It was in August 2021 that the Petroleum Industry Bill was signed to become an Act. This was after the Electricity and Power Sector Reform Act 2005, followed by the Electricity Power Sector Reform Act 2019 and the Electricity Act passed July 2022 that was signed by President Tinubu in June 2023.
The reforms announced the full liberalisation of the two key critical sectors that are very fundamental to how Nigerians live and business is done in terms of the costs of doing business, costs of living, purchasing powers as well as standards of living of families. Coupled with these reforms was the tweaking of the monetary policies, a step taken by former Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, which was announced precisely on October 26, 2022. The CBN, inter alia, announced the need to replace higher naira denominations, control the amount of money in circulation, revised cash withdrawal limits, effective January 15, 2023.
The fiscal and monetary policies signalled the unpalatable experiences for over two hundred million Nigerians – a situation that unleash cash crunch, deprivation, hunger, loss of lives and destruction of businesses, fuel scarcity, inflation, no food, and other harrowing experiences. Nigerians were still grappling with the terrible situation for almost five months when ‘subsidy is gone’ pronouncement was made on May 29, 2023 at the swearing-in ceremony of the new President of the Federal Republic of Nigeria. The total removal of the petrol subsidy a month before the set date made the price of petrol to jump above 300% (pre-May 29 price). The sudden jump in the price of fuel and the effects of the unification of the official and parallel market forex rates further aggravated the shocks, thereby leading to massive emigration (Japa) of the working class out of the country, enormous betting among youths and the working class, cyber frauds and yahoo-inspired rituals taken to greater heights as well as hook-ups in a new dimension among young ladies.
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Should Nigerians be caught napping by the government activities and developments of early-to-middle 2023? But for the Emefiele-caused demonetisation hara-kiri, Nigerians shouldn’t have been if they are a people that know how to process, dissect and make use information to plan life. Also, if government had been alive to its responsibilities by implementing actions necessary prior to subsidy removal date, including proper orientation of the populace – and the people on their part know how to work with information and with discerning hearts to understand that it would no longer be business as usual once subsidy is removed. Greater percentage of Nigerians are hard of hearing and they hardly understand. Even if you take time to repeat a matter several times, they will still be caught unprepared.
Subsidies are incentives given by government in form of cash, grants, or tax breaks to improve supplies of certain goods and services; to enable consumers access cheaper products or commodities. They are provided to specific industries with the aim of keeping the prices of products and/or services low for people to be able to afford them. This is what the government of Nigeria had been doing for decades to ensure petroleum products or tariffs paid on power supply are kept low. Whereas subsidies are given to stimulate production and/or consumption, what Nigeria had been doing, for years, did not encourage production or stimulate consumption but to help further destruction of few local players that are daily subjected to harsh competition with influx of cheaper foreign products. If at all subsidies by Nigerian government achieved anything, it was to stimulate corruption unto a level where it was clear to many that such subsidies cannot be sustained.
The steps taken by the government in year 2023 was to force redirection of the nation’s economy to a free market economy. Hitherto, certain basic necessities are provided at reduced prices; but a free market economy means nobody, not even the government, is forced to do anything, and transactions are entered into willingly through the dictate of price mechanisms, competition, and the forces of supply and demand. Where this is the case, the power of bargain, work to eat, profit making, and voluntary exchange of values will hold sway; and whoever wants the best that life can give must really be ready to work for it and pay the price. How ready are Nigerians, who have been enjoying welfare economy since early 1970s, for this sudden change?
A free market economy is one where demand and supply regulate production and allocation of resources. Costs of doing business will go up and prices of goods and services will also go up. Though Nigeria is a very huge market where whatever product that is thrown into it can be accommodated to a greater extent, it is a fact that some products and services hitherto considered as necessaries will take back seat while attention will be given to the real existential needs. And what about the effects of this sudden change: unemployment, insecurity, loss of jobs, mounting inflation, non-existent social supports, conspicuous poor infrastructure, poor/non-supportive banking system, glaring dismal market regulation, and such like? Clearly, it is time for everybody to reposition.
Ola Emmanuel is a business planning consultant
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