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Envelope-to: okey@brownbrommel.com
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From: Ekanem Etim-Offiong <ekanemetimoffiong@icloud.com>
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Subject: Why economic reform is hard to sell | TheCable
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Date: Mon, 21 Oct 2024 14:14:01 +0100

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<html><head><meta http-equiv=3D"content-type" content=3D"text/html; charset=3D=
utf-8"></head><body dir=3D"auto"><div dir=3D"ltr">=EF=BB=BF<meta http-equiv=3D=
"content-type" content=3D"text/html; charset=3Dutf-8"><div dir=3D"ltr"><base=
 href=3D"https://www.thecable.ng/why-economic-reform-is-hard-to-sell/"><styl=
e id=3D"print"></style><title>Why economic reform is hard to sell | TheCable=
</title><div class=3D"original-url"><br><a href=3D"https://www.thecable.ng/w=
hy-economic-reform-is-hard-to-sell/">https://www.thecable.ng/why-economic-re=
form-is-hard-to-sell/</a><br><br></div><div id=3D"article" role=3D"article" s=
tyle=3D"-webkit-locale: &quot;en&quot;; z-index: 2; text-rendering: optimize=
legibility; font-family: -apple-system-font; font-size: 1.2em; line-height: 1=
.5em; margin: 0px; padding: 0px;" class=3D"system exported">
        
    <div class=3D"page" style=3D"text-align: start; overflow-wrap: break-wor=
d; max-width: 100%;"><h1 class=3D"title" style=3D"font-weight: bold; font-si=
ze: 1.95552em; line-height: 1.2141em; margin-top: 0px; margin-bottom: 0.5em;=
 text-align: start; hyphens: manual; display: block; max-width: 100%;">Why e=
conomic reform is hard to sell</h1><div class=3D"metadata singleline" style=3D=
"text-align: start; hyphens: manual; display: block; margin-bottom: 1.45em; m=
argin-top: -0.75em; max-width: 100%;"><a href=3D"https://www.thecable.ng/aut=
hor/simon/" class=3D"byline" style=3D"margin: 0px; color: rgb(65, 110, 210);=
 max-width: 100%; text-decoration: underline; font-size: 1em !important; fon=
t-weight: normal !important; font-style: normal !important; display: inline !=
important;"><span style=3D"margin: 0px; max-width: 100%; font-size: 1em !imp=
ortant; font-weight: normal !important; font-style: normal !important; displ=
ay: inline !important;">Simon Kolawole</span></a></div>
<p style=3D"max-width: 100%;"><strong style=3D"max-width: 100%;">Breaking Ne=
ws: The World Bank has endorsed President Bola Ahmed Tinubu=E2=80=99s econom=
ic policy, suggesting that Nigeria must maintain its current reforms for the=
 next 10 to 15 years in order to be able to transform its economy. Dr. Inder=
mit Gill, the chief economist and senior vice-president of the World Bank Gr=
oup, said and I quote: =E2=80=9CIf these reforms are sustained, Nigeria will=
 transform its economy and become an engine of growth in sub-Saharan Africa.=
 It is very difficult to implement such reforms, but the rewards are massive=
.=E2=80=9D He was speaking in Abuja at the 30th Nigerian Economic Summit wit=
h the theme: =E2=80=9CCollaborative Action for Growth, Competitiveness, and S=
tability.=E2=80=9D</strong></p>
<p style=3D"max-width: 100%;">Me: Thank you very much, Dr. Gill, but how man=
y Nigerians will still be alive in the long run at this rate? With the massi=
vely falling naira, growing foodflation, explosive fuel costs, and shocking e=
lectricity tariffs, how many Nigerians will make it to the Promised Land? Ni=
gerians have been experiencing the pains of various economic reforms for dec=
ades but it has been eons since they have had to endure this rate of price i=
ncreases all coming within one year. As they are struggling to process one d=
evelopment, another one comes. They are asking: when will there be a respite=
? Petrol price alone has jumped from roughly N185/litre to around N1,000. Th=
is was previously unthinkable.</p>
<p style=3D"max-width: 100%;">When President Olusegun Obasanjo was about to b=
e inaugurated in 1999, Channels TV did a vox-pop of people on the streets, a=
sking them their expectations of the new government. =E2=80=9CI want Obasanj=
o to bring the economy down,=E2=80=9D one market woman yelled into the micro=
phone. Don=E2=80=99t laugh. As far as she was concerned, the =E2=80=9Ceconom=
y=E2=80=9D means prices of goods and services. You know everything about the=
 macro-economic and micro-economic theories, GDP, M1, M2, M3, balance of pay=
