By John Adeoti
Who really cares for the poor? Nigerians are among the best in the world in many professions and human endeavours. However, Nigeria continues to stink with endemic poverty, not because it cannot be tackled, but because we have remained unable to organise and deploy the necessary resources required to effectively confront it. Addressing the poverty challenge has been done at personal and family levels by many. Today, many affluent and accomplished persons have stories of stark and abject poverty behind them.
Likewise, many contemporary rich nations have a history of being very poor in the past. Examples of rich nations with a history of deep poverty in not too distant past include China, Singapore, South Korea, and Taiwan. One of the critical common factors in these countries is the care for the poor by the civil and military leaders.
The case of China’s audacity in putting an end to endemic poverty is particularly instructive. From a positive viewpoint, China’s communist revolution is widely perceived as a movement that initiated a government that cared for its people. When the communist leaders discovered that the communist economic ideals were not yielding the expected result of care for the people, they made a bold and unusual strategic decision that was hitherto unimaginable. In 1978, the Chinese Leader Deng Xiaoping started the Chinese economic reform that opened the Chinese economy to capitalist ethos.
In demonstration of their care for the people, the communist party leadership committed itself firmly to poverty elimination; and Deng Xiaoping was reported to have declared, “poverty is not socialism; socialism means eliminating poverty”. By then, China was one of the poorest countries in the world with a GDP of US$149.5 billion and a per capita income of US$156. In 1978, the per capita income of the world was estimated at US$2,026, making the world per capita income about thirteenfold that of China. In the same year, Nigeria was far better than China in living standards: though Nigeria had a GDP of only US$36.5 billion, her per capita income was US$527 (more than three times that of China). In 2022, China’s per capita income had risen to US$12,720 while Nigeria’s was only US$2,184. Moreover, China’s per capita income has caught up with the world average per capita income which was US$12,648 in 2022; and President Xi Jinping of China gleefully declared in February 2021 that extreme poverty had been eradicated in China. It is also noteworthy that China lifted 800 million persons out of extreme poverty between 1978 and 2021, the greatest poverty escape success in modern history. (All data cited are from the World Bank).
In Nigeria, who really cares for the poor? Nigeria’s somewhat consistent economic decline and descent into misery have been very embarrassing and worrisome in the past ten years. Most embarrassing is the reluctance to learn from successful exemplars and tardiness in reforming unhelpful policies, the culture of decay and decadence almost in every sector of the economy. While Nigeria’s petroleum products subsidies started as veritable and perhaps justifiable means of cushioning the effects of rising international crude oil prices instigated by the actions of the Organization of the Petroleum Exporting Countries (OPEC) in the 1970s, the subsidies have been terribly mismanaged to become a dare-devil instrument of plundering Nigeria’s resources. The fuel subsidy scam and its apparent pervasive dislocation of allocation of scarce resources in Nigeria have taunted Nigeria’s policymakers for the past four decades.
Consequently, fuel subsidy in Nigeria, specifically subsidy on the premium motor spirit (PMS) commonly called petrol, has generated diverse and unresolved controversies for many years. Every attempt to remove the subsidy has been sternly resisted by labour unions and civil society organisations with massive mobilization of the masses. The resistance to fuel subsidy removal easily receives mass support because it is perceived to be a fight in defence of the poor and vulnerable segments of our society. It is seen as a demonstration of our civility epitomised by our care for the poor. Care for the poor is core to every culture and civilization that has succeeded in banishing extreme poverty, hunger, and lack. The government represents the people and has two main purposes: the welfare and security of citizens. Though the two functions of government are interdependent, welfare directly connotes a good life for all. Care for the poor, as a welfare obligation, requires a thoughtful compensation mechanism for economic policies that may directly or indirectly hurt the poor.
While it is commendable that the new government of President Bola Ahmed Tinubu had been courageous in ensuring an end to petrol subsidy, the equally problematic and perhaps more needful concern and care for the poor stare us in the face. It is also impressive that the president is responding quickly and personally to agitations from labour unions and civil societies to ensure no one rocks the boat as we sail on with no petrol subsidy.
Fuel subsidy test
As an economist, I have written and advocated for the removal of petrol subsidy for so many reasons. The most profound of these reasons is the fact that subsidy on petrol is grossly inefficient because it is a subsidy on an imported consumption item with a large domestic market. Worse still, petrol is a consumption item for which we have a large comparative advantage to produce locally. Continuous subsidy accompanied by a lack of credible efforts to revive local production is simply a transfer of local jobs to foreign lands and an avoidable stress on Nigeria’s foreign currency reserves. Besides, smuggling of Nigeria’s subsidized petrol into neigbouring countries became a big illicit business over which the security forces had lost control.
It has also been amply shown from economic statistics that petrol subsidy benefits the rich while hurting the poor. This is however valid only when public servants are prudent and disciplined in managing public resources. If our leaders continue with business as usual, fuelling fleets of vehicles with public funds, then the poor would still pay for the extravagance of the rich, and subsidy removal will profusely hurt the poor, at least in the short run.
Hence, to gain the support of the poor in the present circumstances, political leaders must show necessary decorum and fairness in allocating subsidy savings to address critical development challenges that directly alleviate the sufferings of the poor, particularly in the short term. In the medium to long term, the economy would have stabilised and the real gains from the termination of the petrol subsidy will be made manifest as the government’s fiscal stance improves and subsidy savings are available for spending in education, health, infrastructure, and other needful concerns that are required for genuine poverty reduction rather than mere palliatives.
Nigeria and its handlers are currently in a fuel subsidy test. We must pass this test and use the lessons thereof to address other menaces that are suffocating Nigeria. First, the contents of the new government’s antidote to the current sufferings instigated by the end of petrol subsidy should be quickly unpacked so that the poor can directly experience compassion from the government. Secondly, our political leaders should demonstrate that they are not for business as usual in these unusual times.
Care for the poor suggests that our leaders everywhere (government, military, business, religious, communal, etc.) should be honestly committed to helping the poor and vulnerable to cushion the adverse effects of petrol subsidy removal. This should involve genuine sacrifices. These sacrifices are opportunities to win the hearts of the people and rebuild trust in our terribly polarised society. Politicians should jettison the collection of obscene pecuniary allowances from the government and the collection of ridiculously large sums of money as palliatives for the poor.
To be continued tomorrow
- Adeoti is a Professor of Development Economics at the Nigerian Institute of Social and Economic Research (NISER), Ibadan, Nigeria.
