 The federal government suspends fuel subsidy removal and, to me praise, silver, doi diri and others, battle to win the hearts of the people in Bajasa ahead of the government elections. This is PlusPolitus, I am Mary-Anna Cummings. The National Economic Council on Thursday in Abuja said it has agreed that petrol subsidy should not be removed as earlier planned for June 2023. The Minister of Finance, Bodger to National Planning, Mrs. Zainab Ahmad disclosed this to the State House correspondents shortly after the Valedictory Council meeting presided over by Vice-President Yemi Oshibajo at the council chambers of the presidential villa in Abuja. Ahmad said the council agreed on the need to have continued discussions on the issue adding that the federal government together with states and representatives of the incoming administration require more preparatory work. Joining us to discuss this and more is Shagun Shopiton, he is a public affairs analyst and Gospel of Bailey, who is the chief economist at Streetsnomics Ltd. Thank you so much gentlemen for joining us, that's a little bit of a tongue twister. Good evening. Good evening, thanks for having me. Thanks for having me. Great. Gospel, I'll start with you because you're the numbers guy. Mohamed Buhari was one of those who were the leaders of the Occupy Nigeria protests, I'm sure we all remember this. He flanked by several other people who make up his government today, but some of the people who protested against the Good Luck administration saying that they did not want the removal of fuel subsidy and they gave reasons. Years down the line the president is pushing for the removal of fuel subsidy but then the snag is that they've been paying lip service to it but then removing the subsidy in itself seems to be a problem and now it seems to have been kicked down the line to the next government that might be sworn in May 29. What do you make of this? Thank you once again for having me, Mary Ann, great to be here. There are much more complications to the subsidy conversation than what we know. That's the fact that they are very divested interests for or against the removal of subsidy. Again, it's the fact that there's also the drive to be very much politically correct. One of the key elements or patterns of things since the beginning of January 2022, the drive to be more politically correct is from the lens of the current political administration and then the ban to go back to the next. What you have is that the government would rather the next administration take the baggage of whether to remove or not and also that would intensify the expectations going forward. But then again, let's also take the concerns that there is a projection by the IMF that in less than two years it will continue to subsidy payments and obligations that Nigeria will be at the very negative end of the revenue crisis in the context of things where the revenue crisis will technically be very, very negative and will be using our debts to pay for subsidies. Now, should subsidy be removed or not, I think that has a very big question that the next addition would need to answer and likelihood that they may want to remove it. However, I think that the conversation or the argument is much more deeper than the subsidy conversation here. There are new causal elements to the nature of what we are faced with called subsidy. I mean, we should always face because subsidy plus the fact that you have a very strong demand side economy for fossil fuels, you know, and that's because you don't have our, you know, and secondly, because you don't have a local refineries fixed and working. Now, the lack of those two has led to more Nigerians depending on fossil fuels and as a result of an increased demand side pressure on what should be important to the country as fuel or what we term as, you know, final products on crude oil. And again, that hikes up the amount of money of wanting to take, you know, to import these elements. Again, giving credence to the argument and subsidy, you need to subsidize this payment so that it's much more cheaper by the time you get to the end user, you know, in context. So if you take out the critical elements that both are heavily on demand by fixing those good causal issues, subsidy will not be a conversation on the table to start with. All right, so the economics of subsidy, everything about the economics of subsidy is really wrong. But then again, it's a distraction within the times we're in. And it's been played around the lines of political interest that what is really key to that with Nigerian. Let's talk about the politics of it since you're bringing it up. I mean, at first glance, you know, we would look at this subsidy removal as, you know, something that might contradict what the economic plan that the incoming president has. I mean, I'd like to read exactly. He's promising to achieve, you know, peace and economic renaissance. Also, it could also further, you know, somewhat erase any glimmer of hope for citizens in terms of this, because you see, when you say that you're taking out subsidy, then it means that there are lots of things that we'd have to tighten our belts for. But now you're talking about politics and, you know, the willpower to do it and the can being further kicked down the road, which means that we might just keep playing ping-pong with it until eight years is over. But if we were, if it came down to putting their foot down, what, at what cost will we have to, what will we have to pat with to be able to deal with this subsidy removal? It's going to be a very massive cost to the economy. My thoughts will be a possible removal in phases of this subsidy. However, that may not necessarily be the case, you know, and they were back again to square one. Again, removing the subsidy would mean that a lot of political and commercially stressed have to be met. You know, deals have to be brokered on the table to ensure that there is a relative or, you know, sensible way of being on the table, especially for the key stakeholders as it were. But once the subsidy is removed, what I feel like Nigerians already have a taste of what a removal would look like. You know, in November, December, there was first currency. We were buying a meter as high as 700 naira in a state. You know, that's technically what the reality is going to look like if you leave it to market forces. You know, again, leaving things to market forces