As the day draws to a close, Janet Omor sits on a wooden bench under a stall selling smoked fish and pepper in the busy market district of Basili in Ad Ekiti, Nigeria. Smoke leaks faintly from under her grill, where the fire keeps flies away from the fish. Nearby are rows of small bowls with tomatoes and peppers.
These are all clear signs that Omole’s business is going through difficult times.
“Normally, by this time, most of the fish and peppers are almost sold out. Her loss of patronage reduced her profits and made it nearly impossible to support a family of six.
Four weeks of excruciating market slump followed after Nigeria’s President Bola Tinub announced the end of the country’s fuel subsidy program on May 29. The decision pushed petrol prices up from 190 to 550 Naira per liter (a variation of about $0.24 to $0.69) and reduced daily consumption. drop increased by 18.5 million liters (approximately 4.9 million gallons).Over 22 million gasoline generators installed in Nigeria Power 26 percent for households and 30 percent for small businesses. Businesses like Omore’s have come to a standstill as fuel prices soared, driving up prices for everyday items.
Despite being Africa’s largest oil producer, Nigeria has no functioning refineries and cannot simply produce more fuel to bring down expensive gas prices. Her four major refineries in the country are: shut down This was because poor maintenance left the oil out of service, and producers had to send it overseas (Belgium and Holland) to be refined before being sent back.Newly commissioned refinery near Lagos to start operations operating It will happen soon, but it may not have a big impact on the price.
Fuel subsidies were introduced in 1973 to keep gasoline cheap for Nigerians. Since then, the government has started paying part of the petrol bill so that people can buy petrol at a cheaper price. However, this system had built-in vulnerabilities.Nigeria last year lost $10 million to fuel a subsidy scam lurking in the bosom of a national oil company. Mr. Tinub said his decision would benefit the poor and drew a sigh of relief from the International Monetary Fund (IMF) and the World Bank, which have been pushing for the end of the policy for decades.
In addition to abolishing the subsidy policy, the Tinub government also rolled out currency reforms that saw the naira rate no longer pegged by the central bank and pegged to the US dollar, giving way to a rate determined by supply and demand, a policy known as ‘floating’. Killing two birds with one stone, Mr. Tinub’s move will be an attempt to rebuild the country’s economy, a key election promise. The effect of these decisions could theoretically help Nigeria at the macroeconomic level by reducing its national debt at the cost of harming regular Nigerians.
The naira has plummeted to record lows against the dollar since the government destabilized the currency. The fixed interest rate was 450 naira to the dollar, but it has risen to 800 naira to the dollar. Naira fluctuations caused an immediate increase in the prices of imported goods and services, and Nigeria’s import-dependent economy has devastated small businesses and low-income households. A company that distributes electricity increased Tariffs were raised by 40% to compensate for the loss of Naira’s value.
In theory, Nigerians could get around this problem by selling naira at black market rates, but the gap between the official floating rate and the black market is not as big as it used to be. Before the change, the official rate was pegged at Naira 450 per dollar and the black market rate could be Naira 700. At the time of this writing, the black market interest rate is 823.3 Naira, while the floating rate is 792.2 Naira across all sectors.
Mama Ekerche, a senior fellow at the Center for African Economic Research, said now is the perfect time to pursue changes in monetary policy. “It is unsustainable for the government to maintain an artificial exchange rate. It will encourage arbitrage, lead to foreign exchange shortages, depletion of foreign exchange reserves, and alienate investors,” he said, adding that the market-determined naira would attract more foreign investors.
But ordinary Nigerians battling a wave of inflation, unemployment and a Russo-Ukrainian war that has reduced grain imports and increased bread prices have yet to see the impact of this trickle-down argument. In fact, 63% of Nigerians already live in a multidimensional world. povertyAnd more people could slide down the economic ladder if the government doesn’t change course, experts say.
Instead, Mr. Tinub is adding fiscal policies that hurt the country’s poor even more. Market women like Omore, who drive Nigeria’s informal economy, will have to: payment Newly enacted VAT for the Federal Inland Revenue as the government seeks to expand its scope. Earnings.
Stanley Achonu, country director for Nigeria at ONE Campaign, an international organization working to end extreme poverty, said it was too early to impose a new tax on the informal economy.
“Nigerians, who work mainly in the informal sector, are still grappling with the impacts and difficulties of removing subsidies.
So why is Mr. Tinub pursuing these measures, and may they come at a political cost?
