The premium motor spirit (PMS) subsidy removal offers Nigeria the rare strength to crawl back from the fiscal cliff, but whether the imminent doomsday is only shifted miles away or completely aborted may not only depend on how the current transition is managed but also the response of critical stakeholders to the decision.

To suggest that the country has been dancing around the abyss in the past few days is to discount the severity of the challenges. Of course, the push-and-pull narrative about subsidy removal had been elevated to a popular discourse in the past two decades or so. But never has the waste and corruption associated with it pushed the economy to its current bend-or-break position.

And the red figures as well as headshaking facts are now in the open. Volumes of books could be written about the missed opportunities but nothing calls for deep-thinking and audacious action than the current sorrowful state of public finances, poor infrastructure spending and mounting liabilities.

The argument could continue endlessly on whether the government should have toed its path in clotting the open wound subsidy and all its trappings have assumed or endure the bleeding a little longer. But it is what it is – the country is on life support and does not have the luxury of time to tarry before proceeding with the much-needed surgical operation.

First, the recent steep increase in deficits amid dissaving is a major concern. As at the end of April, the outstanding on the Excess Crude Account (ECA), according to the Federation Account Allocation Committee (FAAC), was $0.475 million, 98 per cent steep fall from $2.1 billion in the coffer about less than a decade ago.

The fiscal deficit has also grown from less than N1 trillion in the period to a projected N10.78 trillion captured in the 2023 budget. The deficit accumulation is matched with a borrowing spree that has seen national public debt stocks balloon to about N70 trillion. Sadly, much of the debt is frittered away through subsidy payments and non-productive channels rather than reinvested in infrastructure and other local capacity-building projects that could raise the output level and taxable incomes in the future. Hence, the country has consistently grappled with tattered finances amid rising deficits; which raises fears about the future ability to pay. In 2015, when ex-President Muhammadu Buhari assumed office, the Federal Government’s total earned revenue was N2.4 trillion. Seven years later, it managed to climb up by 85 per cent to N4.46 trillion.

But within the period, the total expenditure moved from N4.477 trillion to N11.08 trillion or an equivalent of 132 per cent increase. The recurrent expenditure also went up by over 100 per cent, from N4.3 trillion to N9.2 trillion. That implies that the revenue profile has been growing much slower than the government’s expenditures.

However, that is just an aspect of the problem. In dollar terms, the FG’s earned more in 2015 than they did seven years later. Using the prevailing exchange rates, the total retained revenue was $12.2 billion in 2015 but it dipped to $10.8 trillion in 2021. If the revenue earned is juxtaposed with the growth of the country’s population and widening infrastructural needs, the extent of the decline in the commonwealth becomes even more abysmal.

The growing need amid declining revenues has tipped government to debt financing, with huge consequences of rising debt service affecting the country’s credit rating and negating its ability to secure fresh loans.

As at end of last November, for instance, 80.6 per cent of the government’s N6.5 trillion retained revenue in the year was spent on debt servicing whereas only N1.88 trillion was released for capital projects. Rising debt service to revenue ratio reduces equity financing capacity and increases the tendency to take more loans, experts have warned. The dilemma could also push the government deeper into a debt trap.

The proportion of government income that goes into debt service is already alarming but the World Bank warned, last year, that it could be much higher in years to come if urgent reforms are not implemented. The Bank said it could hit 160 per cent in five years, except broad-based reforms are implemented to ‘unfreeze’ the fiscal space.

Country Director, Shubham Chaudhuri, had noted that the percentage of government’s revenue going into debt service cost would continue to trend upward in the next five years and balloon except the government bite the bullet and cut off its excesses, including subsidy removal and other public sector reforms.

Between 2015 and last November, the budgetary allocation for capital projects was N10.3 trillion, which is less than twice of N5.24 trillion the FG paid its creditors for only 11 months last year. In the past 18 months, about N7.6 trillion was budgeted for the subsidy scheme alone. The figure is over half of Buhari’s eight-year budgetary support for capital projects, assuming the N5.47 earmarked last year was fully released. Recall that only 34.4 per cent (or N1.88 trillion) was released at end of November.

Perhaps, the worst damage subsidy payment inflicts on the economy comes through external factor leakages. From about $3 billion monthly remittance to the Federation Account in 2014, receipts from the Nigeria National Petroleum Corporation Limited (NNPCL) dropped to zero last year. That means more depletion of the external reserve position, which sends a negative signal to the international market about Nigeria’s ability to meet its maturing obligation, triggering a positive feedback loop.

