Nigerians woke up on New Year’s day to an unwanted gift from the Jonathan government; an overnight increase (by about 100%) of prices of their daily conveniences. Everyone from Barbers, to Stylists, to Tailors, to Transport drivers, to Traders, increased the prices of their goods and services on account of the increase in petrol from N65/litre to N141/litre.
The government had doubled down in the last few months in their campaign to convince Nigerians of the benefits of scrapping the subsidy but the policy change still remained widely unpopular amongst the masses. Most were concerned about the effect of the subsidy removal on their standard of living and obviously those concerns are well founded as in the last few days since the policy took effect, prices of basic goods have skyrocketed. Food prices have increased. Folks whose commute to work cost N400 on December 31st are having to now pay N900. Barbers charge N300 for a hair cut with when there is light and N800 when you have to use the generators. Tailors increased prices by 200% because they have to use the generator to finish their clothes. And the list goes on and on. It was not exactly unexpected as everyone depends on petrol-guzzling generators for power anyway.
In theory the subsidy removal is economically sound; consumer subsidies seriously distort the economy and is unsustainable. The money freed up from the subsidy removal could be put to better use in fixing our refineries so we can refine our oil in-state and sell at a lower rate. Some of that money could also be appropriated to infrastructural development. The problem however is that, Nigeria has for a long time defied the basic laws of economics, the corruption that permeates our society is so rife that even basic laws of supply and demand barely work. No one has any faith that the monies saved from the subsidy removal would be used to do the right thing.
Also, with the security threats from Boko Haram in the north and the kidnapping rings in the south, people do not have that much faith in the government’s ability to provide security for the people. Why should they trust that the money from the subsidy removal will be used judiciously?
They say “never look a gift horse in the mouth” but if you tell a recent college grad with mounting bills and outstanding loan payments that you would like to give her a $50k job but you would be paying her salary into a 401-k account, i’m sure she’ll tell you to take the job and shove it up your…
Photo Sources: http://stream.aljazeera.com/story/nigerian-fuel-subsidy-cut-angers-citizens-0021957