers at half the rate of landing cost, shouldering ₦7.8tn in the first seven months of 2024 alone. Even the Major Energies Marketers Association of Nigeria, MEMAN, stated that the landing cost for the product is still ₦1,117/litre. So it is clear that the government is covering the shortfalls. With this state of affairs how possible is it that when they finally and fully come on stream private refineries like that owned by Dangote or BUA will sell below ₦600 regulated pump price to Nigerians if the government does not subsidise?
It is excruciating that Nigerians are buying petrol at over ₦1,000 even with subsidy far from gone. The findings remain: subsidy is opacity laced with vagueness. More concerning is the fact that the president who doubles as the minister of petroleum could not create price control in the sector, yet poor traders whose businesses are badly affected by his policies are to review product prices downward. What happens to the purchasing power of the common which is already declining with the naira? A further decline?
For emphasis: citizens do not control inflation as they do not control foreign exchange windows. These are part of the monetary and macroeconomic policies of the CBN under the federal government which determine what happens in the local business environment, including price.
Inflation, in the scale and size it now exists, is a corollary of ‘subsidy is gone’ speech of May 29, 2023. Price inflation is not letting up because most sellers increase the price of their product to be able to meet family needs – consumption. Again, this is not making a case for racketeering.
The options open to the federal government are to: address worsening insecurity to enable displaced communities and farmers to access their farms and begin cultivation; channel the half-subsidy funds from shortfalls, as it exists today, to revitalising the refineries to ramp up oil production; pump more funds into the ministry of agriculture and the National Agricultural Development Fund, NADF; encourage incentives to agriculture where the federal government can buy local produce and store same at the national strategic reserves to enhance food security and sustainability; reintroduce subsidy on energy, at least by half, to jumpstart local production and mobilise Nigeria’s productive forces; remove the cabals from the value chain and help Nigeria recover all stolen oil assets; issue licences to competent local/modular/artisanal refiners through the content development board to shore up local production/consumption; reduce cost of governance and focus on critical infrastructure like railway rehabilitation and construction. The government needs to come clean first.
It is only when these have been done, both as long- and short-term measures, that the government can talk of quashing prices. Lastly, the Foundation is aware of the concern expressed by Mr. Tunji Bello where he used the cost of a product in Texas to express price inflation in Victoria Island or somewhere near Lekki. While the Foundation understands his concern, it advises that businesses in Lekki or VI are usually exclusive to the haves and wealthy, though this does not go to support price inflation or misalignment. Even in the same America, people who live in highbrow areas may face similar hard choices. It is only laughable that the FCCPC could issue such a policy when it does not have the personnel size required to ensure market enforcement. How many people are going to be deployed, to how many markets?
Adjusting inflationary trends in Nigeria goes beyond increasing lending rate and unifying the exchange rate windows after partially or totally removing subsidies on petrol and energy. To control the price regime of the day, the federal government must understand that the Nigerian markets are reacting to its policy choices and begin to initiate reforms, not just fiats.
Signed;
Comrade Nelson Nnanna Nwafor
Executive Director
Foundation for Environmental Rights, Advocacy & Development (FENRAD Nigeria
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