At the close of May, the country’s external reserves dropped to $35 billion, about 46 per cent hair shave from its all-time high of $64.8 billion reached in August 2008 (at a time the country’s import was less than what it is today). An analysis of Nigeria’s import volume vis-à-vis its peers in relation to their external reserve positions leaves the country with gaping holes.

The rule of thumb used in assessing reserve adequacy suggests that countries should keep amounts sufficient to cover their short-term debts or three-month imports. In the fourth quarter of last year, the country’s total imports stood at N5.4 trillion ($11.74 billion). In nominal terms, the country is in its comfort zone. But beneath the veneer are unsettling issues, chief of which is the volatility of the reserves.

Still, on per capita analysis, Nigeria’s external reserve translates to $162, which pales into insignificance when compared with other oil-producing countries or those at the same stage of development. For instance, Kuwait’s per capita reserve is above $10,000 while that of South Africa is $780. Some of the countries with healthier foreign reserve positions are even more self-sufficient, thus less import-dependent than Nigeria.

Besides, a school of thought has argued that the recommended three-month import cover does not suffice given rising unforeseeable market risks such as COVID-19. The experts are calling for much larger reserves. In the post-COVID era when Nigeria’s reserve sufficiency became a serious debate, India’s had hit an all-time high of $605 billion, providing an import cover of about 15 months. But the intellectual community of the Asian country kicked, saying that the amount did not provide a sufficient buffer. Then, the argument was understandable as the reserve of its regional rival, China, could clear import bills of 16 months while Japan had enough reserve to last for 22 months as at then.

Falling external reserves have a cause-and-effect relationship with the weak naira, which also takes a beating from rising petroleum imports. The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, had lamented that the country spent about 40 per cent of its scarce FX on the importation of petroleum products as well as petrochemicals, which have continued to put pressure on the exchange rate.

The waste has pushed naira to a crisis level. Eight years ago, the official exchange rate was about N196/$ with the black market rates converging around the same rate or even trading slightly lower in some days. At the black market, the currency has lost about 290 per cent of its value against the dollar in less than a decade, while it dipped by close to 150 per cent at the official market.

The just-commissioned Dangote Refinery is expected to alter the course of history and move Nigeria from a net importer of petroleum products to a net exporter. But the country faces a concentration risk of relying on only one refinery to break the self-inflicted jinx. Experts have argued that a deregulated market could trigger a chain of investments in the downstream sector to halt petroleum product importation.

At full capacity, Dangote Refinery is projected to generate 135,000 direct jobs, while the indirect could be in multiple. This means more taxable incomes for the government, improvement in the standard of living and real-time poverty reduction.

Like medical surgery, deregulation will come with pains. Some economists, including Yemi Kale, the former Statistician-General of the Federation, have projected that the inflation rate could spike by as much as six percentage points in June. But a retired investment banker, Victor Ogiemwonyi, pushed back, saying the focus should shift to “driving growth faster than inflation”.

The economist, who believes the removal offers a rare opportunity to stabilise the fiscal position, also advises the authority to work towards reflating the economy, cutting the cost of governance, reducing waste and enhancing public transportation as soothing balms on the temporal wounds the surgical procedure would cause.

“Fuel subsidy is a consumption subsidy that can be used by governments with surplus income to redistribute the surplus if investment opportunities are scarce. However, for a developing economy with untapped vast opportunities, instead of consumption subsidy, the government pursues a policy of production subsidy as a strategy to direct resources to areas of production where they can catalyse growth, create wealth and generate productive employment.

“FG borrows money to subsidise consumption instead of taxing it to generate revenue. Mounting FG debt arises partly from consumption subsidies. If the subsidy is discontinued, it will help in balancing the budget and reduce debt servicing obligations. It will free more funds for the execution of FG’s capital projects… Discontinuation of fuel subsidy can impact the foreign reserve of Nigeria positively because less fuel will be imported and consumed,” David Adonri of Highcap Securities Limited, told The Guardian.

Maybe, Bismarck Rewane, an economist and member of the Presidential Economic Advisory Council (PEAC) under Buhari is more inspirational about how bold reforms (like subsidy removal) could jumpstart the economy when he puts the country’s potential output at $1.6 trillion, a mind boggling 235 per cent above the country’s current discounted gross domestic product (GDP) size – $477 billion.

Yes, Rewane’s estimation is outside the production possibility curve, which the country cannot attain with its current factors. It needs to expand its factor inputs, including injecting additional capital, to reach that level of output. The fresh investment can only come on the back of liberalisation advocated by pro-subsidy advocates.

