President Bola Tinubu has consciously or otherwise made the application of palliatives an instrument of economic policy. He has used palliatives so generously and so early in his presidency that its scope has expanded in time and coverage. States and Local Governments are mandated or empowered to transmit Federal Government palliatives or introduce their own variants in their domains to suit their perculiar circumstances. In Nigeria today, the application of these supposedly ad-hoc pain-relieving measures targeted at vulnerable demographics has become the norm; it is now governance by palliatives.
This is unacceptable. Rather than providing relief, the reverse is the case as the palliatives are hurting the people, the government and the economy the more.
What happened?
It all started when the President, in his inauguration speech, casually announced the removal of fuel subsidy and promised to re-channel the savings from it into “better investment in public infrastructure, education, health care and jobs that will materially improve the lives of millions.” He followed the subsidy withdrawal one month later with the floatation of the foreign exchange rate. As expected, the markets went wild instantly. The pump price of petroleum products tripled, or quadrupled in some cases, with all other market prices and costs skyrocketing in tandem.
By the time the federal cabinet was constituted three months after the president’s inauguration, the country’s business, economy and social life had become something of a fire on the mountain that required frantic efforts to put off. The response of the new government was to roll out a regime of palliatives to cushion the effects. As at October 1, 2023, President Tinubu had announced at least nine of them, mainly cash allocations to different sectors and demographics. For instance, sectors like manufacturing, agriculture, transportation and business were allocated N500 billion while workers and selected households received N35,000 and N25,000, respectively, for a period. Federal lawmakers’ allocation was N110.2 billion, while the 36 states got N185 billion.
As hunger and anger swept through the country, the nature of palliatives shifted from cash allocations to direct purchase of food stuffs, especially grains, and farming inputs like fertilizer, for distribution to selected vulnerable groups and individuals. The latest of such palliatives was the reported distribution, in July, of 20 trucks of rice to each state in the country in a bid to cushion the effects of food inflation and rising general inflation.
The bigger picture
It is moot to state that, since the 1970s when crude oil effectively replaced agriculture as the main source of national revenue and foreign exchange earnings, the Nigerian economy catches cold when the oil industry sneezes. For so long also, the issue of subsidy on petroleum products has become an albatross. The argument as to whether to remove the costly and corruption-riddled subsidy or not has raged with each new government since the military era in the mid-1980s. But, for once, there was almost a convergence of opinion among the leading candidates in last year’s presidential election on the desirability of removing it.
However, what we find difficult to understand was why the new president hastily and casually took the action without proper articulation of its negative consequences on the economy and the remedial policies or measures to deal with them. That failure or omission on the part of the president apparently compelled him to resort to the application of palliatives instead of applying well-thought out policies in running the economy. The result, unfortunately, is what we have today: an economy that is turned on its head. Many businesses are either dead or on life support, inflation and unemployment are running riot; hunger has taken over the land; and life generally has become hellish. The just-ended #Endbadgovernance nationwide protests represent the natural response of disappointed, frustrated, hungry and angry citizens to the intolerable conditions of living they have been subjected to in the last fourteen months of Tinubu’s presidency.
We are of the strong conviction that the regime of palliatives introduced by President Tinubu has failed abysmally. Although government revenues have increased significantly as a result of the removal of fuel subsidy, there is no evidence that these have been re-channelled “into better investment… that will materially improve the lives of millions,” as promised by the President in his inaugural speech.
Worse still, many more maladies are associated with the palliatives regime than the subsidy it replaced. Subsidy is easier to administer through known marketing channels and it benefits virtually the entire population directly or indirectly in the ordinary course of their daily activities as fuel consumers, commuters, business people and as citizens. Not so with palliatives, most of which have no identifiable institutional structures through which they are administered. This makes them vulnerable to corruption, one of the evils that necessitated the scrapping of subsidy. Most of the cash palliatives channeled through government ministries, departments or agencies are either paid into private accounts of the administrators or applied to proxies captured on fake lists of supposed target beneficiaries. A former and a serving minister (now suspended) and other officials connected with the administration of palliatives and social investments are currently being investigated on allegations of this kind of cash theft running into billions of Naira. Some others may not have been caught yet while many more are only waiting for an opportunity, or their turn, to partake in the palliative cash fest.
The corruption involved in the purchase of foodstuff palliatives – grains such as rice, corn, millet, garri, etc – and fertilizer is even worse. Reports across the country indicate that politicians through whom they are channeled appropriate them as personal property, dole out a token to a few associates and warehouse the bulk with intention to use them to entice voters during the next election. That is just part of the story. Some government agents or palliatives contractors buy off any of these items, especially grains, which they find in the market, bag them and deliver without any quality checks. Some of such consignments have been found to be mixed with other stuff not fit for consumption or for crops.
The mopping up of foodstuffs by palliative contractors has created severe scarcity of food in the country as farmers prefer to sell to them rather than in the open market. The result is the escalating prices of food, a development that defeats the very objective of introducing the palliatives.
Meanwhile, amidst the frenzy of palliatives in the domestic economy, the foreign exchange market has been on the boil. The value of the Naira has been falling persistently, pushing up the cost of imported fuel. With government trying to hold down the pump price of petrol through its oil company, NNPCL, experts say subsidy is back in full measure.
For all practical purposes, the regime of palliatives in Nigeria has failed, either as a remedial measure for cushioning the adverse effects of the withdrawal of fuel subsidy or as a substitute for fuel subsidy. It is like applying a combustible substance to quench a raging fire. Government is only throwing huge sums of money at an otherwise very serious national economic challenge and making new set of billionaires outside the petroleum industry. In a country without reliable demographic data base, most of the reported millions of vulnerable beneficiaries exist only on paper. Funds being expended on palliatives represent government money gone down the drain. The regime of palliatives must end.
What next?
The savings from subsidy removal, the celebrated increase in government revenues under the Tinubu administration, should be channeled towards reviving the four government-owned refineries. Government should also support Dangote refinery to operate at full capacity and see to the take-off of other licenced private refineries. No matter the cost, the long-term payoffs of domestic refining of crude oil on the economy will more than justify the investment. It will stabilize local petroleum products supply and prices as well as stabilize general price level, costs and the economy at large. Local refining will also cut Nigeria off wholesome dependence on imported fuel and reduce pressure on the exchange rate.
The government should also demonstrate commitment to fiscal discipline by cutting down on the size of government and cost of governance by reducing the number of ministries, departments and agencies in line with the Oronsanye Committee report. It should trim the number of political appointees, from cabinet members down the line, and go beyond temporary salary cuts to comprehensive wage bill downsizing. A robust interplay of effective monetary and fiscal policies, especially the entrenchment of fiscal discipline, is the foundation on which strong econmies are built, not the quicksands palliatives.
President Tinubu failed to build this foundation when he assumed office over a year ago. The President must begin to work on it now if he, the government, the economy and the citizens are to get the respite they desperately need. No sustainable relief can come from palliatives.