is going to function of how much of balancing you have on both ends. All right, there's a strong heavy demand side. Now, if you don't have a solid supply base and you leave anything to market forces, again, just the same with the Nigerian Naira Commission, you know, is really, if you don't have a strong supply base, what happens is that demand will far outweigh supply and then the crisis in the market will keep spiraling in terms of increase over time. And the supplier, we're talking about local refineries or providing alternative energy sources. But that said, that would technically mean that the cost of leaving would rise. Which we technically saw that in November, December. And what we saw is just a tip of the iceberg. It's going to get really bad and really worse. And when cost of leaving rises, cost of food will rise, cost of energy prices will rise. When the cost of leaving will rise and cost of farm to market will rise, cost of doing business will rise. And as a result of the increase in cost of doing business, the cost per unit of an item will be pushed to the average consumer. So what you'll realize is the complex web of cost pressure. And let's not forget the average Nigerian is already faced with the huge cost per energy, sorry, cost pressure as a result of erosion and the current evolutionary dynamics and interest rates we're dealing with. So that's going to further worsen things on the economics of how that demand and supply works. And again, it may not be too held in terms of the first thing that the next administration wants to do. I don't even get what I'm trying to say. So there's going to be a lot of... That's why I mentioned the fact that the political variable is a major variable in this context. Again, it's 50-50. The next president-elect may say that it really hits the ground running like he would always say. I mean, he should take out the subsidy or choose to take it out in faces or buy more time before he does that. So it's still a developing story, but this is literally a time bomb waiting to happen. Either way, he's going to pay the card. Sounds more like a hot pot with boiling water in it. And you decide whether you want to take it up the fire or you want to use a rack to take it off. But let me go to Shagong. Shagong, still talking about the politics of it. We've had to deal with realities and the uncovering of the fact that there's a huge degree of all theft happening right under the nose of Mr. President, who supposedly is the Petroleum Minister. And of course, with the christening and re-christening of the NMPC now, PLC are limited, as it's called. With all of that, we still are not able to have fuel. We have enough oil, but then it's still sent out to re-refine. We still buy it back and we still don't have enough. And we don't have enough policing of this oil, I mean, pipelines. And then of course, he talks about the politics of it. If we were able to deal with this, plus the fact that we were devoting trillions of Naira to service refineries that are not doing anything and were paying salaries to people who are working in refineries that are not doing anything for us. If we were able to deal with these other problems, could we have made one way or the other the removal of this subsidy a bit more easier for us if we were able to plug all these loopholes? Yeah, Maria and Luke, this conversation is not supposed to be as difficult as it is. I think it is this difficult because just like Gus Ho said, there are a lot of interests at play. So first of all, you say you want to remove subsidy and I think I agree with everything that Gus Ho has said, 100%. It will be a catastrophic disaster. It takes the subsidy away at this time. And I think it's just good that good reason and good sense have finally revealed. I have said this on all the platforms that have had the opportunity to speak that they dare not take the subsidy out. It's very simple. So talking about the political angle to things you have to remember. Whether people like it or not, and I know that some supporters of the current administration and the incoming one do not like to hear this. But this administration is going to suffer legitimacy problems. It's just simple, black and white. You have an administration that is coming into power off the back of a 36% yes vote to a 67% no. It means that the majority of the electorate said no to this administration. Which means the first task they are going to have before any other governance and policy-related issue is to deal with the legitimacy problem and win Nigerians over. How do you win Nigerians over? When the first thing that you do is to make their lives doubly or triply difficult. So from the political side, it would be suicide for a credible amethyst noble to go this way. And I think that the removal, the extension of the timeline for the removal may very well be at his own instance. Because once Boadi has gone back to Dara, he's happy and he's told us that he can't wait to go. And then it's in a way he's going to be left with a very difficult task of managing a policy that the Boadi administration had forced on him. So it's a very good thing that some sort of good sense has prevailed and this has been postponed. But I want to say, coming back to the question you asked, look, removing the subsidy will not be a conversation. These those basic things that need to happen are done in the first instance. And you know, the actual Ebola amethyst noble has been talked up by his supporters at a legendary policy from later strategy developer, implementer and all that. I hope they're right and I hope it's true because the first thing that I would expect him to do as he's coming on board, is to provide for local supply. You cannot remove subsidy if you do not have adequate local supply, local production that takes care of our local demand. If you do not do that, the subsidy question will never go away. Now, consider this and I would imagine that this is one of the reasons that, you know, this has been postponed. When you take the subsidies out, please can somebody explain to me who is going to be doing the importation of petroleum products because NNPC is doing that 100% now. So we let NNPC continue to do that, using the swap agreement arrangement where they give crude and then we collect PMS back and all that. Or will the oil marketers, the major oil marketers or the independent marketers, will they be allowed? Will they then have