BRIDGING MACRO AND MICRO: How To Make Reforms In Nigeria Reach The Kitchen Faster (1)

Last week, I argued that the centralisation of policing in 1966 and the introduction of fuel subsidies in 1973 were both temporary measures introduced during Gen. Yakubu Gowon’s administration that became permanent because they had no end dates. This week, I prom­ised to address the bigger question readers have been asking: if the macroeconomy is now working, why is the microeconomy still hurting?

The answer lies in what economists call trans­mission lag. As I explained last week, it takes be­tween 24 and 36 months to build a factory. Readers were also reminded that Aliko Dangote spent seven years building his 650,000-barrels-per-day refinery from start to finish.

Therefore, the $50 billion in Memoranda of Un­derstanding (MoUs), the $2.06 billion in Foreign Direct Investment (FDI), and the JPMorgan bond listing, which could bring $17.5 billion into the Nige­rian economy, as I argued in this column last week, are real prospects.

But these developments are concentrated at the top, at the macroeconomic level. They will not translate into money in the market woman’s purse or food in our families’ cooking pots until someone in the middle converts macroeconomic gains into microeconomic opportunities and jobs.

How do we shorten that 36-month transmission lag to 12 months? There are three bridges to cross.

I would like us to adopt Gen. Gowon’s develop­ment template from some 53 years ago, when he intervened as Head of State to protect Nigerians from the kind of oil price shock the world is cur­rently grappling with, arising from the ongoing Iran-US-Israeli war and manifesting as a global energy crisis.

As readers may recall, Gen. Gowon’s adminis­tration introduced a petrol price subsidy in 1973 to cushion the impact of the oil price shock on Ni­gerians following the Yom Kippur War between Egypt and Israel.

The difference I identified between Gowon’s 1973 policy and the current actions of European leaders seeking to ameliorate the effects of the oil price shock arising from the Iran-Israel-US conflict is that their interventions, through tax relief on oil, have end dates. Gowon’s intervention, howev­er, had no specified termination date. This is why the fuel subsidy remained in operation until the incumbent president, Bola Tinubu, announced its removal in his inaugural speech on May 29, 2023, some 50 years later.

Incidentally, the current government interven­tion, announced last Thursday by the Minister of Finance and Coordinating Minister of the Econo­my, Taiwo Oyedele, in the form of a 30-day discount on petrol prices, has an end date.

This suggests to me that the government is read­ing and listening to those of us in the commentariat who are essentially leading from the streets. Hence, it has decided not to repeat the mistake of the Gowon era, when temporary interventions were introduced without time limits, as I pointed out in this column last week.

By offering a 30-day discount on petrol prices, presumably renewable if the prevailing circum­stances persist, the government has demonstrated that it has learnt the lesson of ensuring that tem­porary policies have clearly defined end dates from the outset. This is necessary to prevent temporary interventions from becoming permanent, as hap­pened with the centralisation of policing in 1966 and petroleum product subsidies in 1973.

For the record, and to emphasise the point, the other open-ended policy that became permanent because it had no time frame was the centralisation of policing in Nigeria in 1966, following the military coup that toppled the First Republic’s democrat­ic administration. The Tinubu administration is also in the process of reversing that arrangement through the ongoing decentralisation of policing, which has already undergone crucial legislative procedures.

Gen. Gowon’s second approach to alleviating the hardship Nigerians faced under circumstances similar to those prevailing today was the introduc­tion of a salary award known as the Udoji Award, named after the chairman of the commission that recommended the reforms. The aim was to provide relief to long-suffering Nigerian workers.

In fact, the policy worked very well, except that its implementation was cut short following the oust­er of Gowon’s administration in a military coup d’état in 1975.

Unfortunately, the Tinubu administration has not yet adopted a Udoji-style salary award as a means of reducing the hardship arising from the removal of the petrol subsidy.

Instead, a rather nebulous and complex, high-cost-of-living intervention, described through terms such as discount and modulation, among other la­bels designed to distinguish it from subsidy, has been adopted. The initiative has attracted consid­erable public backlash and even parody, largely be­cause it is too complicated to understand, while the estimated relief of N66 per litre is too insignificant for the masses to appreciate the intended benefit.

