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Let's play a drinking game
Take a shot every time I complain about Nigeria's fuel subsidy
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If we were to create a drinking game for the Notadeepdive newsletter, it would be one of two things: take a shot every time I talk about the CBN governor, or take a shot everytime I talk about fuel subsidy. The CBN governor hasn’t been in my crosshairs for a while, even though Nigeria’s headline inflation continues to reach record levels (17% in may). Behind this inflation number is one reality: 15 million Nigerians are at the risk of being pushed into poverty in the next two years. Yet, nobody in or around the Nigerian government cares about the economy anymore. In serious societies, this sort of wicked double-digit inflation is something central bankers worry about.
But this week, Godwin Emefiele had the fuel scarcity to thank for taking all of the heat. Nigerians spent hours in fuel queues across the country in the third fuel scarcity in the last six months. In Lagos, the fuel scarcity and hustle for fuel worsened the traffic situation, making an already unlivable city a nightmare. One of the things I heard a lot this week as we all tried to buy fuel was the belief that the government was lowkey trying to increase the price of petrol. Strangely, many of the people I spoke to said that at this rate, they would take increased fuel price over the quarterly scarcity.
We’re in a unique situation where the perception of the Buhari government is so bad, that they can now afford to pull subsidy removal. The economic costs of subsidy are clear; this year, the NNPC has remitted money to the Federal Government once-the rest of the country’s revenue from oil has been used to pay for petrol subsidy. At a time when oil prices are sky-high, Nigeria, an oil-producing country, is not only facing fuel scarcity but can’t capitalise on those high prices.
Here’s President Buhari's response to Bloomberg recently on the possibility of removing fuel subsidy:
“Most western countries are today implementing fuel subsidies. Why would we remove ours now? What is good for the goose is good for the gander!
What our western allies are learning the hard way is what looks good on paper and the human consequences are two different things. My government set in motion plans to remove the subsidy late last year. After further consultation with stakeholders, and as events unfolded this year, such a move became increasingly untenable. Boosting internal production for refined products shall also help. Capacity is due to step up markedly later this year and next, as private players and modular refineries (Dangote Refinery, BUA Group Refinery, Waltersmith Refinery) come on board.”
Away from subsidy, the other elephant in the room for our oil revenues is declining production levels. Our oil output for May 2022 stood at 1.5 million barrels per day, the lowest oil production level in 15 years. Oil thieves–it feels more honest to call them stakeholders at this rate–now have the full run of the yard, and Nigeria is now losing more oil than ever to them. Speaking of, I haven’t heard Tony Elumelu’s voice in a minute, someone check on that man.
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What’s the common thread? The two biggest threats to Nigeria’s economy, inflation and our inability to secure the commodity we earn much-needed dollars from are receiving no attention from the government. The World Bank has a brilliant summary of Nigeria’s projected position in 2023:
“The weakening of Nigeria’s macroeconomic framework is mainly due to the absence of concerted efforts to reduce inflation, address fiscal pressures, and strengthen exchange rate management. As a result, inflation is expected to be two percentage points higher in 2022–2023 than in our baseline scenario from six months ago. In addition, against a burgeoning petrol subsidy (estimated to cost over US$9 billion in 2022 or almost 2 per cent of GDP) and low oil production, the general government fiscal deficit for 2022 has been revised upwards from 5.3 to 5.8 per cent of GDP.”
What I’ve been reading
This story is about Kune, a Kenya-based food delivery startup that has now gone out of business
This fascinating essay by Galloway on crypto’s Trustless promise
A big difference between professional and amateur athletes is the intensity of training
Communiqué 29: The Money Africa playbook
Nigerians are learning to buy now and pay later
See you on Sunday!