Perspective: #Endbadgovernance: Nigerian government needs to speak the truth about its policies to citizens – Analyst

Devaluation is a key fiscal tool used by government to encourage exports, stimulate growth, manage debt, and control inflation. It may increase or reduce inflation, reduce citizens purchasing power, and potential loss of investors’ confidence.Nigeria FG earns close to $11 billion ‘net profit’ annually from crude oil and Nigerians consumes about ‘$18 billion’ worth of PMS yearly.Nigerian FG strives to pay an average of about 50% of the PMS price while Nigerians pay the other half.When the president said the subsidy is gone in May 2023 and devalued Naira subsequently, he was only being smart and economical with the truth.

All FG did through the president’s pronouncement was increase the PMS price ahead of an anticipated Naira devaluation to ensure that the fiscal benefit is not eroded by the imbalance in subsidy on PMS which would have exceeded the 50% threshold substantially.

The PMS pump price is a function of value of Naira and % of subsidy paid by FG. Before May 29th 2023, PMS sold on average of N254.06 per liter while USD exchanged to Naira at N459.07 per US$.

The average cost of PMS (product cost + margin) is about $1.00 per liter.If PMS had remained at N254 pre May 2023 price and Naira was devalued or floated, FG would have being paying over 80% of the PMS price in subsidy.

To avoid the above situation, the FG best option was to increase the fuel price through the back door of subsidy removal. FG has not been able to tell Nigerians the actual position of subsidy payment as at today because they have boasted and touted that decision as a master stroke.

The statement by some proponent that the extra cost incurred by FG is not subsidy but an element of WHO’s whatever is nothing but a bluff. The truth is that in nominal terms, we are paying more in subsidy than we did pre May 2023. Yes, going by N800 per liter, FG pay about N700 per liter on subsidy considering the $1 per liter price of PMS.

This is obviously more than N200 per liter paid by FG before May 29, 2023.Nigeria does more import than export, so the devaluation will only benefit FG while businesses and majority of us suffer.

This decision has caused a number of companies to relocate their businesses to other regions. The investor’ confidence is low as devaluation caused them to lose substantial value of their investment.

Devaluation can be used to control inflation, unfortunately the high inflation we have today is induced by the devaluation as most goods and services we use have foreign currency components. The yam seller or farmer will factor cost of transportation, power and maintenance in determining his selling price, and the truth remains that all these have USD components.The recent devaluation by FG was a fiscal drive clothed in deceit to tax Nigerians more and to manage FG’s debts. Devaluation brings more money to FG as local debts are paid with devalued Naira, workers’ wages rates persist pending when minimum wage is upgraded and even when it is done FG does not match the previous wage in USD terms.

Also, FG has excess USD to pay up foreign debt as fewer USD are used to upset Naira commitments. This is the reason FG and the state governors are getting more Naira and not subsidy removal.Our leaders need to learn to speak truth to Nigerians, carry us along in the Nigeria project, and show humility. Plans do go wrong but the manner of engagement of stakeholders is what makes the difference. Government should not be afraid to share their failures and the efforts made or being made in addressing them.

This attitude of grandstanding does not avail us the opportunities to learn from experiences of our leaders while in office and to also inclusively contribute constructively.

The #EndBadGovernance protest is a demand by Nigerians for poverty reduction, inclusiveness, strong and transparent institutions and resilient systems where consequences of our actions are obvious and certain.

Nnamdi Agukwe (5t4r)