Stop Power Subsidy Removal

The International Monetary Fund (IMF) was founded after World War II to help rebuild economies that were devastated by the conflict. Over the years, the IMF has played an essential role in promoting global monetary cooperation and ensuring financial stability. One of its key functions is providing financial assistance to member countries in need. However, the IMF’s involvement in the domestic affairs of borrowing nations, like Nigeria, goes beyond just providing loans.
Undeniably, Nigeria has maintained a strong partnership with the global financial institution over the years. The organisation regularly guides economic and social policies to the giant of Africa in exchange for financial assistance. While these recommendations often focus on essential fiscal reforms, some critics believe they fail to consider the country’s specific socio-economic challenges, potentially worsening existing issues.
Historically, the Monetary Fund has been criticised for promoting strategies that prioritise Western economic interests over those of the recipient nations. This pattern has led to scepticism and accusations of neo-colonialism. Many believe that the Fund’s policies contribute to a cycle of debt, dependency, and economic vulnerability for the recipient nations, ultimately reinforcing the dominance of the West on the global stage.
Unfortunately, the global financial institution has been advocating for the removal of subsidies in Nigeria, claiming that they hinder economic growth and development. This argument has gained traction recently, with the institution urging the Nigerian government to eliminate all subsidies, especially in the electricity sector. According to the institution, subsidies create market distortions, promote overconsumption, and put a strain on government finances. They believe that removing subsidies would stimulate economic growth by promoting fair competition and reducing the burden on the government.
We strongly disagree with IMF’s proposal to take away subsidies, especially for those on power. These subsidies are essential for the well-being and security of ordinary Nigerians as they impact the cost of living and overall quality of life. In a country facing various socio-economic challenges such as low income, poverty, unemployment and gross income inequality, subsidies help alleviate financial burdens, particularly for those in low-income households. Removing them, as suggested by the IMF, could result in higher living costs, increased poverty levels, and heightened public discontent.
IMF’s admonition is akin to giving the President Bola Tinubu government a rope to hang itself with, given the possible outcome of such a move at this juncture of extreme hardship in the country. Because of the poverty-generating framework of the Nigerian economy, the attempts to completely commercialise the power market have been unsuccessful. Consequently, the Federal Government is obliged to provide financial support through the Nigerian Bulk Electricity Trading Company (NBET) to compensate for the deficit resulting from the inadequate revenue collected by the power companies.
An example of this is seen in 2023 when the power companies managed to gather N783 billion in tariffs out of a total bill of N1.06 trillion. To bridge the gap, the Federal Government had to provide N375 billion in subsidies. Removing this subsidy now would result in consumers having to pay more than 35 per cent extra compared to current rates. Additionally, consumers would need to brace themselves for unpredictable tariff hikes that power companies are eager to implement.
While some argue that full deregulation will attract investors, Nigeria’s experience has shown otherwise. For instance, despite the removal of the petrol subsidy almost a year ago, the promised benefits have not materialised. The Dangote and government refineries, which were expected to lower the cost of petroleum products, are not in production. This highlights the complexities of the Nigerian market and the challenges that come with full deregulation.
For the already terribly afflicted Nigerian masses, the elimination of power subsidies at this time would be very difficult.  The withdrawal of fuel subsidy has already caused many businesses to shut down, as the value of the naira continues to decline. Elimination of power subsidy may be the final straw that breaks the camel’s back. The protests that have been occurring, which the government believes are sponsored, could escalate and become unmanageable.
Nigeria is already struggling with recent changes in electricity and exchange rates, so the Bretton Woods Institutions’ harsh demands are placing the nation in a risky situation. The additional burden of higher electricity tariffs could severely impact the competitiveness of the nation’s manufacturing sector, which is already facing defiances such as low productivity, high costs, and inadequate infrastructure.
Both the IMF and the World Bank have demonstrated insensitivity and hypocrisy in their policies towards Nigeria. They have failed to consider the impact of their  suggestions on the welfare of Nigerian workers and the general population. They must understand that there is a correlation between the purchasing power of the people and their ability to afford essential services like electricity. The government must be cautious in heeding their advice, as the  abdication of electricity subsidies could worsen the current economic crisis. Policies should be implemented with the well-being of the people in mind.
The official exchange rate for the dollar was N464.51/$1 before the removal of the fuel subsidy on May 29, 2023. Today, it is about N1,650 -$1 in the parallel market. This crisis has led to high inflation, pushing up prices of goods and foodstuffs. Therefore, Nigerian leaders should take advice that will assuage the sufferings of the citizens and better their lives. They have to address the economic remonstrances facing the country and find solutions that will benefit the people. Nigerians can no longer absorb any further shocks because of the difficulties of the times.