 Okay, it's time for our very first hot topic and Basile Abia of the Kwakol Institute of Research. He's a research associate, Kwakol Research, Abuja. He's joined us to take a look at what marketers are proposing, 720 Naira a liter. They're also suspending the import of fuel because the Naira continues to fall. They are saying if something is not done to urgently fix this, they can no longer import fuel. And Labour has also said that if that happens, if they increase the price of fuel, they're going to go on strike. It's going to be total shutdown and they're not going to give the government any notice before doing that. So Basile, Basile. Hello ma'am. Hello Maureen. Good to have you join us again. Thank you. It's always my pleasure and always a privilege. You know, the song that came to mind right now is a jingle that we used to hear during the late MKO Abialah's campaign, On the March Again. So Labour is on the March Again. I mean, give us first of all, how are you processing all that's happening right now with the dollar, the Naira, the marketers and then Labour? So first of all, I'll tell you what the conventional economics says about this. This is just, I would say, this is how market driven, a market driven economy usually is. And as you know, we have been maintaining the full subsidy arrangement for over 50 years, if I'm not mistaken, 53 years onto the subsidy removal three months ago. Also, the structure behind, on the mechanism behind oil importation now is based that because the no more federal government subsidies, whatever it is that the marketers are importing the fall for, were paying the dollar, I would say, related pricing for all of the PMs that we take in. So if the Naira against the dollar is super weak, like it currently is now, if I'm not mistaken, the black market is about 950. And then of course, on the importers, investors and exporters window, which is basically the full access window for an exchange window that we have that is domiciled with the CBN. If I'm not mistaken, this is just around 840, 850 Naira per litre. So most of these importers are obviously using that IME FX window that CBN, that is domiciled with the CBN. So what that means is that with global oil prices, just I wouldn't say very high, but you know, around that plateau price, when you do the math, we're paying almost the same number that we're supposed to pay around 600. So now that the Naira is 950, the black market around 840, 850 ish, there's a high chance that we're even supposed to even pay more based on Naira for a litre. So I'm not even talking about 720, I'm looking at around the 800s in those levels. So yeah, this is what the market driven economy is. You'll have to pay your poor electricity based on a cost-reflective tariff, right? What is the unit cost for the power that you're taking in? And remember, the international energy market is based on the US dollar. So all of these things boil down to just how poor the Naira is. And I'm sure you'll be asking, what can we do to make the Naira stronger? It's just in economics, you just have to make sure that the Naira is stronger with more exports. We need to export more. We need to do very consummate capital formation, and what I mean by that is the inventory of our capital goes to the value of cash holdings and non-cash holdings with regards, you know, the markets have to increase the foreign investments that we're joining and have to increase. These are the metrics for strengthening the Naira and making sure that both in the black market as well as in the formal foreign exchange market, the Naira is stronger and you're just going to feel the bronze. Now, I'll just wrap up by saying from the labor end, which is obviously where the question was a full spectrum question and wanted me to end with the labor dynamically. The labor are right to do what they're doing and that's their job. They're supposed to fight for workers. They're supposed to fight for the people, you know, the masses. And the problem is societies, in fact, even the most capitalist societies in the US have forms of subsidy that they still maintain. They subsidize their farmers a lot, but you mess up with not subsidizing farm produce and fertilizer, farm imputes and certain fertilizer imputes for farmers in the US. If you mess up and don't give them some logees, they're going to campaign against you and going to lose the election. That's how powerful the farmers are in the US. So food is heavily subsidized in the US. We know that basic education, especially from kindergarten, is heavily subsidized in the US as capitalist as it is. Yeah, forms of subsidies exist everywhere in the UK. Health care is heavily subsidized. People might make complaints about the NHS, the National Health Service in the UK, but it's still one of the best forms of health insurance globally and it's the oldest performance variable. So subsidies exist in most, in fact, in all capitalist societies that are subsidized. Just what are you trying to subsidize? In the context of Nigeria, while we have removed subsidies, it has been very poor from the government that we have failed to find violative and remedial measures that actually help Nigerians the masses minus the situation. I'll give you a start. That average need Nigerians spend close to 70% of their earnings on a combination of food and transportation alone. In Lagos, transportation covers about the average percentage that the monthly incomes cover for transportation by 40%. In Sokoto, for instance, 90% of their income on a monthly basis is on food. So this statistics or that I'm currently trying to cite in here should give you a picture of the things that governments should target when trying to make sure that Nigerians don't fuel the brunt of the devaluation of NERA as well as the removal of software. What am I saying? Because our transportation infrastructure is very poor. It's not a public mass transit based and we spend a lot on transportation, especially in open areas and semi open areas. You have to find a way to make quick investments in public mass transit so that people can for just above $15 an hour or $100 an hour a day spend just that little amount on transportation. Transport yourself from