the depot and the infrastructure? How will they source the foreign exchange? Will they source at official rates? Will they source from the parallel market? Can the official market even meet that demand? So those questions are questions that the government has not answered adequately. Which obviously is why this thing has been postponed. And I would say, and this is just free advice or whoever is listening in the incoming administration, you do not and you cannot take the subsidies out if you have not dealt with the problem of local refining capacity. This thing is not rocket science. If it is what people say he is, then this time next year, we should be able to have at least two, either Greenfield or the current government-owned ones, refineries working. And once you have that in place, then the subsidy question goes away. Then it's not even, it just solves itself. So I think that those fundamentals need to be dealt with before we even come back to the subsidy question itself. Interesting. There are a few things that I would like to, I mean, the average Nigerian would be curious about. Even if we were to agree with to this subsidy removal and the incoming government decides they're going to do it at the get-go. There are a few things that Nigerians will be seeking to see from this government. And you made mention of the fact that already Nigerians are skeptical about the incoming administration. But then the issue of transparency comes to play because of course there's not been necessarily transparency when it comes to our oil and gas sector, whether it's upstream or downstream. Nigerians are also going to be looking for trust. And Nigerians want to see how funds are utilized. Do you think this will be a major characteristic that this administration that is incoming will be able to exhibit in order to be able to get Nigerians onto their side? For what? Why do you set me up with this type of question? Because my opinion is very well known in the public space. Look, I always say that you want to relate with Nigerians based on evidence. Evidence-based analysis, evidence-based logical reasoning. And I tell you, Miriam, the evidence does not support that assumption. I have lived in Lagos for better part of 35 years. I have been in Lagos through the entirety of this foreign republic during which the president left of governor for a two-term period. And up until even after he left. And I tell you that one of the most difficult things that you will get from legal states is transparency, is costs of governance, is cost of projects executed. So a lot of projects have been executed. Fantastic, and we all know this. We can see it. A lot of revenues have been generated. It's also very good and it gives one hope that the revenue to GDP problem that the country has can be fixed by the president's elect. However, in the middle of all of that financial ongoing inflows and outflows, nobody knows the specifics. We have an idea with regards to the internet-generated revenue of legal state government, but how that money is applied is a secret. And I say that with all sense of responsibility. So if you go to the website of legal state government, for example, you will see the published and audited accounts of the government. It simply doesn't add up. I've looked at it, I'm looking for the cost of certain projects, I'm looking for the cost of certain infrastructure efforts and projects on the part of the legal state government. And you just don't find it in a manner that agrees with what you believe to be the reality because the costs you find there are simply extremely understated. But Boshagun, that's not necessarily a legal state problem, is it? How often has the federal government or even other states across the federation been able to make their buttocks open and plain and been able to break down how these monies have been spent? How many? Well, you'd be surprised. You'd be surprised that the amount and the volume of information that is available with regard to the peddragoments finances out there. The Auditor General of the Federation of Nigeria reduces a report, an annual audit report on the federal government finances every year. The content of that report is immediately damning with regards to how the transactions of the federal government have been conducted, but nothing happens. So it's a bit, the federal government is further down the line on that spectrum, on the transparency spectrum, that they are further advanced than legal states currently is. So will things get better at the federal government level or will they regress to where legal state government is now? The question remains to be seen, but you have rightly identified this that if the federal government on that Ashwagibola Metinubu will win the cross of Nigerians, he has to change his ways in terms of transparency, in terms of even his own body language and the way he communicates and the mannerism that he abuses when he talks to Nigerians. There is this tendency to be dismissive and to exude this air of what they call only science. I know what is best for all of you. You don't know what you're talking about. Go sit down somewhere. When you see the results, you will applaud me. That body language will not work at the federal level far. So you have to change this. People must trust you in order to support your policies so that they don't sabotage you. One of the biggest problems that the Bari administration faced when they came on board is that they did not have the trust of the people for long enough. The trust that was there, they were wasted very quickly and before you knew what was happening, there was a lot of sabotage and negative expressions from the populace. So the president, Bala Metinubu and the guest on it needs to deal with the transparency question you have very spot on with regards to this. Okay, gospel back to you. Nigerians have been really perturbed by this $800 million loan from the World Bank that they said they're going to use as some sort of palliative to cushion the effect of, you know, the proposed subsidy removal by June. But then trade and labor unions and some in the oil and gas industry have not hidden their disapproval for this. And we have a clip here by the TUC, I think in Akiti State. Let's take a listen and then I'll come back to you. What I said is that it is not going to be removed now. Which means it will not be removed before the transition is completed. That's what it