The ghost chasing Nigeria’s economy: Consequences of subsidy regime

By Sunny Chuba Nwachukwu

In physics, Newton’s law states that, “action and reaction are equal and opposite”. Likewise in economics, the simple principle of prudent management of limited resources or money shows that, “you can’t eat your cake, and have it” (word of wisdom, always used by our elders). The sayings, of course, are germane, and clearly point out a known fact, that careless and reckless management of financial income, ultimately manifest poverty – which is the woe that follows prodigal spending.

This has now become the situation presently experienced in the nation’s oil Industry, based on her past activities and poor performance in its financial management. Obviously, the current spate of financial turbulence being experienced in the economy is directly and indirectly one of the consequences of the petroleum subsidy regime profligacy of several years. All manners of corrupt practices took over the subsidy space, and it became a drain pipe against the state’s wealth conservation efforts because, primarily, such initiative was originally aimed at improving the wellbeing of the citizenry by reducing the cost of energy consumption for the general public. That already had been defeated after being hijacked by a few individuals benefitting at the expense of the growth of the economy through exportation of jobs to other countries engaged to refine our crude, which in return is sold to us at exorbitant cost in foreign currency.

This danger had long been identified as a thorn in the flesh; and its sustainability also openly questioned, which was kept drumming on the deaf ears of the powers that be (in the media) for it to be scrapped! Today, the aftermath of it is manifesting as a monster rearing its ugly head that can it no longer be economically sustained, after a gradual and consistent devastation of the value of the domestic currency, the naira. This in itself was the result of unproductive engagements and unbalanced international trade commitments as a “consumer nation”, unnecessarily bearing the heavy financial load of inflation within the economy.

Low and behold, today the Nigerian National Petroleum Corporation (NNPC) has sent signals that it would not be able to remit her contributions to the Federation Account Allocation Committee (FAAC) account as being done monthly along with the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service, for the months of May, and possibly beyond that, towards the monthly sharing bazaar for the three tiers of government that benefit from the ritual that takes place in Abuja monthly. This is the reality borne out of the unsustainable monthly funds under the cover of N120 billion on imported refined products for stabilisation of the pump price of petrol at N162/litre, for our daily energy consumption.

At this juncture, the nation is currently facing harsh, unpleasant times that require immediate macroeconomic reengineering of fiscal policy that should contain the imminent national financial embarrassment staring her in the face. The impact of such withdrawal and its adverse multiplier effect on the economy is yet to be imagined. Who has bewitched this economy?

This singular position by the NNPC has exposed and thrown open a lot of the imminent challenges various levels of governance should expect, especially over payment of the workers monthly salaries. It, however, leaves much food for thought (i.e., the alternative approaches to think outside the box), regarding other effective and self-sustainable sources to generate revenue by governments at all levels. Although its mitigation does not require a rocket science approach, it does remind governance at the three tiers to look inwards and “think productive” towards being self-sustainable (in other words, “Backward Integration”, at the three governance levels).

There is no point crying over spilt milk because, it’s rather too late brooding over a lost opportunity (although there are still chances of survival). The hope or learning from a bitter lesson of such past mistakes is that future dealings could be corrected, going forward. The survival instincts lie in the hands of the leadership, to take economic measures by applying political will without further delay. Such strategic measures need instant utilization of technocrats in the relevant fields and economic sectors available within reach, for urgent economic turnarround of the available natural resources for recreation of useful products needed in designated markets. Human capital development of the youths is not left out either; because, potential intellectual properties (including development of Artificial Inteligence) inherent in our teeming unemployed youths at the job market could be discovered and developed.

All these working together shall amount to a multiple portfolio management of what the economy could afford for exports (outside oil and gas). It is worthy of note to still remind the leadership that entrepreneural development that can empower the younger generation is vital, and a key to a sustainable economic future because, without a solidly built foundation for a sound and thriving organised private sector in the economy, the hope and chances of survival and exploits for such economy shall be extremely slim.

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Nwachukwu, a graduate of pure and applied chemistry with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce.

Sunny Chuba Nwachukwu (FICCON, LS)

Onitsha, +2348033182105