one point to another point, that cheaply. The price transmission will be seen with people. Also food as well will be slightly cheaper. And then of course, the other dynamic of why I was citing this is to say that we also have to find a way to subsidize food. And one way to do that is to temporarily remove the non-tariff barriers that we have on food importation. So we need to block the Nigerian market with a lot of food. Because basic climate means that when there's more supply that demand, prices drop. So that's how we're going to get food cheaper for everybody. And so the masses will not complain about these very important macroeconomic problems. Very important that I say that it was important that we removed subsidy. And it was also very important that we ensure that somewhere somehow our foreign exchange windows were based on the framework or mechanism of demand and supply and not a controlled price. That obviously gave credence to arbitrage and then foreign exchange scarcity making it very difficult for investors to engage in their capital repatriation for trading investors and showing that we left the country from controlling investors not interested in our equities market and running away. So the macroeconomic problems are very important but you have to engage in them with a context of Nigeria. And Nigeria is a very poor country, so you have to ensure that you subsidize other forms of elements from Nigeria so that they can be at the brunt and are patient. And if things continue the way they are and Nigeria starts to pay 720 per liter or almost about 800, I'll show you, laborer are going to do all they can to ensure that the economy comes to a standstill. And we don't want that, but they have to do what they have to do because that's what society is built on. Unions where workers come together to defend their rights, people airing out. And there are other forms of reactions to these very severe consequences of the macroeconomic reforms. It could be in the form of riots. They are already happening in the form of petty thefts. There's a lot of petty thefts in semi-alban areas and in urban areas. Where I live, for instance, there is a slum just behind the district that I live in. And I was speaking to a driver who lives in the slum and he was telling me that the level of petty theft has increased remarkably. And obviously that means that they will now start getting bored as they come into the main district and carry out a lot of their crime. That's social science for you. With more scarcity comes poor human behavior and that means more crime. And that's what's happening across Nigeria. All right. Basile, you've spoken well and yeah, being a researcher, one understands. And when we talk about market-driven economy, that's what we're seeing. It's what we're seeing playing out. But the average Nigerian who is listening to you, will tell you, look, some of these things are just, look, brother, that she or not making sense in the sense that and that's where they feel when they listen to governments oftentimes trying to explain a way or talk about their policies and stuff. Look, what they want to see is prizes of things coming down. What the average Nigerian knows is that we are an oil-producing country for goodness sake. And then you're talking to them about how expensive it is to import fuel into their country. And they begin to ask you, what are you talking about? People especially from the Niger Delta, people in places where this oil, they drill this oil, will tell you, what are you talking about? Why am I suffering so much when this oil is gotten from my own backyard and is affecting the cost of every other thing in the country? And so marketers are saying it's costing them so much to import this thing. The irony window, there's no money there. They can't find dollars. So they have to go to the black market where it is. You just mentioned how it is. 930 is something, Naira. And so everything is, you've talked about the metrics. We are export dependent. So how is all that? It just looks so gloomy, but still, doesn't it? Well, it is very gloomy. So I try to cover the full spectrum of the points that you've made, very salient and poignant points, by the way. First and foremost, the people will not trust people like me when I'm making the explanations and the analysis. They will not listen to government. They won't trust them because there's already a social distrust problem that we have. And that trust deficit has permeated for as many years as possible, if not up to 50 years, at least 50 out of the 60 plus years of our existence as an independent republic and an independent country. The bulk of those years have demonstrated people, the people of Nigeria, demonstrating their high level of distrust for the government, the diverse governments that have governed them. And the major reason is simple. We know that in political science, we're taught about social contracts. Governments are supposed to provide services and ensure that society is run efficiently. And then we, the people, we're supposed to be law-abiding citizens as our own by game or our own end of the agreement. So it's supposed to be law-abiding, we're supposed to trust them. But the social contract gets almost torn to pieces in the context of Nigeria because first and foremost, Nigerians, they trust the government because they have failed to provide services. The Nigerian society isn't run efficiently. So that's the social distrust problem. We're going to have even more, which is very problematic for the reforms that we're carrying out. If you're a public policymaker, if you're working for the federal government, and you're carrying out these reforms, you want to have public communications at the top file of the quality that you're showing. You want to have efficient public relations. And one way to have that is that at the other end of your public relations work or your public communications work, there's a reasonable level of trust. You want the people to be carried along. You want the people to say, okay, look, I will take as much sacrifice as possible because this in the long run is good for me and my future generations, right? But when you have a situation where Nigerians