On July 28, 2023, I wrote that “Nigeria will either pause the full floating of its currency or return back to fuel subsidy” because using basic economics, Nigeria cannot handle both at the same time due to the heterogeneous nature of the economy, across regions. In other words, full removal of fuel subsidy will annihilate the northern region’s economy, as costs of logistics will skyrocket even as comparative advantages remain muted.
When the government announced the policy, I posited that it was going to be reversed since there was no basis for it to even work. Nigeria is a one-city supply chain country, on global logistics. Yes, Lagos runs the show, and more than 90% of imported shipped items used in Nigeria come via Lagos.
If you remove fuel subsidies, you give Lagos an asymmetric comparative advantage as production cost will become unusually cheaper in Lagos than other parts of the nation, even as Lagos retains most of its current advantages in other dimensions. Who will go to Sokoto, Uyo, Okigwe, etc to set up a factory considering that energy cost is a key component of production in our generator-run economy?
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But if Nigeria has a working railway system, you can do that. You can also do that if you have a diversified deep seaport system which would have reduced cost for the east-northern corridor for imports via Cross River and Akwa Ibom states. We do not feel the fuel pricing imbalance because of the petroleum equalization fund which is a “magic fund” which is used to pay transporters to ensure fuel prices are largely uniform across Nigeria.
You want to remove that without providing options? You do not understand the geography of Nigeria. Good People, Bloomberg just made it clear that Nigeria has since reintroduced fuel subsidy. I am happy the experts are seeing what I saw in July 2023.
From Bloomberg: “Nigeria’s reintroduction of a gasoline subsidy months after it was scrapped is expected to guzzle almost half of its projected oil revenue this year, according to the International Monetary Fund. The implicit subsidy will cost Africa’s largest crude producer an estimated 8.43 trillion naira ($5.9 billion) of its projected 17.7 trillion naira of oil revenue, the IMF said in a report published on Thursday. Its forecasts are similar to Bank of America’s, which projects it could cost Nigeria between $7 billion and $10 billion this year if it imports between 18 and 25 billion liters of gasoline…”
On July 28, 2023, I wrote that “Nigeria will either pause the full floating of its currency or return back to fuel subsidy” because using basic economics, Nigeria cannot handle both at the same time due to the heterogeneous nature of the economy, across regions. In other words,… pic.twitter.com/N0nnhM7naX
— Ndubuisi Ekekwe (@ndekekwe) May 12, 2024
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Nigeria is atakata-agbo. This geographic space called Nigeria, if you hold it in your hands, it becomes too hot; if you put it in your mouth and try to chew, you are in a bigger trouble; if you drop it on the ground, then you making things more difficult for yourself. Anyone that thinks he can fix Nigeria without injuring so many people will need to have his head examined. There are too many moving targets.
With the official reintroduction of petrol subsidy, can we have our eggs back to N40 and old layers going for N2k? We need some economy and financial peace, too much was taken away from our purses in the last ten months.
What will now be the official price of petrol here, still above N500? We don’t even know what is real in this country again. Our NNPC changed name but our problems are not getting smaller, instead we keep going deeper into the hole.
Wherever our managers get the inspiration from to come up with the kind of things we do here, some form of exorcism might be necessary right now, because we cannot continue like this.
We destroy much more than we build.
One day you will wake up and discover that they have stolen the darn thing.