I am not an economist but I live in this world and have been buying goods and services for over 4 decades. I note in my part of the world that the economy of even the greatest capitalist country on earth will stagnate if the pump price of gasoline were to increase in any significant may. Even a 20% hike in pump price of gasoline can significantly impact all sectors of the economy through its rippling impact on the price of goods and services. The prices of food and groceries will go up. People stay at home, and avoid non-essential purchases.The entire economy falters. I may not be a world-renowned economist, but I make bold to say that if some constellation of circumstances were to suddenly jack up the pump price of gasoline by 100%, the economy of any such country, even the United States would collapse. If for instance OPEC raises its price suddenly, or if there is an acute shortage of crude oil, and the pump price of gasoline rises beyond a certain comfort level, the president of the United States can be guaranteed to release oil from the strategic reserves to keep gasoline prices at a level that will preserve the economy.
While I may understand compelling arguments in favor of removing oil subsidy, I am at a loss while the economic titans serving our president and our country would even imagine that the Nigerian economy would survive an outright withdrawal of whatever subsidy may have been in existence, and push the pump price of gasoline up by 120% to 150. What were they thinking? Is this what they teach in Harvard Business School? That at a time of global economic depression (the worst since the Great Depression), when even the biggest capitalist countries are providing unprecedented subsidies to many sectors of their economy to cushion their citizens from the effects of the global economic downturn, our county should inflict this kind of pain on its citizens overnight? Was it not an option to phase out the oil subsidy in a graduated fashion? I suspect t if subsidy was phased out gradually over a 10-year period, its effect would have been barely noticeable. During those ten years, our government would have had the opportunity to incrementally work on those projects the president announced in his broadcast so that by the time there is no more subsidy, Nigerians would have decent mass transit by road and rail, cheaper gasoline refined locally, uninterrupted power supply so that they would not spend money on uneconomical independent power production at the rate of one 1-3 generators per family.
Whoever advised our government that they could pursue any policy that suddenly raises the pump price of gasoline from N69 to N145 has done Nigeria great harm.Even if workers were to keep quiet and swallow this poisoned pill, the impact of this in an economy where majority are living on less than $3 per day is still hard to imagine. The According to a World Bank report carried in the Nigerian Vanguard newspaper of 10th February 2010, "Nigerians that live on $1.25 per day make 29.6 per cent of the population while those that live on $2 are 83.9 per cent". The World Bank 2010 World Development Report quoted in the same publication revealed that "Nigeria's per capita income stands at $2,748, falling behind that of Ghana and Cameroun with $10,748 and $10,758 respectively". I returned from a visit to Nigeria the day after the announcement to remove oil subsidy. I saw how my dear country has been turned into a nation of beggars. Every one providing services, from the cop to the soldier at the check point, the airport security checking your luggage and person, the airline staff, to mention a few openly beg for their tip. Nigerians have even lost their pride because of poverty? And we are a major oil producing country?
I am not sure if anyone knows the way out of this mess. Is it too late to re-work this policy on oil subsidy withdrawal to suit the reality in Nigeria? If the sudden withdrawal was because of corruption, why do we not unleash the full might of the EFCC on those corrupting the oil industry. Why can't we all come together as Nigerians and back the EFCC and release them as attack dogs to go and get those inflicting so much damage to our dear country. Of course that is too naïve an idea. I forgot we are talking about Nigeria.
U. Walter Udoeyop
Johnson City, TN
Da Walter,
Welcome back. You have in your usual candid and eloquent way spoken my mind. I agree with everything you iterated here. You do not have to be an economist to feel and see the pinch, the pain and pangs of a bad and deplorable economic decision. A few weeks ago I voiced my opposition to the withdrawal of the oil subsidy. I was particularly piqued by the fact that the Nigerian Government, to justify its decision, alluded to the fact that the American Ambasdor to Nigeria says it is okay for the government to withdraw oil subsidies. I wonder if the Ambassador is a member of the cabinet, or if he has the interest of Nigerians at heart more than the Nigerian government. My comment was, whether the Nigerian Government had asked the Hon. Ambassador, if there are any subsidies in America. I also asked if they knew that in the US, there are multiple subsidies, to help the economy, and assist the ordinary folk. That there is ethanol subsidy, there is farm subsidy, there is medicare and medicaid, as social programs to assist the poor and the elderly. I also mentioned, that the only condition Nigeria could justifiably withdraw the oil subsidy would be when they have instituted enough social and economic conditions to cope with the repercussion of this exercise, and offer a safety net for the masses. Those adv icing the government have done the people a grievous harm.
I hope the Nigerian government realizes that this is a very serious, and costly mistake, swallow their pride, and reverse course. There is no serious or good government on this earth that I know of, that does not have some sort of subsidies, or some sort of social programs, or some sort of safety net to help both the economy and also its vulnerable citizens. Even the United States of America, the bastion of capitalism in the world, have. I think those raking in fortunes in the government and the corridors of power, seem to think, that the average Joe lives at the same degree of opulence and extravagance, like they do, that people have enough disposable incomes to overcome the hyperinflation that would follow. What they fail to realize is that there are millions of people who cannot afford to even feed themselves. People are in penury and living in abject poverty!! They are completely out of touch with the reality of Nigeria, and this may spell a doom for the administration, the economy and the country.
Withdrawing the oil subsidy for such lame, childish, egregious and ridiculous reasons is like biting the nose to spite the face. Talking about ameliorating conditions after the fact, is a mere afterthought, and is like putting the cart before the horse. This is inanity.
Asuquo Inyang
Dallastown, PA
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