By Clement Adeyi, Linus Aleke, David Lawani, and Ben Adoga
Following the recent removal of subsidy on electricity which led to the hike in tariff across the different cadres of power distribution to consumers, economic experts have said the Federal Government is not bound to implement policy advice by the International Monetary Fund (IMF).
Recently, the Executive Board of the IMF rose from its Post Financing Assessment (PFA) meeting and urged the Federal Government to completely phase out all forms of subsidies, including electricity subsidy.
The recent 300 per cent hike in electricity tariff of a sectional part of the country categorised as Band A implies that the government might be acting out the IMF script through its economic policies.
However, some economic experts who spoke to ThisNigeria expressed divergent views on the IMF’s stand and the FG’s economic policies that border on subsidy removal in the context of the government’s responsibilities to the citizenry.
A renowned economist and Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said FG’s removal of subsidies and increase in electricity tariff was not connected to IMF’s advice to the government to completely phase out all forms of subsidy. He noted that whatever advice was given by the financial body was advisory.
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Yusuf, who is the immediate past Director General of the Lagos Chamber of Commerce (LCC), argued that FG’s removal of subsidies from services, especially PMS and electricity was not absolute, insisting that there were still elements of subsidies in several other products and services being consumed by the populace.
He added that the removal of subsidies was a coincidence with the IMF’s advice because it was the multidimensional challenges in the energy sector that compelled the government to remove some subsidies.
He further argued that FG’s removal of subsidies was not a function of the IMF’s advice because it (the FG) did not owe it (the IMF) any obligation to take all its advice hook, line, and sinker because it did not take any facility or loan from them.
*Say phased removals of all forms of subsidies choking people, economy
The economist who dissected several economic implications of the issues, noted, “IMF’s prescriptions are not entirely bad. Some of those prescriptions are good. But some of them are not compatible with our economic conditions. So, it is for us as a country to choose what will work for us and what will not work for us.
“I will not say that we should dismiss entirely what IMF is saying, but at the same time, I won’t say that we should adopt hook, line, and sinker all the things that they are suggesting.
“On the specific issue of subsidy, all of us know that we have a subsidy problem with PMS. I mean the petrol subsidy, which created a lot of problems for the economy. It made some sense to remove the subsidy because it was creating macroeconomic challenges.
“It was creating a lot of problems with the deficit, leading to borrowing of money and printing of money which were not good for the economy. So, the government had to take the subsidy removal step.
“Incidentally, the IMF had been suggesting that we remove subsidy on PMS. If you look at the price of PMS today, you will see that there are some elements of subsidy. If the government had removed subsidy completely, we wouldn’t still be buying fuel at N620 or N650 per litre; the price would have gone up close to N1,000 per litre.”
Yusuf said Nigeria was not drifting towards capitalism because the country runs a mixed economy in which both the government and the private sector played their peculiar roles.
“We are actually in a mixed economy. What that means is that the government is playing some roles, while the private sector is also playing some roles. So it is not a capitalist economy entirely because the government is still providing some subsidies as I said earlier.
“Even in electricity, the government is still paying some bills to cover certain gaps, especially because the DisCos are not providing adequate liquidity to support them. If the government were not providing such subsidies, the system would have collapsed,” Yusuf said.
Also, a former Nigerian Ambassador to Mexico, Ogbole Amedu-Ode, said Western countries lived by the dictum, “do as I say, but don’t do as I do.”
He noted that the US, UK, France, and others preach the same sermon of “do as I say but don’t do as I do,” to leaders in the global south using Institutions like IMF, World Bank, and WTO.
“Let me take the area of agriculture that I think I am more familiar with, under the European Commission that transmuted to become the European Union (EU). They have a policy called the Common Agricultural Policy (CAP).
“It is via this common agricultural policy that they subsidize very massively the agricultural industry and sector in their countries. But they will tell us, why do you subsidise. You find out that their agricultural products become cheaper, compared to our own as a result.
“Although there are other underlying factors, the next thing is that our markets are flooded because they have tricked us into the World Trade Organisation (WTO), and over the years, this has made us a food import-dependent country.