This is certainly a bend-or-break moment for the country. And Tinubu has taken the first shot. What may be required to start pulling back the lost years and transition to a more productive environment, one that creates jobs and raises public revenues is certainly not a relapse to old culture but forward-looking initiatives.

The best time to have removed the PMS subsidy was before it started; the second best time appears to be now.

[Guardian]

The Oyo State government has announced the constitution of new excos for the Park Management System (PMS) in the state, with Mr Tomiwa Omolewa as Chairman.

This is just as the state government ordered the reopening of the parks which had been under lock and key following the dissolution of the PMS Disciplinary Committee led by Alhaji Mukaila Lamidi

The new Chairman, Omolewa was among personalities who pledged their support for the state government’s new plan on transport management at last week’s stakeholders’ meeting held at the House of Chiefs, State Secretariat, Ibadan.

The stakeholders’ meeting, among others, had agreed to the imperativeness of a reorganisation of the PMS as well as need for appointment an Interim Management Committee for transport management in the State.

The latest development on transport management in the State was conveyed in a statement by the Chief Press Secretary to the Oyo Governor, Mr Sulaiman Olanrewaju, on Sunday.
Also contained in the statement was the appointment of Mr Kasali Lawal as PMS secretary in the State.

The new management team announced by the government on Sunday comprises of members from all the major factions in the transport union.

Apart from the chairman and secretary, other members of the management include Alhaji Tajudeen Jimoh, Deputy Chairman; Kamardeen Idowu, Treasurer; Tirimisiyu Olowoposi, Financial Secretary; Abass Amolese, Organising Secretary; and Alhaji Hamidu Mustapha Were, Auditor.

Others are Alhaji Abideen Ejiogbe, First Vice Chairman; Ganiyu Mojeed, First Trustee; Alhaji Musa Alubankudi, Second Trustee, Alhaji Rahman Akinsola Tokyo, Second Auditor; and Alhaji Wasiu Emiola, Public Relations Officer.

Speaking after the announcement, the new PMS chairman, Tomiwa Omolewa, said he would work towards ensuring peace across the state.

He said: “I thank Governor Seyi Makinde for counting me worthy of this position. I use this opportunity to assure the people of Oyo State and the government that there will be a difference in our attitude to work.”

“I promise that the people will notice a significant difference in our operations as we assume office.”

It will be recalled that Governor Seyi Makinde, hours after he was sworn in for a second term in office, ordered the dissolution of the disciplinary committee of the PMS led by Mr Mukaila Lamidi popularly called Auxiliary.

Afrobeats singer, David Adeleke, also known as Davido, has revealed how he met his wife Chioma.

Davido, in an Interview with YouTuber and vlogger Tayo Aina, said he first met Chioma while they were both studying at Babcock University.

The singer mentioned he was pursuing a degree in music, while Chioma studied Economics.

He said in part, “I was in school for a year before I blew up. That was when I met my wife. I remember the day I saw her. I can never forget it.

“I was in a Prado, and I looked behind and I saw this girl walking. Just there with her bag, it was Chioma.

“I told Lati omo I like that girl, go and call that girl for me.

“He called her but she did not answer me at the time. Later on, she came to Lagos and we linked up. And I was like, yeah, I got you.”

Following the clash of interest that ensued between the former Chairman of disciplinary committee of the Park Management System in Oyo state, Alhaji Mukaila Lamidi, aka Auxiliary and Governor Seyi Makinde, the governor, has broken silence on why he sacked PMS boss, saying there can’t be two governments in a state.

The governor, made this revelation on Sunday, during a thanksgiving service to commemorate his Omituntun 2.0, held at the Cathedral of St. Peter, Aremo, Ibadan.

Recall that, Makinde, through his ex-Chief of Staff, Segun Ogunwuyi, last Tuesday, announced dissolution of the PMS headed by the former NURTW boss.

Oyo Police Command on the other hand, declared Auxillary wanted in connection with cases of attempted murder, causing grievous harm, arms dealing, murder, armed robbery within Oyo state and kidnapping at Oke-ogun and Ibarapa axis of the State.

The governor said he wielded the big stick by dissolving PMS, saying no meaningful activity can take place in an atmosphere of insecurity.

But Makinde, while speaking at the thanksgiving service, assured government would do all necessary reforms in PMS to ensure those fomenting trouble were engaged.