means. But then we have two laws that have inadvertently made the provision that we should exit by June. So if the committee's work, which will include the representatives of the incoming administration determine that the remover can be done by June, then the plan, the work plan. It's removed also have our own position. The minimum wage will never be 30,000 again. The minimum wage will go to nothing less than 100,000. And we're going to tell the federal government that you put it side by side. If they cannot accommodate it, go and remove. But a minimum wage will not be less than 1,000. That is it. It is there we'll be able to cope with 500 nera per liter or 600 nera per liter or 800 nera per liter. Another condition we gave was that refineries at least two out of the four should be put into nothing less than 80% use. Internal production, the internal refineries of our crude oil. Don't let me deceive you. Nigeria economy will be going down. Gospel, so this is what they're saying. If you're going to remove subsidy, then of course you're going to have to increase our salaries. And this is detail for everybody. COVID came with its own whirlwind that made us have to chop off some of our take home pay, which did not take a lot of us home anymore. And some companies are still having to deal with that. The cost of living is rising high, but the take home pay is no longer taking people home. And so do you agree with the position of the TUC in a QT state? One of the things I know and am very comfortable or convinced about is that there is a cross on the valuation of many things in Nigeria. Even the GDP is on the value, inflation is on the size, rewards are on the paid or on the value in many cases. So top of mind is that subsidy or not, there has to be an overall review of salary structure and reward structure in the country. And we now contextualize the current events that are happening, the cost of the world crisis and all that. Yes, the arguments by these institutions are actually very much valid because right now it's getting much difficult. I mean, Nigeria to even, I mean, the grade is about 1,500 right now. It used to be over 452 to three years ago. All right, so how do we go from 450 to 1,500? That's to tell you how really bad things have gone, not just about Nigeria in context but actually, globally, the UK has hit 10% in terms of the highest in five decades. So there is a clamor for salary increase globally. There's a clamor for review of revenue structure globally. There's a clamor for more discounts and more, everything that has to help the average Nigerian or average Nigerian gains on form of relief. So on the grounds of that, yes, they have a very valid proposition. The big ticket argument is number one, where do those monies come from? In terms of government paying these guys. Number two, are we making enough money or generating a lot of fraction enough as an economy to be able to meet the expectations? So those are very bad. So as much as you look at the demand side, you also look at the supply side, which is why I think that removing the supply outrightly upon resumption may not be a very good idea. Yes, it could be removing phases but the current impact on the average Nigerian is going to be at strongly high. So yes, it's valid, but the questions heavily bothers on the supply side of that equation. I'm really going to be able to pay 100,000 for each sale a month, monthly, as a normal wage, which I think again is a possibility. You block all the bouquets and you're in great government waste. That's a possibility. Shagal, let me ask a question. Nigeria is believed to, I have spoken to a lot of scientists and a lot of people who work in the oil and gas sector, some who have even worked in oil companies and retired. And one of the things that I've gotten to realize is that Nigeria has some of the largest, if not one of the largest gas reserves in Africa, but yet it is very underutilized. We're not even tapping it. Don't forget the issue of gas flaring. We would rather take money instead of stopping the gas flares and using it for other things. We'd rather not. Do you see the next administration taking advantage of this situation and making more money for us on the side, being that now we're looking for every way, to mop up cash? Yes, I believe that one thing you cannot decorate on, Pala Amit, is that it's a very brilliant mind. It's not a brilliant mind, it's a blessed one. So if we display the political will, then absolutely, you know, during one of the engagements that he had in the run-up to the election, he actually addressed this issue and he addressed it very eloquently. He demonstrated a very good deep understanding of the issue that the oil and gas sector let's not forget that he was a treasurer at the top level for an oil and gas company in Nigeria. So he understand the issues, I believe within the faculty then, he recognized and I remember he's paying for his ability to drive revenues up. So he will be checking out all of these angles and I'm sure that he will make some moves, some right moves in this regard. And that is where I think the conversation needs to edge into two words. How do we increase revenues? Instead of fixating and being of self about the removal of subsidy, look, our revenue problem is a tremendous problem. I said it on air before. Nigeria has the lowest revenue to GDP, tax revenue to GDP ratio in the world except two countries at war and all countries that will not accept it. We are running at 3.7% to the GDP, it's at thresholds. The best countries in the world, in fact we have African countries that have 22% tax revenue to GDP. So that's not to be the area of focus for the government in a manner that will not be punitive and that will not further impoverish the Nigerian people. I think this will be an ongoing conversation guys and unfortunately we're out of time but we will revisit this conversation. I think we have to keep sounding like broken records until something is done. Shagu Shopita is a public affairs analyst and Gospel Obele is the chief economist, I beg your pardon, of Tritonomics Ltd. Thank you so much gentlemen for having this conversation with me. Thank you, I have a good idea. Thank you. All right, well up next we'll be turning our attention to biostasis for government elections drawn near. All those who are flying the flags of the different political parties are gunning for the votes of the people. Stay with us.