“Nigeria graduated from being a net exporter of food and agricultural products to a net importer, including palm oil. So, if we have a government in place that thinks that this is the right direction for us to go and they are in power, there is nothing we can do but follow in obedience. But truth be told, it is squeezing the economy and it is strangulating the people. This is where I love the Arab countries.”
He, however, regretted that there is a staccato of subsidy removals that is choking the people and the economy.
He said, “We have been really unfortunate in our national space in the past three years. At the beginning of last year, we had the currency redesign, or re-colouring as some prefer to call it. Most of the businesses that depended on daily cash flow fizzled out because they could not access cash. During the inauguration of the incumbent administration, the president announced the removal of fuel subsidy. Then the floating of the naira and now removal of subsidy on electricity Band A.”
A research professor of International Relations and Strategic Studies at the Nigerian Institute of International Affairs, Lagos, Femi Otubanjo, said that the position of the IMF on the issue of subsidy removal was advisory.
IMF, he said, always considered a global picture of the world economy, adding that it looked at country by country and advises each country on how to move forward with their economic management.
The International Relations scholar said that it was not as if the IMF was dictating to Nigeria how to run its domestic affairs.
Drawing an inference between a father and his grown-up son, Otubanjo explained, “Take a situation in which you have a grown-up child who is perhaps married and comes to you to borrow a few thousand naira to make up for his child’s school fees. And as a father, you ask him what he does with his salary and he tells you. And you tell him that if he wants his economy to be stable, he needs to cut down ABC, and so on.
“What the father has done is not dictate to his child how to run his family. He is only giving him rational economic ideas. That is why people go to the university to study Economics and there are human choices.
“We can learn the economic theories and decide at the end of the day to do what we like. The number one problem of subsidy in Nigeria is the word that starts with C – corruption. The so-called subsidy in Nigeria is the greatest avenue for corruption.
“They told us that Nigerians are consuming 300,000 litres of petroleum every day and people were making claims for that quantity even when we know that it was not true. People were doing round-tripping imports and collecting money. It became a syndicate. Those who are supposed to authenticate simply collect their cut and stamp the document. We are talking about trillions of naira, not billions.”
“The same thing can happen with electricity. It is a matter of the syndicate sitting at the critical points of authentication and buying it off. When you buy it off, and then spend N2 and claim that you have spent N5 that will be it”.
Otubanjo said that there were two ways to manage an economy.
“We can subsidise, let people consume or we can get the people to consume less without subsidy and that is where we are today in Nigeria. We have pushed people to consume less petrol and less diesel. How many Nigerians now can afford to run the ‘I better pass my neighbour’ generator, as was the case in the past?
“What the government wants to do with electricity is to ensure that it can supply constant power. We can improve supply and get people away from generators.
A professor of Economics at the University of Abuja, Prof Peter Siyan, said any nation that builds its economic structure on IMF policy decisions was doing so at its peril.
He noted that asking Nigeria to liberalize its economic policy smacked of direct control over the market forces which might hurt the nation.
He said, “Any nation that builds its structure on the IMF liberalization principle or relaxation of government regulation of economic is simply promoting a free market mechanism guided by an invisible hand.
“It will encourage competitiveness, and attract foreign direct investment. This might sound great for a productive and diversified economy that has what to encourage competition and stimulate the economy.”
“They have asked Nigeria to liberalise the financial market for greater participation of people who have nothing to save. They asked us to liberalise the market or open our market to competition. Completion among the people who are begging God and man for survival.
“They say that we should liberalize investment to remove barriers to attract investment from abroad. Nigerians have, however, continued to pray beyond abroad and are currently tired of looking above.
“The summary is that they have succeeded in removing the subsidy on fuel and natural gas that God has magnanimously blessed us with. Oh! I remember the days of Michael Imoudu, Frank Kokori, Adam Oshiomhole, Beko Ransom-Kuti, and Gani Fawehinmi. I remember 1986 and the Structural Adjustment Program (SAP)’s debate.”
