By Olutayo Obadina
Every Nigerian is concerned with the announcement of a new fuel price hike of N340 come June 2022. Nigerians need to give some thoughts to avert the unpleasant crisis that may accompany the actual execution of the plan.
The Nigeria Labour Congress (NLC) under the leadership of Comrade Ayuba Wabba has indicated that Labour will not accept this 178 per cent increase. He wants the refineries to start working first, before we can change the fuel price. Labour has maintained its stand since the Obasanjo regime, in 2000, with an uneconomic mind set.
Is the Labour having a genuine point, going against the planned deregulations? The answer is yes. Because when the fuel price goes up the commercial bus operators will double their own fares too.
Imported cars, plant and machines will become more expensive, the price of food items would skyrocket, rent and services will go up.
Unfortunately, staff salaries will not be increased as a result of the short-change; salary earners, pensioners, interest income receivers, annuitants and non-essential artisans will be forced into an increase in all forms of dishonesty, cutting corners and criminalities in their attempt to meet up the usual expenses.
How else would a driver behave if his living expenses increase by 178 per cent than to cut corners around his office as driver? A lot of employers wonder why managers could be involved in fraudulent practices when their salaries are paid on time. They forget that inflation has reduced their salaries as a result of fall in value of naira over time.
One may ask if government is right in increasing fuel price. In other words, is it good to fully deregulate the oil industry? The answer is a capital yes. No responsible government would spend 25 per cent of its budget on loan servicing and another 25 per cent on fuel subsidy.
Fifty per cent of the budget is too low to run universities, pay doctors, lecturers, legislators, ministers and provide security. It does not make sense.
The fuel subsidy is even more annoying when we consider that Nigeria’s fuel is smuggled to Benin, Togo, Niger, Mali and virtually all the
West African countries. And let nobody deceive himself or herself, the smugglers cannot be policed or stopped from doing their job. Whoever tries to stop them will pay with his life.
The smugglers make so much money from the business. For example, one tanker consists 33,000 litres. Buy fuel at N162 and sell at N300 is a profit of N4,554,000. This is one tanker. Only few people can resist the bribe the smugglers can afford to pay. And when such person refuses to take bribe the smugglers can pay hoodlums to kill the person.
The crux of the matter now is that there is a simple solution to the impending crisis. There is no need for government to increase the fuel prize. There is no need to stop the smuggler thereby endangering one’s life. Let the naira value stay at the dollar conversion rate that produces fuel cost of N162 per litre.
We are living witnesses to the fall of the naira from $1 to N0.3 in 1980. It gradually fell to $1 to N28 during Babangida’s regime. During Abacha’s era the Naira was stable at $1 to N77. But after his regime it started falling again. By 2015, when this administration took over power from PDP, the rate was $1 to N200 but today the rate has gone to $1 to 500. If things continue like this in 2023, rate will be $1 to 750.
If government increases fuel price to N340 in 2022, by 2023 oil subsidy regime will surface again. The simple reason is that Naira is falling.
It is not the fuel imported that costs more manifesting in subsidy but the exchange rate that is causing untold damages to our economy.
One may ask, is it possible for exchange rate to be controlled? The answer is capital yes. Abacha did it. It is a matter of looking at the use of dollar compared to receipt of dollar and make sure there is equilibrium.
Oil receipt is not the only source of receiving dollars into Nigeria.
There are home remittals of Nigerians in the Diaspora. The Federal government can deliberate export workers and they will surely remit dollar home. Every item that constitutes dollar inflow can be looked into and an effort is made to improve on the present situation.
Exportation of artists, the National carrier, air and waters, tourism, African trade are a few examples of getting more dollars into Nigeria.
On the outflow of fund is importation of visible goods and services, invisible trade (medical tourism, PTA/BTA, tuition fees etc). The major or substantially value goods and services should be reviewed and appropriate action taken.
The Federal Government activities in agriculture especially rice and wheat projects are steps in the right direction. These are still major areas to be looked into. The act of changing naira to dollars by “rich” men, just for keeps can become substantial.
A small tax can be imposed on exchange business which when paid will show details of those who change naira and are in possession of dollars.
Anyone holding dollar notes should be encouraged to deposit the same with domiciliary bank account. It should therefore be an offense to keep dollars above $10,000 in the house. The Central Bank of Nigeria (CBN) will work out the details here.
When government is fully on top of all inflow of dollars as well as outflow, the exchange rate will be determined by an equilibrium envisaged by government. Instead of fighting for no fuel increase, the NLC should better be partnering with the CBN and the Federal Government to reverse the exchange rate of naira.
Before the present government exits on May 29, 2021, it is possible to return the exchange rate back to where they met it in 2015 i.e $1 to N120. In fact, General Muhammadu Buhari has promised to do that in his speech to Nigerians.
The landing cost of petrol per litre and the eventual pump price will be at no subsidy and Nigeria will surely have a stronger economy as opposed to facing a fuel “ENDSARS” match in 2022.
• Dr Obadina writes from Lagos