The governor said, “Before the last election, it wasn’t as if there is no thugs but we called them and told them the new Oyo State we want. We don’t want them to fight themselves, we don’t want fight to break from our garages every time.”

“We told them, don’t fight anybody. if we are re-elected, we shall ensure we unite you so that everyone can get what belongs to him or her for people and the government to operate in the atmosphere of peace.”

“But one of them said he can’t work with others. so I said two governments cannot operate in the state, there will only be one government.”

The governor said it took the grace of God for all his achievements in his first term.

He noted that the most important thing in Omituntun 2.0 is the upgrade of condition of the people, saying government shall do everything possible to make the upgrade is seemless and provide atmosphere for people to comply.

Mr. Olusade Adesola, the Permanent Secretary, Federal Capital Territory Administration (FCTA), says steps will be taken towards developing bicycle tracks within the Abuja metropolis.

Adesola made the expression in a statement by the Director, Information and Communication FCT, Mr Muhammad Sule, in Abuja on Sunday.

According to the statement, Adesola spoke at the opening of the 2023 World Bicycle Day in Abuja.
He said that bicycle tracks were already captured in the master plan of Abuja city, saying, ”We need to develop them.

“This move will deepen the campaign to reduce the effect of climate change, emissions will be reduced if cycling is encouraged,” he said.

The permanent secretary described cycling as an enjoyable and physically beneficial sport which should be encouraged and promoted.

“As a people, we need to imbibe the culture of riding bicycles, both as sport, exercise and means of transportation.

“The benefits of cycling are enormous. It can improve heart health and strengthen the limbs,” he said.
Adesola commended the Indian High Commission in Nigeria for its consistent supports towards the celebration of World Bicycle Day in the FCT.

Speaking, the Indian High Commissioner to Nigeria, Mr Shri Balasubramanian, urged Nigerians to embrace cycling in the interest of good health and healthier environment.

He said the Commission had, in the last five years, supported the celebration of the day in the FCT.
The theme of the event was: ”Cycling – A Better Way to Enjoy the City.”

The Judicial Staff Union(JUSUN) has mobilised its members to join the strike action declared by the Nigeria Labour Congress to protest fuel subsidy removal by the federal government.

In a circular addressed to the Deputy President, All Vice Presidents, All Branches and chapters of JUSUN” and dated June 3rd, 2023.

It reads “I bring you fraternal greetings from Nigeria (JUSUN) The leadership of the Judiciary Staff Union.

“This is to inform all Branches and chapters of our great union across Nigeria to begin mobilisation for a nationwide action and withdrawal of service which would commence on Wednesday 7th June 2023.

“This followed a decision of the National Executive Council (NEC) of the Nigeria Labour Congress (NLC) at her meeting on 2nd June, 2023 over the increase in the pump price of Petroleum Motor Spirit (PMS) by the Federal Government through NNPCL

All zonal vice presidents are to coordinate their zones by ensuring that Branch and chapters chairmen mobilise their members for a total compliance. Also note that the nationwide action commences on Wednesday 7th, June 2023.” The circular, signed for the NLC General Secretary by M.J. Akwashiki, instructed its addressees.

Hopes for an increase in crude oil production for Nigeria was rekindled on Sunday following approval by the Organization of Petroleum Exporting Countries to Nigeria, Congo and Angola to produce “maximally”

This was disclosed in a statement issued on Sunday

Nigeria and other OPEC and non-OPEC members at the 35th Joint Ministerial Monitoring Committee Meeting of OPEC held in Vienna, Austria, on Sunday have agreed to cut production volumes in order to ensure global oil market stability just as it allowed Nigeria, Congo and Angola to continue to produce maximally to their OPEC quota of 2023.

In the statement, Nigeria, Congo and Angola have agreed that the highest production volumes of the last six months from November 2022 to April 2023 should be used as the basis for the determination of their 2024 production quota

Nigeria alongside other OPEC and Non-OPEC members at the JMMC meeting agreed to a cut production volumes in order to ensure global oil market stability.

Furthermore, the statement added that Nigeria, Congo and Angola have agreed that the highest production volumes of the last Six (6) months (November 2022 – April 2023) to be used as the basis for the determination of their 2024 production quota.

Nigeria’s highest production of crude oil only of 1.383 MBPD was achieved in February 2023.

The statement reads in part, “OPEC has also agreed to allow these countries to continue to produce maximally to their OPEC quota of 2023.

“This implies that Nigeria can ramp up its production up to its current quota of 1742KBD and subsequently be capped at 10pwr cent less as its quota for 2024 subject to verification by independent secondary sources.”

