The World Today for July 04, 2023

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NIGERIA

One of Bola Tinubu’s first actions, when he became president of Nigeria in May, was eliminating the oil-producing country’s fuel subsidy. As the Economist explained, the subsidy that in 2022 reached $10 billion a year has long been a drag on the Nigerian economy. Because of the subsidy, the state-owned Nigerian National Petroleum Corporation contributed nothing to the government’s coffers year after year, even though the country pumps more oil than any other on the African continent.

Foreign investors hailed the move towards “orthodoxy,” or more conservative economic and fiscal principles, the Financial Times reported, adding that Tinubu is also liberalizing foreign exchange rules, making it easier to put money in and pull money out of the country.

The president’s move immediately caused a run on gas stations as Nigerians sought to fill their tanks with the last remaining cheap fuel. The long-term effects will likely be more important, however.

It also nearly destroyed black markets in Cameroon, Benin and Togo that sell contraband fuel, Reuters added, threatening to destabilize Nigeria’s neighbors.

In the country, human rights activists expressed concerns about the knock-on effects of the dramatic hike in the price of fuel, which increased 300 percent to $1.20 a liter after Tinubu’s announcement. Almost half of the Nigerian population lives in poverty. Only recently the United Nations issued a warning that 4.3 million people in the country’s northeastern states were facing severe food shortages.

“Millions of Nigerians … are concerned that they will be unable to meet the costs of education, food, and healthcare,” said Amnesty International Nigeria’s acting director Isa Sanusi. “The government is yet to suggest any ways to mitigate the impact of this decision for people on low incomes.”

Fuel prices, in turn, are causing general inflation. Comparing income rates in January through late May, the World Bank estimated that rising prices alone cast four million people into poverty, reported Punch, a Nigerian newspaper.

Muslims, for instance, who comprise around half the country’s population, have toned down celebrations during the holy month of Ramadan. Many can’t afford to drive to relatives’ homes or buy goods to mark the holidays due to high fuel costs, Voice of America wrote.

The World Bank also estimated that the measure would save the Nigerian government $5.1 billion, Business Insider Africa wrote. That extra money can shore up the government’s finances, help avoid financial crises, and potentially give Tinubu room to launch new programs to help poor Nigerians.

The president might not get a chance to propose those efforts, however, if his constituents are miserable and he’s wildly unpopular.

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