It is encouraging that Gen. Gowon recently vis­ited President Tinubu at the Aso Rock Presidential Villa. I would like to hazard a guess that he may have shared his experience of managing the tur­bulence associated with oil booms and busts with the president.

In the latter part of this intervention, I will ex­amine this concern more deeply to determine why a salary award, which has not yet been considered, might have been more efficacious than the price discount, modulation and forward sale of crude oil to local refiners currently on offer. These measures have triggered considerable public debate across conventional and social media platforms.

For now, it is appropriate to focus on the three bridges between progress at the macroeconomic and microeconomic levels that I proposed in the opening paragraphs of this intervention.

The First Bridge: The Fiscal Bridge — From the Federation Account Allocation Committee (FAAC) to the pocket and cooking pot

In my article last week, I referenced the Udoji Award of 1974 as an example of a policy intro­duced under Gowon’s administration that worked because the money went directly into workers’ pockets.

Today, monthly allocations from the Federation Account Allocation Committee (FAAC) to states have increased substantially, reportedly rising from N1.1 trillion to more than N2.2 trillion following the removal of the petrol subsidy. Yet, the ordinary Ni­gerian in Warri, Kaura Namoda, Ohafia or Igokoda does not feel the impact.

The solution, in my view, is to borrow from Gowon’s approach but modernise it.

Of the roughly N10 trillion saved from subsi­dy removal since May 2023, 50 percent should be ring-fenced, not for palliatives such as rice distri­butions that quickly disappear, but for conditional vouchers. These could include vouchers for farm inputs, compressed natural gas (CNG) conversion kits for commercial tricycles, or keke (rather than focusing only on mass-transit buses, cars and other commercial vehicles), as well as school-fee credits paid directly to schools.

That way, the poor could begin to feel the much-vaunted dividends of the bold reforms un­dertaken by the Tinubu administration within 30 days, rather than having to wait 30 months.

Another unconventional but potentially impact­ful measure would be to publish FAAC spending on a local government area-by-local government area basis online, just as the Budget Office already publishes information at the federal level.

That way, our youths, who have been devoting too much of their valuable skills and talents to dis­torting information to suit their political biases, would have sufficient data and content to engage in more useful and productive work. Such efforts could help steer the ship of progress in our beloved nation in the right direction.

Let none of the critics claim that government does not listen and act on advice.

Let none of the critics come up with the excuse that the government does not listen to advice or act on it.

That may have been true of past administra­tions, but the incumbent administration is not shy about reversing its policies when it realises that they are unpopular with the masses or lack prag­matism.

The increase in cash transfers to indigent mem­bers of society is a case in point. The threshold for beneficiaries had initially been set at a lower level, but President Tinubu subsequently increased the amount payable.

Another example can be cited from as recently as last week.

In this column last Tuesday, I identified the ab­sence of commencement and end dates as the bo­gey of policies intended to be temporary but which eventually became permanent. Examples include the centralisation of policing since 1966 and the introduction of petrol subsidies in 1973.

I then wondered whether the administration would offer some reprieve from the burden of ris­ing petrol prices by restoring some form of subsidy, as European and Asian countries are doing, or sus­tain its commitment not to reverse the removal of petrol subsidies and instead find alternative ways to ameliorate the unfolding cost-of-living crisis.

By Thursday, the government had announced a 30-day discount on petrol prices. Although the initiative is complex, the relief appears limited, and the measure may not produce the intended impact, its commencement and end dates are as clear as crystal.

Before I identified the shortcomings associated with the open-ended nature of policies intended to be temporary but which eventually became perpet­ual, commentators debating whether petrol subsi­dies were sustainable—including presidential can­didates now clamouring for their restoration—had largely focused on the abruptness of the removal. They blamed Tinubu for failing to consult stake­holders beforehand, while promising to do better if elected.

None of them, however, indicated that any subsidy policy they might introduce would have a defined tenure, as Minister of Finance and Coordi­nating Minister of the Economy Taiwo Oyedele has now done with the current intervention.

The Second Bridge: The Production Bridge — Securing The Economy

The second bridge is what I call the Production Bridge, anchored on economic security.

As we can all agree, poverty in Nigeria is largely farming-related poverty. And poverty cannot be re­duced when farmers are unable to go to their farms because of insecurity.

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