NNAJI JEKWU ONOVO
Public Forum
The twin evil of petroleum subsidy and naira devaluation manifested during Ibrahim Babangida military administration. In fact, the two were part of the International Monetary Fund’s draconian conditions to grant our request for loan of $2.4 billion naira, equivalent of N2.4 billion when naira was NAIRA. In April 1983, the country’s application for the N2.4 billion loan was formally presented to the IMF. But negotiations dragged over a number of unacceptable conditions prescribed by the fund. Among these were: Reduction of government subsidies, especially on petroleum products; trade liberalisation and adjustment of naira exchange rate, commonly known as devaluation.
Alhaji Shehu Shagari, whose administration initiated the move, started the implementation of some of the conditions through the imposition of austerity measures. The discontent generated by the austerity measures was part of the reasons for the ouster of Shagari through a military coup that saw Muhammadu Buhari’s first coming as head of state. Buhari, on assuming office, had to grapple with the problem of satisfying the yearnings and aspirations of Nigerians and maintaining economic programmes acceptable to the IMF. Buhari knew as did many Nigerians that the IMF conditions for devaluation of naira, trade liberalisation and lifting of petroleum subsidies were not in the best interest of Nigeria. The feeling of the majority of Nigerians about the IMF conditionality was summed up by the Chief of Staff, Supreme Headquarters, Major General Tunde Idiagbon. He told the Canadian high commissioner to Nigeria, Mr. Garret Lambert, who paid him a courtesy call at Dodan Barracks, “I don’t like the IMF both in principle and in practice.”
He told the high commissioner that the conditions given by the IMF before granting loans to Nigeria were unacceptable. Watchers of international affairs knew that the statements were politically expensive. We woke up in the early hours of August 27, 1985, to hear of a military coup replacing Buhari’s administration with Major General Ibrahim Babangida.
Babangida set up a committee to organise public debate to determine the desirability or otherwise of the IMF loan. The IMF debate kicked off as planned and ushered in a new dispensation, converting all and sundry to emergency economists. The argument ranged from outright rejection to cautious approval. Babangida announced the end of the IMF debate, with a ‘NO’ to the IMF loan, but concealed his administration’s intention to implement the IMF conditionality, even as Nigerians lauded the rejection of the loan.
Babangida’s administration skilfully started the implementation of the IMF conditions. It announced what it called partial withdrawal of petroleum subsidy, by raising the pump price of gasoline (petrol) and diesel oil. Import liberalisation was introduced through the government announcement that the use of import licence for goods coming into the country would gradually be phased out. It was obvious that curtailing frivolous and reckless importation would be difficult. In the estimation of the government, the naira had been overvalued. It, therefore, announced that it would continue its policy of realistic adjustment of the external value of the naira, with a view to reducing the degree of over-valuation. All these measures came under what was christened Structural Adjustment Programme (SAP). For the devaluation of the naira, the government introduced Second Tier Foreign Exchange Market (SFEM) and this started on September 29, 1986. That was the day of the first bidding as one American dollar could fetch as much as N4.7 and one British pound N6.7. The staggering revelation did not help the already over-inflated price tags in the local market. Government painstakingly defended SFEM, and continued in its determined move to find the “realistic” value of the naira. But some of its programmes received the bashing of SFEM. One of its programmes that suffered setbacks was the pricing of petroleum products locally. As the value of the naira dropped further, more subsidies emerged. And to achieve government goals in the area of subsidy removal, the resulting subsidies must be removed. So, government usually schemed to remove part or whole of the resulting oil subsidy. These have been replicated by subsequent administrations in the country. I don’t envy Buhari at all, as circumstances force him to accept what his military administration rejected. Nigerians have the right to protest the new plan to remove subsidy, but we must realise from the brief history that subsidy removal goes with naira depreciation. So, the truth is that, as long as we continue searching for the realistic value of the naira, so long shall we continue the search for the appropriate pricing of petroleum products. In other words, as the naira continues to depreciate, so will the so-called subsidies continue to emerge and these, as part of the economic imbroglio, must always be removed. It is a vicious circle. Appropriate pricing of petroleum products should be seen as part of the new economic order.
Nonetheless, we could ameliorate the situation through some measures, such as diversification of the economy to increase foreign exchange earnings. Until the discovery of oil in Nigeria in 1958, agriculture was the country’s mainstay of the economy, with different regions boasting of different cash crops like groundnut, cocoa, rubber, palm oil produce and many more. Then, the country was a net exporter of food and earned most of its foreign exchange from agricultural produce. The economic potential lying untapped in the solid minerals sector is enormous and can completely transform the economic fortunes of the country.
We should resuscitate the four government-owned refineries through public-private partnership (PPP). PPP is a contractual arrangement, which is formed between public and private sector partners, and involve the private sector in the development, financing, ownership and or operation of a public facility or service.
One critical aspect worth realigning is our insatiable and voracious appetite for foreign and imported goods. We need a major shift and attitudinal overhaul from our preference for imported goods to the detriment of our local contents.
•Onovo wrote from Lagos; [email protected]