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By: Sir Henry Olujimi Boyo (Les Leba), first published in September 2005


Last week, we republished the article titled “Can Buhari Make Naira Equal to Dollar?” This article discussed some of the unmet promises of President Buhari, as well as the CBN’s monetary frameworks which appear to go unchecked by the current administration due to the fact that the current Naira rates have worsened since the article was first published in 2015. If you missed this article, it can be found using the link below.

(See www.betternaijanow.com for this series and more articles by the Late Sir Henry Boyo)

Today’s article was initially published about sixteen years ago which is enough cause for concern that Nigeria is still facing many of the struggles analysed in the article. If we take note of a previous article republished on the 23rd of August 2021 titled “The Oppressive Folly of Fuel Subsidy” which discussed the deregulation of the oil sector in light of a recent article by Obas Esiedesa titled “Petrol Subsidy Removal Not Immediate- FG” we can see evidence that the issue of higher fuel prices and its effects on the living standards of Nigerians, as well as the ever-declining purchasing power of the Naira, is still problematic. The below article discusses the struggles of the average Nigerian as a result of these concerns and provides sound recommendations as a caution to the government.

Keep in mind the current rates as you compare with the previous rates discussed in this article for the year 2005. ………………………………………………………………………………………………

The operational definition of the masses in this article shall include the unemployed retired civil servants, pensioners and all those whose monthly income fall below N50,000 per month it is expected that all who fall within this broad category must eat, clothe themselves, incur transportation expenses, pay all sorts of bills which would include rent, electricity, medical, and possibly school fees for their children or wards. Indeed, it would be fair to say that over 90% of the Nigerian working class fall into the above category, and the larger percentage would be found in our urban centres with Lagos alone accounting for a sizeable proportion of the working class.

The nature of urbanization compels residents to devote a steady amount of their monthly income to transportation to and from their places of employment. The ratio of transport expenditure to total income would depend on factors relating to efficiency and cost of mass transportation generally. The excellent mass transit systems in existence in serious-minded and focused economies ensure that personal transportation costs would form an insignificant portion of a worker’s income.

In developing countries such as ours, where mass transit systems are often uncoordinated and chaotic, inefficiency thrives and urban residents invariably find that a greater portion of their meager income of between $1 and $12 per day would go into the pocket of transport operators. Thus, any increase in transportation costs would mean greater pressure on an already limited income as less money becomes available for each basic vital need such as food, health and child education.

The problem of the urban dweller is further compounded by the multiplier effects of increased transportation costs on even those same basic needs; thus, we have a situation where not only is less money available for food, for example, but the increase in food prices make difficult to sustain an already battered diet plan. The result is a mass of living dead in our urban centres, people who become so pauperised that they soon lose all sense of decency and civil behavior, people who live just to get to work and back with dignity barely superior to slave labour.

The masses of this country have witnessed about six increases in the price of automotive and domestic fuel in the last six years. The people of Nigeria have become poorer and poorer as a result of the effects of higher fuel prices on all facets of their lives and last week’s increase of over 25% on the previous price of N50.5/litre may have dealt a dastardly blow on an already emasculated populace.

The death blow will surely come sooner than later, as the authorities have maintained that the new price of N65/litre includes a subsidy, which is not permissible in a deregulated market scenario. Nature has joined the conspiracy to compound our woes and expose the inefficiency and the illogicality in our current monetary framework, by bringing on Hurricane Katrina to major oil fields in the United States.

The effect of this act of God can only mean higher crude oil prices which would invariably trigger higher pump prices of fuel in Nigeria in spite of the attendant blessings of increasing poverty for our people. The promises of the benefits of deregulation of the downstream sector of the oil industry remain a mirage; yet, we are admonished to exercise patience and assured that we would be better off as soon as international crude oil prices fall and our export earnings from crude oil start to drop!

If the layman is confused by such logic, concerned economic analysts wonder if the dollar earned from oil exports is different from the dollar investments which our dear President has traversed the world to bring to Nigeria. If our fuel prices will only come down when we begin to earn less and less export revenue from crude oil, analysts wonder at the extension of this logic, with the implication that we would be better off when crude oil prices fall as low as possible, maybe to less than $10/barrel, so that even though our export earnings will fall, we will at least enjoy cheaper fuel prices domestically and everyone will be happier!

The above is, to say the least farcical; economic theory and commonsense dictate that you cannot be poorer when you have increasing wealth! Technically, increasing crude oil prices brings us increasing wealth, such that we can amass dollar reserves in excess of $32bn (including so called excess reserves). Our heavy dollar revenue should automatically strengthen the value of our local currency, the naira, such that our domestic cost of fuel will fall inversely with the rate of increase of crude oil prices and by extension our dollar reserves; factors which have induced the interest of even our Shylock creditors to want to parley with us!

The earlier we call the operators of our monetary policies to question and top them from deceiving Nigerians with a dream of better days to come with the current monetary framework, the earlier we can start enjoying God’s abundant blessings on us from the current unprecedented windfall we have received from rising crude oil prices.

It is painful when enlightened Nigerians hinge the problem of high domestic fuel prices on the limited capacity and poor state of our refineries! I reiterate that if 100 new and efficient refineries were in place, this would only affect the price of local petrol marginally; i.e., the difference with current prices would only be less than 10%, the freight cost of transporting crude oil overseas for refining and the cost of bringing back refined fuel in a deregulated system.

It is also disturbing when eminent Nigerians ask for the sustenance of huge subsidies and palliatives in a deregulated market when the government can easily put in place a monetary system that is economics compliant, and which would automatically strengthen the naira value and bring down domestic fuel prices with the attendant practicality of a petrol sales tax of between 10-20%.

The practical approach to bring this about is to discard the current process of infusing export dollar earnings into the system by first converting to naira before sharing. If dollar certificates were adopted for the infusion, the above benevolent economics compliant scenario would emerge, and we would all clap together and rejoice when God blesses us with higher crude oil prices and higher earnings! This makes more sense than the nonsense arrangements we have at the moment.

I will conclude this week’s piece by sounding the warning that the government should stop and contemplate the severe hardship that would be imposed on the Nigerian masses if the adverse multiplier effects of higher fuel prices are compounded by the proposed increase in the rate of VAT from 5% to sales tax on goods and services produced and sold within the state.

It is difficult to imagine how the government can hold down severe inflation and halt further pauperisation of the Nigerian masses in view of the effects of these factors on spending power, industrial capacities, employment generation and ultimately survival of our people. However, if the intention of the government is to decimate the majority of our people, then there is no doubt that the current framework will achieve their purpose.

Save the Naira, Save Nigerians!