The statement stated that the Nigerian delegation is confident that the ongoing security intervention under the leadership of President Bola Ahmed Tinubu will enable the restoration of country’s production to the 1580KBD crude oil only.

This will be complimented by condensate of about 400KBD.

This will ultimately enable Nigeria’s crude oil and condensate production of about Two (2) Million Barrels per day in 2024.

Nigeria’s daily crude oil production has surged to about 1.6 million barrels per day, and it’s expected to hit 1.8 million barrels per day according to the Chief Upstream Investment Officer of the NNPC Upstream Investment Management Services, Bala Wunti.

Wunti had said on Saturday at the 186th meeting of the Organisation of Petroleum Exporting Countries (OPEC) that with the technology deployed, Nigeria’s oil production will hit 1.8 million barrels by July or early August.

He said, “It is what we are harvesting already, and the result of the security collaboration is what actually reversed the trend of our declining production.

“That we are back to about 1.6 million barrels today is a result of the collaboration. Everybody is working, the security agencies are working in synergy with the industry, the regulators are working and the communities .

“What we have done is to bring everybody together the four players: the security agencies, the regulators, industry players, as well as the communities through the private community contractors.

“And then we brought in overlaying technology. That technology created a lit of platforms, one of which is the collaborating platform, whereby all security issues are now seen in real time.

“And it is the outcome of that that has brought about the confidence that we have to hit about 1.8 million barrels by the end of July or early August. “

He dismissed every doubt of reaching the new target, saying that, “as of today this morning, our instantaneous production number is about 1.59 million which is basically 1.6 million and this is because of some of our facilities that are basically going through a turn around maintenance.”

He said some of the facilities have 40,000 barrels capacity, which will be on stream by Sunday.

The Ohanaeze Ndigbo, the apex Igbo socio-cultural group, has called on Federal Lawmakers from the zone in the 10th National Assembly to vote for its principal officers based on their inclination.

Chiedozie Ogbonnia, National Publicity Secretary, Ohanaeze Ndigbo Worldwide, made the disclosure in an interview with the News Agency of Nigeria (NAN) in Awka on Sunday.

Ogbonnia said that the group is not in agreement with the zoning of key offices of the 10th National Assembly as has been proposed by the ruling party.

He said that the apex Igbo group leadership, under Chief Emmanuel Iwuanyanwu, agreed to direct all Igbo lawmakers to vote according to their discretion.

Ogbonnia said that the Igbo Apex group rejects the principle of zoning of principal offices of the Senate and the House of Representatives of the Federal Republic of Nigeria.

He said the group, after due evaluations and considerations, described the allocation of the position of the Deputy Speaker to the South East as highly disgusting and provocative to the Igbo race.

“The Ohanaeze Ndigbo Worldwide has watched with keen concern the zoning of principal offices of the Senate and the House of Representatives of the Federal Republic of Nigeria.

“We have also observed that the All Peoples Congress (APC) zoned the position of the Deputy Speaker to the South East of Nigeria, and this we considered to be unacceptable,” he said.

Ogbonnia said that the lawmakers should have the best interest of the nation at heart in all their duties as national legislators to ensure that longings of the geo-political zones would be addressed.

He said that the federal lawmakers should be independent in their core decisions and work in a harmonious manner irrespective of their political parties, religion or ethnicity to bridge any gap of disunity.

A team set up by President Bola Tinubu is currently meeting with representatives of the Trade Union Congress (TUC) at the Presidential Villa, Abuja.

The meeting, which is taking place in the conference room of the Chief of Staff to the president, started at 5 pm

It is expected to discuss the fallouts from the removal of fuel subsidy.

Dissatisfied with the President for declaring the subsidy gone, the Organised Labour, including the Nigerian Labour Congress (NLC) and TUC, met with the same team last Wednesday but ended in a deadlock.

The Secretary is leading the federal government’s team to the Government of the Federation (SGF), Senator George Akume.

Others are the Governor of the Central Bank of Nigeria (CBN), Godwin Emefie; former Governor of Edo State, Comrade Adams Oshiomhole; and the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari.

Also in the meeting are the Executive Secretary of the National Sugar Development Council (NSDC), Zacch Adedeji; Executive Vice President, Downstream, of the NNPCL, Yemi Adetunji; former Lagos State Commissioner for Information and Strategy, Mr Dele Alake; Hon James Faleke, among others.

On the TUC side are seven members, led by their President, Mr Festus Osifo.

More details to come later…

[Tribune]