Last week, I was so rusty from returning to the newsletter after a month-long absence that I forgot to remind you guys to share. That newsletter had 19 shares, an all-time low; let’s fix that today by sharing this newsletter and telling people why it’s so awesome.
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This week, the news of the possible removal of fuel subsidies in Nigeria hogged the headlines. For many Nigerians, conversations around fuel subsidies are a familiar dance. For the uninitiated, here’s a backstory: Although Nigeria is an oil-producing country, we import petrol because our refineries don’t work — but importing fuel is expensive. Nigeria pays billions of dollars annually for these imports, and because the trade happens in dollars, the cost can be tricky. To ensure that this cost isn’t passed to you, the Federal Government pays import subsidies.
But as with everything else in Nigeria, the fuel subsidy program has become a conduit for corruption. While subsidies have been a thing since the 70s, they didn’t receive unusual attention because there were similar support programs across all sectors. But as Nigeria’s population grew, the poor economics and sheer fraud related to subsidies became clear. $6 billion was paid in fraudulent subsidy claims in 2012 alone. And a report by the then Jonathan government showed that fuel importers were paid for 59 million litres of petrol daily while Nigeria’s daily petrol consumption was 35 million litres at the time.
That consumption has only continued to rise. In May 2021, data from the NNPC showed that Nigeria’s petrol consumption was 72 million litres daily. That increase suggests mind-boggling corruption around the subsidy process, which means Nigeria now spends N250 billion per month on fuel subsidies. That the payments are unsustainable is obvious for a country where government revenue growth has been sluggish. But putting a stop to them has proved difficult.
One big fear is that a rise in domestic petrol prices will depress the economy and increase inflation from15.99%. But a counterargument is that Nigeria’s economy, which is on the ropes, cannot afford to keep making those subsidy payments.
In June, a World Bank report on Nigeria recommended the removal of fuel and electricity subsidies. The IMF made similar comments this week after an official visit to Nigeria. It cited the Petroleum Industry Act, which says fuel prices should be market-determined.
Over the last six years, the Buhari-led government has claimed to end the fuel subsidy payments on more than one occasion but has quietly returned with every jump in global fuel prices (which Nigeria does not benefit from because our local production is inefficient). For some reason, the government is listening and looks poised to end subsidy payments by Q1 2022.
Here’s a fantastic throwaway from the IMF about Nigeria’s subsidy removal
“Nigeria’s past experiences with fuel subsidy removal, which have all been short-lived and reversed, underscore the importance of building a consensus and improving public trust regarding the protection of the poor and efficient and transparent use of the saved resources.”
The latter part of the sentence is why the Ministry of Finance plans to give N5000 ($12.20) to 30-40 million people every month starting in July. When petrol and electricity prices rise, millions of vulnerable Nigerians will face a tighter squeeze. There have already been two increases in electricity tariffs this year.
There are other vital pointers from the IMF report, one of which is to allow a market-clearing unified exchange rate —look away now, Godwin Emefiele. “The mission advised a move to a unified and market-clearing exchange rate without further delays,” the IMF said. “To preserve competitiveness, any exchange rate adjustment should be accompanied by clear communications regarding exchange rate policy going forward,” it added.
That’s enough reporting on the Nigerian economy for one day, and I’m sure the first half of today's newsletter will be useful for a drinking game. Take a shot every time the word “Subsidy” appears. But right before you get drunk, let me touch on some thoughts I intend to flesh out in another newsletter.
Some thoughts on transparency
This week, two separate incidents underlined a broad absence of transparency within Nigeria’s technology sector. A Techcrunch report on PiggyVest’s ownership of Abeg, which generated counterclaims and subliminal messages from different tech insiders, and Mono’s now deleted tweet telling customers of an integration with Chaka and Bamboo. Although both incidents have now blown over, the wider public is none the wiser about the key issues.
Were there any ethical issues around PiggyVest’s acquisition of Abeg? Were some founders sidelined, and why did Chaka and Bamboo issue such strongly-worded statements that left Mono red-faced? These are legitimate questions, but if the Nigerian tech space is anything to go by, don’t hold your breath expecting answers.
A long history of staying under the radar to prevent regulatory attention may be the culprit, but what it is leading to is a sector filled with startups that never really answer tough questions. Those startups are also led by rockstar founders, who have more clout and reach than many journalists or publications, resulting in a dynamic where they hold all the cards. There’s no meaningful way to verify claims because founders run a tight ship and people who work at these companies are often terrified of the repercussions of talking to the press.
So companies can make claims about transaction volumes, or some other important metrics. But it’s challenging for journalists to independently verify such figures or hold them to account, leading to an interesting situation where some of the most critical stories in the sector are not being told.
There might be no real danger to a small private company being secretive, but the bigger a company gets, the more scrutiny it should receive, because its impact has gotten bigger. We all understand this when we shade the traditional players for their failings or call out Apple for being secretive, but we forget that it applies to startups too.
What I read this week
Is Bitcoin a true replacement for fiat currencies? That’s an interesting question this author gets into; and as your timeline continues to be taken over by crypto maximalists, perhaps we can get a rebuttal that will help move the conversation forward.
There’s nothing we like better than a good ‘ol, “I told you so.” Here’s an article on the rise and fall of Clubhouse
Before you head out to cheat this weekend, how about this article on why humans keep trying and failing at monogamy
And before you think I don’t believe in love, here’s this fantastic Modern Love piece that may be my all-time favourite.
Also, this really good newsletter covered API transparency. That might sound complex, but I think it’s very easy to read.
That’s it from me. It’s taking all my willpower to publish these Friday pieces so I’m not sure when the Sunday newsletter will return. I also now understand why people put up paywalls; these newsletters are a lot harder than they seem.
Don’t be shy about emailing me to ask for my account details if you find that this newsletter is useful and you want to make a donation. Also, please leave a comment if you’ve gotten this far, thank you and see you next week!
*Edited by Abubakar Idris