The indomitable Margaret Thatcher, erstwhile Prime Minister of Great Britain was once said to have quipped that “The problem with socialism is that you eventually run out of other people’s money.”
In Nigeria it seems that with the creeping rise of Statist policies, we are increasingly running out of other people to blame too (where is GEJ these days?).
Today Nigeria is faced with a currency crises, fuel scarcity, electricity shortages, and dollar shortages for most local manufacturing firms.
A major theme running through these problems is the heavy hand of the State and an unwillingness to let market forces determine the price of goods and services from Petrol to the Dollar.
In Lagos it is often said that one could buy anything for the right price.
However, having driven round the past 4 hours looking for fuel to buy to no avail I am stymied by the fact that millions of Nigerians across the country are in the same exact predicament as I am.
They have ample demand for a product (Gasoline), but because market forces have been largely eliminated from the supply chain and price setting mechanism, there is no incentive for entrepreneurs to supply that good or service.
The rise of the State in Nigeria can be seen by a hesitation to end corrupt fuel subsidy payments for petroleum products, thoughts around the resurrection of bankrupt Nigerian airways, the banal ritual of continuing to throw good money after bad by refusing to privatise Nigeria’s old and decrepit refineries, and the resistance to devalue the naira and let market forces determine its level, despite the near 60 percent fall in oil prices from its most recent peak.
For the hapless masses for which most of these policies are supposed to be protecting the stark truth is that they are getting squeezed and becoming poorer from policies the Government says is designed to do the opposite.
The road to hell they say is paved with good intentions.
How Statist Policies are hurting your pockets
–The refusal by the Government to devalue the Naira is hurting the average Nigerian in numerous ways.
First of all it is estimated that an average of N100 billion has been unavailable every month for the 3 tiers of Government to share since the CBN began its unorthodox monetary policies and refused to devalue the currency.
Less money for the states mean, they are less able to pay workers or fund important items like Pensions.
Moving the 2016 budget benchmark rate to between N250 and N300 per dollar from N199 would also have reduced the overall deficit embedded in the budget, cut borrowing costs, and reduced future interest payments, freeing up money for the proverbial masses.
For example this year’s budget has an embedded N1.4 trillion dedicated to interest payments on the debt alone.
On the macro – level Nigerian unemployment jumped to 9.9 percent in the third quarter (Q3) of 2015 up from 8.2 percent as growth slowed to the lowest levels in more than a decade.
The economy expanded by just 2.84 percent in Q3 2015, less than the annual population growth rate of about 3 percent andimplying negative per capita income growth, even as inflation remains high at 9.6 percent (January).
Nigeria’s benchmark stock index has returned – 15.4 percent this year loosing trillions of naira in the process.
A more market determined Naira rate would have at the very least attracted investments and portfolio inflows helping to cushion some of the impact of these negative indices on the real sector.
–Because Nigeria refuses to end fuel subsidies or let market forces determine the price of Petrol, we have now been thrust into another round of fuel shortage crises.
The dollar shortage is linked to this too because most major marketers cannot source dollars to import products, leaving the NNPC as the only major importer.
Interestingly while the Government insists the product must be sold at N86.5 per liter, the National Bureau of Statistics (NBS) has consistently released data showing that nobody in Nigeria buys Petrol at that price.
The latest PMS watch from the NBS which can be seen here shows that the average price Nigerians purchased PMS in January was N109.59 per liter.
The shortage of fuel means that Nigerians are spending more time in filling stations instead of at work creating wealth for themselves and the economy at large.
It means an economy that was largely unproductive to begin with, is becoming less productive, and there can be no increase in wealth without productivity gains.
–On refineries the NNPC has spent about $5 billion since 2009 on so called Turn – Around Maintenance.
The outcome has been that capacity utilisation for Nigeria’s 4 refineries fell to zero (0) percent in October 2015, down from 2 percent in September.
The highest utilisation rate for the refineries achieved in 2015 was a low 24.1 percent recorded in August.
The NNPC will continue to pretend that it can keep throwing good money after bad; however the reality is that its refining operations are a drag on operations and need to be sold.
NNPCs full year results showed that it made a loss of $1.34 billion or N267 billion led mostly by its refining units.
Most major oil companies with refining operations from Exxon to Shell made huge profits last year from refining as oil prices plunged showing that NNPC refining problems are systemic and a drain on the Nigerian state and by extension you the masses.