care of setting lages of money, billions, if not hundreds of millions of money being marked for SUVs purchases in some quarters of government, for instance, or you hear of the waste stages in federal and state governments at this early stage of the government, or you hear that you're going to get close to, if I'm not mistaken, 45, if not 49 ministers with a large cabinet and then you're hearing some of the language from some political acolytes saying that they can't wait for the board appointments to come in because obviously the excitement is not because they want to work, it's because for them these appointments are access to government rents. So the people are hearing this, the people are not foolish, people are not foolish in general terms of society or societal management. So they understand they're very smart. That's why the distrust problem is there. Now, back to the moving forward, when you look at the situation right now with the economy, especially with regards what we have to do to be able to arrest the situation, we follow the narrative where it's ensuring that we have more than enough demand levels for energy because it's a good sign when there's reasonable demand levels for energy. It's a sign that your country is very productive. However, what we're currently noticing right now across Nigeria is demand destruction of the highest levels. You know, they are setting streets now in Lagos right now that are almost empty because almost everybody's either trekking or they can't even trek anymore because nobody wants to access the rooms using their cars due to the very high cost of operating. And so people think it's a good thing that the streets are free but it's a mismatch. If you don't have people moving from point A to point B in the economy, the bidirectional effects of that demand decimation or demand destruction is going to be very dusted. So basically means the productivity is shrinking in our biggest economy in Nigeria. Lagos is obviously, as you know, the biggest economy of the biggest state economy in Nigeria. And when demand destruction is that vivid, you know, then it's a problem. The same case here in Abuja is the same everywhere. I have family in Adama State, Yola, so I speak with them and they tell me a lot more people no longer access using buses and cars, no longer access to the city centre in Yola solely because of this cost increases. You know, all of these bones down to the fact that we have a poor society and our people can't really afford market reflective pricing. That's because we're poor. So you have to find a way to incentivize them to access that market reflective pricing because market reflective pricing is very good for our industries. It's very good for our power sector. It's very good for the downstream segment of the petroleum industry because marketers get to, you know, earn in a judicious way. What I mean by that is that government no longer has to give them a subsidy rebate, which was the case for most of the time. I think at some point on the Buhari NMPC decided to take full advantage of that and decided to be the sole marketers. However, now in the importation of oil and distribution in Thailand, in Nigeria, it's now been opened up so we have more oil marketers now participating in that value chain of PMS importation and distribution. So all of these things boil down to the pure fact that the economy is roughly a lot of poor people, people whose purchasing power is heavily decimated. And also our macroeconomic reforms are needed, but they were carried out in the right way. And of course, as I mentioned, the right way need timely complication. You need to build social trust so people can decide to take on the sacrifices. And third, you need to provide subsidies in all the forms. For me, I think if you subsidize food, you make sure food is cheaper. And you need more food imports, at least for now before you start to expand on domestic food production. And then, well, all of these added together that's basically where we are right now as a country. And so marketers are proposing 720 naira a liter for them to survive. That's for them to be able to survive as a business, basically. Yeah. And they're saying they will not be able to import more if the naira continues to fall and asking the government to urgently halt the consistent slide in the value of the naira. So, except this is done, and except we're also able to fix our refineries, but still we may end up seeing, is it possible? It does appear that that's what we end up seeing, that the price of fuel may even increase further. Yeah. But when you came out, beyond 720. Yes, absolutely. Absolutely. I remember making a prediction last month that we're going to get four prices at around 800, 800 mark, largely because we're predicting that the dollar won't reach at least 1000, both in the black market as well as in the INE. And the major reason is obviously due to the scarcity of the dollar. We begin the management economy and a major reason for that, as I said, get very poor capital formation and a sliding influence of our exports. We need to export more. Do you notice oil production has reduced? We're currently recording a three months low in oil production. If I'm not mistaken, it's about 1.157 million barrels per day. We need to be able to get back to that 1.8 million barrels mark. We also need to be stubborn to even beat the OPEC allocation. We have barely met the OPEC production quarter that's been given to us. At some point, our OPEC production quarter was around 1.8 and then they shrunk it by 400,000 barrels to about 1.4 million barrels. And while we met it a couple of times, most times we barely meet the OPEC production quarter. So the first low hanging fruit for the federal government right now is to make sure that we at least meet the oil production quarter. And that's because when we're able to do that. In fact, the more exports, basically the more oil exports with the way the global oil price system works, the more export means we're going to get more effects. Now that we're no longer spending the effects imputes from our oil exports or subsidy because that was the case for much of the Buhari days. Much of the Buhari days would