ments, capital flows and fiscal consolidation =E2=80=94 but the market woman=
 knows something about the price of garri theory. No matter the imperative o=
f reform, therefore, there is a human element that cannot be ignored.</p>
<p style=3D"max-width: 100%;">Economic reforms are mostly presented as a tec=
hnical activity. You want to attract foreign investments? Remove the artific=
ial peg of the naira, lift barriers to free trade and don=E2=80=99t place a l=
id on capital repatriation. You want more funds for education, healthcare an=
d to build critical infrastructure? Get rid of subsidies. You want more reve=
nue? Increase your tax/GDP ratio =E2=80=94 your rates are too low and enforc=
ement too weak. You want to curb inflation? Reduce money supply by raising i=
nterest rates. On paper, these policies are no-brainers. There is just one p=
roblem: at the receiving end are human beings =E2=80=94 and the poorest of t=
hem are always disproportionately affected.</p>

<p style=3D"max-width: 100%;">Across the country today, Nigerians are groani=
ng over the impact of the reform being embarked upon by Tinubu, who has been=
 nicknamed =E2=80=9CT-Pain=E2=80=9D. The reform has seen to the total or par=
tial removal of three subsidies: petrol, FX and electricity. The =E2=80=9Cte=
chnical=E2=80=9D results are what the World Bank is celebrating: debt servic=
e as percentage of revenue is falling, meaning there will be more money to f=
und the budget; FX reserves are growing, meaning we can now meet our interna=
tional trading obligations better than before; and federation account is get=
ting fatter partly because of the removal of the implicit FX subsidy. But he=
re is the ultimate test: what is the =E2=80=9Cis equal to=E2=80=9D on the pr=
ice of garri?</p>
<p style=3D"max-width: 100%;">On the upside, the removal of petrol subsidy w=
ill end the scam that has been enriching a few. We were to spend about N5.4 t=
rillion on subsidy in 2024, having already doled out N4.2 trillion from Janu=
ary to July. No such claims can be made again and there should, thus, be mor=
e money going into the treasury. On the downside, though, petrol price has b=
een rising and making life miserable for Nigerians. It is complicated by the=
 fact that we are not used to buying petrol at a market-determined price, so=
 it is a culture shock. When prices were increased in the past, they usually=
 stayed on the same spot for years no matter the ex-depot cost. This brought=
 some stability to consumer prices.</p>
<p style=3D"max-width: 100%;">Until recently, we were importing petrol at N1=
,200/litre and selling at N600. The Nigerian National Petroleum Company (NNP=
C) Ltd started owing suppliers and was, in no time, struggling to keep impor=
ting. Word went round that Dangote Refinery, being home-based, would soon st=
art selling petrol for N200, but that was not to be. After all, the refinery=
 also has to buy crude at the market price (whether in naira or dollars) =E2=
=80=94 like any other refinery =E2=80=94 before it can produce petrol. We ha=
ve now entered an era where petrol, like diesel, will be priced like any oth=
er commodity as it is done in most countries around the world. The new order=
, unfortunately, means more pains for Nigerians.</p>
<p style=3D"max-width: 100%;">Meanwhile, the removal of FX subsidy has broug=
ht hardship =E2=80=94 in fact, it is the root of the biggest sufferings Nige=
rians have had to bear, including the hike in fuel prices and electricity ta=
riffs. FX is the baseline for virtually everything in Nigeria, directly and i=
ndirectly. The official exchange rate was around N460/$ when Tinubu became p=
resident. It is now about N1,600/$. In the parallel market, it was N750/$ an=
d now N1,700. We held on to the artificial/official peg for so long that the=
 gap kept widening. Only those with =E2=80=9Clong legs=E2=80=9D could buy FX=
 at the official rate. The most pronounced consequences were the diversion o=
f FX into parallel market and the backlog of unmet demands.</p>
<p style=3D"max-width: 100%;">By allowing the naira to depreciate, Tinubu ca=
n claim to have achieved a few things. One, the incentive for arbitrage =E2=80=
=94 buying at official rate and selling in the parallel market =E2=80=94 has=
 reduced. Some of our celebrated billionaires were milking the country dry t=
hrough arbitrage: getting FX from the Central Bank of Nigeria (CBN) at N460/=
