I got the messages: “The World Bank has said Nigeria was losing around N10 trillion in foregone revenue to fuel subsidy and multiple exchanges as of 2022 before the implementation of President Tinubu’s reforms…The World Bank also noted that the country was on the brink of collapse before the introduction of the critical reforms of removal of subsidy and exchange rate unification.”
My Response: The World Bank point is self-evident and there is nothing to dispute. I never said that Nigeria was not losing money on subsidies. If Nigeria was losing N10 trillion as a government before recent policies, my position was that after the policies that Nigerian companies and people could lose more than that, if the policies were pursued as designed.
MTN alone has flipped from hundreds of billions of Naira profit to more than N600 billion in losses. If you look at lost revenue, what happened was the “loss” moved from the government to companies. Also, because the World Bank’s predicted N750/$ optimal FX did not happen, every Nigerian has lost at least half of his or her purchasing power since as an import-dependent country, prices of many things have gone up. That is estimated at more than N100 trillion of loss for consumers (in my model, the total money consumers send to merchants yearly in Nigeria is about $350 billion yearly).
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I have NEVER argued that the government was not losing money on subsidies. My position was that the proposed plan would not solve the problem, as it would destroy companies and the economy, shifting the loss to companies and the citizens. In all great economies in this world, governments pick something to subsidize; Nigeria cannot be off-subsidy.
In the United States, the US postal service (USPS) has never made a single profit in the last 20 years. So, even if Nigeria was losing money because of fuel subsidies, it must not be interpreted that it was all doom, if we are strategic with zero corruption. In Nigeria, we killed NIPOST because it recorded some red lines even though the total economic activity the NIPOST was powering in Nigeria was enough (from the big picture) to offset the small loss.
But because Nigeria was not looking at the big picture, we killed NIPOST, rail system, etc. Do you know that the US government funded Amtrak rail system has been losing money since 1971? But in Nigeria, we shut down our Nigeria railways because it recorded losses even though Amstrak has NEVER made a profit since 1971. But the US is fine with it knowing that Amtrak powers the economy and the taxes therein offset those losses.
Nigeria froze our postal service and railway because they were not profitable. Nigeria was not looking at the big picture. For the US, USPS and Amstrak power economy, and the taxes on the broad economic activities therein offset the companies’ losses.
Good People, if a bird flies from the land and perches on the ant-hill, it is still very much on the ground. Nothing has happened as I predicted in June 2023 when we began to roll out the reforms. What is happening is that companies and people are the ones losing now, and not the government, and the loss is huge as asset values have been wiped via FX, inflation and other vectors. What the World Bank is writing is contradictory because it cannot fail to see that in the process of the government saving the milk, it dropped the jar which has caused losses for citizens and companies.
Subsidy is not bad. The challenge in Nigeria is the corruption in subsidies. If the World Bank had focused on helping the government reform the process, we could have had losses in the subsidy but the impact would have improved our economy, quickly offsetting the direct losses. The problem, unfortunately, is that we threw away the baby with the water.
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The saying goes thus: do no bother yourself with what they say, rather do what they are doing. The people telling you to jettison subsidies, are they doing same in their respective countries? Which useful and beneficial advices have you ever received from WB, IMF and their likes? Practical Wisdom is supreme, it is why it’s called Universal Knowledge.
It’s unfortunate that we have people in the corridors of power who have no capacity to do the hard work of building a resilient economy through robust policies but have chosen the easy way of implementing WB and IMF recommendations line hook and sinker, which has negative impact on the economy and the people.