This is not the first time the Nigerian government has tried to cut oil subsidies. In early 2012, the government of former President Goodluck Jonathan announced a moratorium after a strong public outcry. A two-week Occupy Nigeria movement led by civil society leaders, trade unions and Tinub’s then-opposition has brought Nigeria to a standstill. At the time, Tinub said of the end of Jonathan’s subsidies: broken A “social contract” with his people. Jonathan surrendered, Restore Fuel subsidies to end nationwide protests.
Tinub embarked on the path he opposed 11 years ago this year, but faced no protests given the relatively precarious economic situation for Nigerians. Experts are blaming the recent elections. full of There was cheating, the result of which is currently being contested in the presidential election court, because there were no protests.opposition figures criticized Mr. Tinub’s U-turn may hope to annul his victory before the courts mobilize against him.
Nigerians are also exhausted and may lack the brilliance of 2012. The disputed elections are just one of the hardships the country has had to endure over the past few years. Inflation has also become rampant. Ikemesit Efion, head of research at SBM Intelligence, a Lagos-based geopolitical risk advisory firm, said the policy was not a shock.
“For many months there have been many movements suggesting a policy shift. For over a year, there has been an increasing conversation about fuel subsidies and the exchange rate regime and that kind of stimulus for Nigerians,” he said.
But some say Tinub’s campaign slogan, “New Hope,” is creating new problems as these policies negatively affect millions of Nigerians. Economic conditions are forcing low-income families like Omore to skip meals and forgo essentials. Her husband, a motorbike taxi driver, supported her family, but high fuel prices made it difficult for her husband to donate, prompting Omore to open a fish shop in Basili.
“I come to the stall every day because I can’t sit at home during these times. My kids and I control whatever food we have.
Olamirekan Abdulsalam, a tricycle taxi driver in Ilorin, is barely able to support his family as his income has dropped significantly since the new policy was announced.Lately he’s been eating more Garicassava-derived flakes are soaked in water and eaten with peanuts and sugar.
“Not so long ago I used to buy food in bulk, but now I only buy by weight.
The country’s minimum wage of 30,000 Naira per month has not risen since 2019, despite a sharp rise in the cost of living. Experts say government intervention is urgently needed to ease the pressure on low-income households or they could collapse under the weight of Tinub’s subsidies, currency and tax policies.
“We also see situations where people resort to criminal and illegal means to supplement their income when they are unable to provide for their families at an adequate level. So there is a national security and criminal dimension to this economic situation,” Efion said.
Some experts believe Tinub should add new poverty-relief policies to ameliorate the impact, rather than undo the policies that caused harm in the first place. ONE Campaign’s Achonu said the government should consider reducing the cost of governance by cutting salaries and reducing the bureaucracy to show the public that it recognizes the financial strain, and said it needs to strengthen and expand social safety net programs to provide immediate assistance to vulnerable Nigerians.
This could include targeted cash transfers, food aid programs and subsidized health care to mitigate the impact of rising prices on essential goods and services. However, the volatility of the country’s fiscal health and pressure from international bodies such as the IMF and World Bank make it nearly impossible to roll back policies aimed at debt relief.
Meanwhile, Tinub’s plan to get the country back on track seems to have damaged its people, though it is unclear whether this plan will achieve the ends that justify its painful measures. June, Nigeria Debt Management Authority Said The country’s debt-to-revenue ratio of 73.5 percent is threatening and unsustainable, it said. The expected external debt is arrival It will increase from $3 billion in 2023 and $2.5 billion in 2024 to about $4 billion by 2025. The country could also face further challenges in repaying its debt, which experts say will further affect the funding of social projects in key areas such as education, health care and agriculture.
Nigeria’s debt continues to rise, hurting the very sectors that directly support low-income households that rely heavily on government support in areas such as health and education. Achonu explained that the inability to prioritize their needs exacerbates poverty and inequality.
“President Tinub and his economic team should promote fiscal discipline, increase revenues from the non-oil sector, strengthen fiscal transparency and accountability, implement targeted policies to support the vulnerable and promote the growth of small and medium-sized enterprises, and work with other African countries to achieve a common position in the global financial architecture,” he said.
June 12, Tinub Asked Nigerians have to endure painfully and sacrifice a little more for the survival of the country. “For your trust and belief in us, I assure you that your sacrifice has not been in vain. The government I lead will pay you back through huge investments in transport infrastructure, education, regular electricity, health care and other public works that improve the quality of life,” he promised.
Mr. Omore, who returned to the stall, prays for God’s intervention. She has a deep mistrust of the government, but she hopes it will alleviate her suffering.
“I come to the stalls every day because I can’t sit at home. “I have people I can’t help right now, including my aging parents. Only those who have eaten can take care of others.”