$ via fake transactions and roundtripping to sell at N750/$ in the parallel m=
arket. The margin was mad. The margin is thin now, making arbitrage less att=
ractive. Two, Tinubu can also say that our dollar reserves are growing again=
, partly because FX inflow is now going through official sources. Now we are=
 settling our FX obligations faster, compared to the past.</p>
<p style=3D"max-width: 100%;">But the downside is devastating. We import mos=
t of the essential things we consume in Nigeria, including fuels, clothing, m=
edication and intermediate goods. Any slight upward adjustment in the exchan=
ge rate will cause a ripple effect on general prices. In fact, it was when t=
he exchange rate went gaga that it finally dawned on me that it is far more i=
mpactful on the poor than the price of petrol. Actually, the fuel prices are=
 largely dependent on the exchange rate. In turn, the cost of transportation=
 is determined by fuel prices. And the pricing of foodstuff, particularly in=
 the southern part of Nigeria, is largely affected by transportation cost. I=
t is like everything happened to us at once.</p>
<p style=3D"max-width: 100%;">Tinubu also partially removed electricity subs=
idy. According to reports, the subsidy bill was estimated at N2 trillion for=
 2024. But through the creation of the =E2=80=9CBand A=E2=80=9D nomenclature=
 and the shifting of most of the subsidy burden there, Tinubu cut the bill b=
y half. The general economic argument is that where there is no subsidy, the=
re is no subsidy scam. Agreed. But the impact has been equally devastating. B=
y the time the tripled tariff landed on businesses and schools (tertiary ins=
titutions in particular), it was all tears. In sum, the removal of the three=
 subsidies =E2=80=94 despite all the highlighted benefits =E2=80=94 has take=
n the cost of living skywards and eroded the purchasing power of Nigerians.<=
/p>
<p style=3D"max-width: 100%;">Where do I stand? To be sure, I am not against=
 reform. The economic hardship is global. Our economy was racing towards the=
 abyss. We were spending most of our revenue on servicing debts, printing mo=
ney to pay salaries and failing to meet our FX obligations. We were living o=
n borrowed time. We were getting to a stage when our letters of credit would=
 no longer be honoured =E2=80=94 meaning we would not be able to import basi=
c stuffs again. It has happened before: in 1983, the Shehu Shagari administr=
ation had to set up a task force to import rice. In 1984, we were queueing t=
o buy =E2=80=9Cessential commodities=E2=80=9D as they were not available in t=
he open market because of FX scarcity.</p>
<p style=3D"max-width: 100%;">In one word, we did not have many options when=
 Tinubu came on board. In fact, the reform should have started as far back a=
s 2014. We did not want Nigerians to suffer, so we delayed and dilly-dallied=
. We started borrowing and also rationing FX to paper over the cracks. Some o=
f the measures actually held down consumer prices for a while and I was part=
ially in support because I believe reform has to be paced. But when the prob=
lems became overwhelming, we delayed action on many fronts. It is like a man=
 with kidney failure dilly-dallying on dialysis until he now has to do a tra=
nsplant. Nigeria is now undergoing a transplant because of its failure to do=
 the painful but necessary dialysis for years.</p>
<p style=3D"max-width: 100%;">Having said that, however, I still do not have=
 nice words for the Tinubu administration. For one, it is clear that the ref=
orm was poorly conceived and harshly implemented. You can devalue the naira,=
 yes, but no country floats its currency recklessly as we did. It was a kami=
kaze. Above all, the measures to cushion the pains are mostly audio. Ages ag=
o, the Tinubu administration announced a planned suspension of tariffs on fo=
od items. Maybe it will start implementation this morning. You can see the u=
nseriousness. No sense of urgency. Yet, the government was eager to award th=
e N15 trillion Lagos-Calabar road contract =E2=80=94 of all the problems in N=
igeria. Construction started instantly. Priorities.</p>
<p style=3D"max-width: 100%;">That, in a nutshell, is why reform is difficul=
t to sell to Nigerians. The people are wondering: are we all in this thing t=
ogether? There is nothing to show that the message of sacrifice is for all. L=