make billions and billions of US dollars from exporting our oil in the international markets and then use those billions and billions of dollars, especially the NNPC. NNPC use that to pay huge subsidy bills. So we would have little to no extra to use and work with. And that's why Buhari had to look for other ways to be able to fund the budget and that meant increasing our debt levels, which is obviously now very risky with the economy. So these are these are the problems we need to export more. That's how we're going to get the the narrow, you know, manageable situation. Yeah, we need to export more beyond oil. Beyond oil. Because whatever effects we get from the export approved by the time we spend a large chunk of it in point in fear, it makes little or no sense, does it? Obviously it makes little or no sense, but you have to understand the context of the country right now. For your medium-term plan and your long-term plan, yes, you're going to have to do all the modalities together to make sure that our non-oil exports expand and our oil exports expand in such a way that domestically we are we are refining almost everything that we produce for domestic consumption. So we no longer have to depend on PMS imports, for instance. However, in the short term, and what I mean by that is in the next six to eight months or to even 12 months, because we're still in price discovery mode with regards to the narrow against the dollar, as well as even prices, probably mode for how much you have to pay for PMS or fuel. So for the short term, the quick fixes, the low hang, that's why I used the phorism low hanging foods. The low hanging foods, the short fixes are ensuring that at least we reach the opaque production quota. That's about 1.4 million. We need to be able to do that. That gives us a better chance. We earn more dollars, more dollars enter into the system, and the scarcity obviously won't be solved, but the scarcity would be managed in a much better way. So we will be able to still hover around the 700 nara per dollar mark that we hovered around for almost one year until the devaluation. Don't forget in the policy documents of President Tino Ruz's team, their target for the next two years is 500 nara to 600 nara per dollar in the international effects market. And look, if they do the quick fixes, if they do the low hanging foods, which I mean, and what I mean by that is meeting the opaque production quota at the very least, then you're going to have that situation where you could manage a nara to a dollar, sorry, a dollar to the nara at 600 or 500 nara. There are other parts to this equation as well. We need to be able to ensure that FBI investors, global FBI investors are investing in our global equity market. So we need to increase foreign portfolio investments rapidly. One of the factors that why our FBI's were doing very low was largely because of the fact that we were managing a very stringent foreign exchange control where CBN would set a price and try to defend the nara based on that price. That was scary for them and they didn't want to pay a part of the market, the equities market. Now the devaluation we're seeing an optic in participation, but we still need more. And most times what this means is that we have to be a bit mental about getting FBI investors here. So you need to actually start making calls with London and Paris and Hong Kong, all of these financial hubs. And speaking with the FBI investors as seen, what is going to make you want to send some of your FBI into Nigeria? And when you have those conversations, and I'm very sure, I'm very sure the policy team has a couple of connected people. Waliya Edun, for instance, is one is a phenomenal finance guy. However, he's leaving private sector for public sector for the first time in a long time. And it's a huge science to see whether he's going to use his network to be able to do that. But it's beyond just a few individuals. It's a huge spectrum of government demonstrating certain levels of public communications that can build the trust not only with the people but build the trust with the foreign portfolio investors. Definitely. But still, let's hope that they do this low-hanging fruit to talk about and bring back some value to the Naira. I remember it was you, I was speaking with some time ago, when I asked, I hope we're not going to become like Zimbabwe with regards to the value of our money. And you said, oh no, it wouldn't get to that. And here we are Naira at $935 to the dollar. Do you still hold that position? Yeah, I still hold the position. And the reason is there are a lot of structural imbalances that Zimbabwe demonstrated before the full crash of the economy and full crash of the Zimbabwe dollar. There are a lot of these imbalances that we noticed in Venezuela when they started having these people right when they turned into 2011, 2012 and 2013, right? We don't see that in Nigeria. And that's because, first and foremost, we still have, to some extent, we still have a very good international trade dynamics, which is obviously held by our participation as a global energy major. We're a global energy major. We're an important member of OPEC, our exports of food oil is still very important too. And there's a setting level of trust in our capital markets. Our capital markets are very sophisticated. I think only South African Egypt and probably Egypt have better capital markets. Okay, so let's leave it on that positive note. Let's leave it on that up note, Basile. That will not permit us to proceed further. But thank you so much for your time. It's always good to have someone from your part of the country, if you know what I mean, in your sector, a researcher with facts and figures discuss this matter so that when some of us get really very emotional, perhaps, when you give us some of this because we're able to calm down a little bit, but then we need to see the government change things urgently, so that Nigerians would at least begin to see the results. Thank you so much, Basile Abiyah. It's my pleasure, Maureen. Thank you. Basile Abiyah Research Associate Kwakol joined me on our first hot topic. We'll take a break and come back with our second hot topic. Stay with us.