President Bola Tinubu is the 16th president of Nigeria. He said that becoming the president of this great nation has been his lifelong ambition. Many of us saw him as the right man for the job given his pedigree as a former senator, governor of Lagos State, a private sector senior management staff and a business mogul. The president has been in the saddle for 16 months now and I daresay many Nigerians are wondering if we voted right last year. The rising cost of living has brought about excruciating pain to most Nigerians; no thanks to the twin policy of subsidy removal and floating Nigeria’s currency, the naira.
The National Bureau of Statistics reported that all measures of inflation rate rose in June 2024, albeit at a slower pace. Headline inflation increased to 34.2 per cent in June 2024 from 22.8 per cent in June 2023 and 34.0 per cent in May 2024. The inflationary pressures remain driven by currency depreciation, with the official exchange rate averaging N1471/US$ in June compared to N769/US$ in June 2023 and rising imported food inflation (36.4 per cent y/y). Headline inflation remains dominantly driven by food inflation, which rose to 40.9 per cent year-on-year, up from 40.7 in May 2024 and significantly higher than 25.3 per cent in June 2023. Similarly, core inflation rose to 27.4 per cent in June 2024, from 27.0 per cent in May 2024 and 20.1 per cent in June 2023. As of September 6, 2024, a dollar was exchanged for over N1,600 at the official exchange rate.
Given the high depreciation of the naira against international currencies, the cost of imported products has hit the roof and is beyond the reach of most Nigerians. Since we only produce a fraction of what we consume locally, the devaluation of the currency has impacted negatively on every good and even service in the country. This is because the raw materials for most products that are purportedly manufactured or assembled in Nigeria are largely imported. Last week Tuesday, September 3, 2024, Nigerians woke up to the news of another price hike of petrol. A 66 per cent increase was effected after weeks of fuel scarcity across the country. While the pump prices of petrol ranged between N600 and N700/litre in July, the cost was raised last week to between N855 and N897/litre by the Nigerian National Petroleum Company Limited, while some independent dealers hiked their prices to above N1,000/litre. This has further worsened the cost of living crisis most families face.
This latest increase in the price of premium motor spirit, coming on the heels of purported $6bn indebtedness by NNPC Ltd to its suppliers is ill-timed. I am of the considered view that the Federal Government should have looked for resources to keep the price of fuel low until several things are put in place. Take, for instance, the Compressed Natural Gas initiative of the Federal Government, where are we with that? The president first promised to roll out 3,000 CNG-powered buses in his July 31 national broadcast. It promised to procure these buses and roll them out by March 2024. This has not happened.
In his Sunday, August 4, 2024, presidential broadcast, Tinubu said inter alia on the CNG, that he had launched the Compressed Natural Gas Initiative to power the country’s transportation economy and bring costs down. This is expected to save the country over N2 trillion a month, being used to import PMS and AGO and free up our resources for more investment in healthcare and education. He said his government would be distributing a million kits at extremely low cost or no cost to commercial vehicles that transport people and goods and who currently consume 80 per cent of the imported PMS and AGO. He claimed that his government had started the distribution of conversion kits and the setting up of conversion centres across the country in conjunction with the private sector. He believes that this CNG initiative will reduce transportation costs by approximately 60 per cent and help to curb inflation. It’s over a month since this information was given but there has not been any rollout of CNG buses.
If these CNG busses, touted as a game changer in our transportation system, had been rolled out, the increase in the cost of PMS might not have had the kind of adverse effect it currently has on the populace. Interestingly, it does not seem like the CNG is cheaper than PMS at this point. Perhaps that’s why many motorists have not taken their cars for conversion. I know this for a fact because one kilogramme of cooking gas is well above N1,000 while petrol is still under N1,000. The government therefore needs to rethink this CNG initiative if it wants the Nigerian masses to embrace it.
The other issue is the unending turnaround maintenance of the Port Harcourt refinery. Mele Kyari, the Group Managing Director of NNPC Ltd, informed the nation around June 2024 that the refinery would start to produce by August 2024. This is September, with no yet concrete date this contraption on which a $1.5bn foreign loan was secured to revive would commence operation. Is this sabotage or force majure? Ironically, for close to 30 years that the country has purportedly spent over $25bn on turnaround maintenance of the four refineries owned by the Nigerian government without anything to show for it, no one has been indicted for the huge economic loss let alone being sanctioned. And thus, the culture of impunity continues to reign.
The only heartwarming news that has come the way of Nigerians in recent weeks is the announcement last week by the Dangote Refinery that it has commenced the production of petrol in its $20bn industrial complex in Lagos. Unfortunately, pricing has become a serious challenge as the company and NNPC Ltd have yet to agree on appropriate pricing for the Nigerian market. Tinubu will do well to have a patriotic negotiation with Alhaji Aliko Dangote to sell its product to Nigerians at an affordable rate. The government can make him do so if he is given a tax holiday and if the crude oil to be supplied to him is below the international market rate. The government may well buy petrol from Dangote at a negotiated price and sell it to Nigerians at a subsidised rate. Whichever way, Nigerians need energy security. Petroleum products are central to the economy and having them at affordable prices is the desire of Nigerians.
In order to also bring down the rising cost of living, the government needs to find a workable solution to the naira devaluation and depreciation. I am of the considered view that floating the naira against international currencies is not working and will not work. This is largely responsible for the astronomic cost of living. Tinubu should find an alternative to stabilising the national currency. In case the president does not know, the new minimum wage of N70,000 is yet to be paid to workers. The lives of most Nigerians are worse off with many parents unable to fend for their families any longer. A stitch in time saves nine!
1 Comment