eadership is best delivered by example. It is more urgent to buy a president=
ial jet than to reduce tariffs on food items and medication that will benefi=
t millions of Nigerians. How many people really benefit from all these palli=
atives? All said, it would be more disastrous to reverse the reform. The tas=
k is how to keep it on track and minimise&nbsp;the&nbsp;pains. I have said t=
his again and again: Nigerians are not impossible to lead. They want to see t=
hat their leaders really and truly care =E2=80=94 not just in words but also=
 in deed.</p>
<h2 style=3D"font-weight: bold; font-size: 1.43em; max-width: 100%;"><span s=
tyle=3D"max-width: 100%;"><strong style=3D"max-width: 100%;">AND FOUR OTHER T=
HINGS=E2=80=A6</strong></span></h2>
<p style=3D"max-width: 100%;"><strong style=3D"max-width: 100%;">KILLING EFC=
C</strong></p>
<p style=3D"max-width: 100%;">There is a big campaign to castrate the EFCC b=
y limiting its powers to only federal officials. Sixteen states are at the S=
upreme Court seeking a definitive pronouncement on the powers of the EFCC. I=
 am not a lawyer (at least, not yet), but my sense is that the EFCC deals wi=
th financial crimes that go through the banking system. Item No. 6 on the ex=
clusive legislative list in the 1999 Constitution places =E2=80=9Cbanks and b=
anking=E2=80=9D under federal jurisdiction. Therefore, the best way governor=
s can plunder our resources and escape the EFCC is to avoid passing their lo=
ot through the financial system. Alternatively, they can get the lawmakers t=
o delete Item 6 from the exclusive list. Simple.</p>
<p style=3D"max-width: 100%;"><strong style=3D"max-width: 100%;">TANKER TRAG=
EDY</strong></p>
<p style=3D"max-width: 100%;">Over 100 people were burnt to death in an expl=
osion in Majia, Jigawa state, on Tuesday night when a petrol-laden tanker ha=
d an accident. Most of the victims were reportedly scooping petrol when the e=
xplosion occurred. It happens all the time. The most memorable for me was th=
e 1998 Jesse pipeline disaster in Delta state =E2=80=94 over 1,000 were burn=
t to death. There have been similar incidents in Cross River and Lagos state=
s. We all know the dangers, but when you are so poor, your sense of adventur=
e can be reckless. You are only thinking of the gain of =E2=80=9Cfree petrol=
=E2=80=9D if you succeed in scooping it. We obviously need to take tanker sa=
fety seriously and citizen education even more seriously. Horrific.</p>
<p style=3D"max-width: 100%;"><strong style=3D"max-width: 100%;">LAWLESS LIB=
YA</strong></p>
<p style=3D"max-width: 100%;">Ahead of the now-postponed Afcon qualifier in L=
ibya, the Super Eagles of Nigeria were treated shabbily by their petulantly h=
ostile hosts. Their flight was diverted to a distant airport =E2=80=94 where=
 they were held hostage without water, food or internet access for 15 hours.=
 However, the Libyans said we meted out a similar treatment to them a few da=
ys earlier when they played in Uyo, Akwa Ibom state. In other words, this wa=
s their revenge. In football, retaliation is a straight red card. It contrad=
icts their claim that the flight was not diverted deliberately. Nigeria has d=
enied the allegations. Why didn=E2=80=99t the Libyans report the Uyo =E2=80=9C=
maltreatment=E2=80=9D to CAF? That would have been far more civil. Self-help=
.</p>
<p style=3D"max-width: 100%;"><strong style=3D"max-width: 100%;">NO COMMENT<=
/strong></p>
<p style=3D"max-width: 100%;">The consultative assembly of the Southeast Ele=
ctricity Consumers Association (SEECA) says residents in the geo-political z=
one will go on an =E2=80=9Cindefinite strike=E2=80=9D from November 1 over a=
 plan to move customers to Band A where electricity tariffs are the highest.=
 Before you laugh, they have a point: faulty infrastructure is yet to be fix=
ed and the Enugu Electricity Distribution Company (EEDC) has not complied wi=
th an order by the Nigerian Electricity Regulatory Commission (NERC) to refu=
nd N11.86 billion to consumers overbilled between January and September 2023=
. But what will a strike look like if EEDC does not stop supply? Switch off t=
he lights? Resort to using diesel generators? Wonderful.</p>
</div></div></div><br id=3D"lineBreakAtBeginningOfSignature"><div dir=3D"ltr=
"><div>Ekanem Etim-Offiong&nbsp;</div><div><br></div>Sent from my iPhone</di=
v></div></body></html>=

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