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    Nilce

    According to President Jonathan, in 2010 $13billion was spent topurchase fuel for self-generation of eltcirecity in Nigeria. That’sabout 6.7% of the 2010 GDP. Not only has the demand for fuel forself-generation of eltcirecity, since then, grown but the subsidyremoval has now doubled all those costs. What would be the impact ofthat on inflation and ultimately on the GDP as the costs ofself-generation of eltcirecity goes over 10%? Everyone seems to betaking subsidy removal as an economically sound recommendation withoutany attempt to assess the particulars.The Governor of the Central Bank of Nigeria displays acute symptoms oftunnel vision in basing his assessment of the impact of the subsidyremoval on the insignificant weight ascribed to fuel fortransportation in the Consumer Price Index. Sanusi seems incapable ofseeing both the forest and the trees. As far back as October 2011,about the time the Jonathan govt. began to suggest that it wouldremove the subsidy, I looked at possible scenarios after a removal ofthe subsidy, exploring the possible impacts on the individuals earningthe proposed, new minimum wage (of course, over 90% of the working agepopulation won’t be so fortunate to as to earn even that measly sum ofabout $110).I used the CPI weights for my projections, and it didn’tlook pretty then. Needless to say, subsequent events have more thanconfirmed my calculations. This has given me cause to wonder whatthose making policy in Nigeria with the better data that they musthave do to earn their keep.Implementing that new minimum wage was one of the triggers for theremoval of the fuel subsidy.And, I wonder how the economic hit womanwho has nothing to recommend her beyond being a career technocrat and world renowned Economist’ proposes to solve the problems and fiscalstrains Government would encounter on the expenditure side when actualprices are higher than budget projections. Okonjo-Iweala shouldalready be familiar with such fiscal strains. The removal of the fuelsubsidy will do worse to the economy than the benchmark oil price peg’ that undergirded the 2005 & 2006 budgets and which caused somuch deficit financing. It got to a point in 2006 that a supplementarybudget was sent to the National Assembly and the Executive would havecontinued to press for the approval of that supplementary budget ifthe IMF hadn’t prevailed on them to withdraw it at the time.It isn’t only the people that would experience hardships due toinflation; Government would, too, in translating its capital vote into projects and in working to hit its developmental targets, and sinceit’s the self same, long suffering people who were meant to benefitfrom those projects and safety nets, that would be ‘double wahala fordeadi-bodi.’ The government seems oblivious to the fact that it issawing off the very branch on which it is currently sitting byremoving the fuel subsidy. I guess I must sound ridiculous myself forpretending the Govt. has any intention to serve the people in anymeaningful way, quite sad but true.The IMF has been leaning on Nigeria to deregulate and privatize forover a decade, and the Fund began to see some adoption of thestrategies it suggested with the return to civil rule in 1999.Although the state had not, and still hasn’t, provided adequate Power,the IMF continued to urge deregulation beginning with Telecoms,instead of with Power. Banking has also followed, along the path ofrestructuring, and the field of Retail has seen an opening up of itsgates to all comers. Cement manufacture, a major sector of theConstruction industry also saw major privatizations.

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