I don't know why the removal of Subsidy discussions can't be held without comparing GEJ & PMB. The Jury is out, if we are going to ensure development of the downstream then we have to remove Subsidy. In both cases, GEJ & PMB , the issue is not the removal of the subsidy but the process by which the fuel price increased sharply.
During GEJ, the Govt wakes up and removes Subsidy without any form of awareness and enlightenment. You are leading over 170 million people (estimated), you have to communicate your key policies to the people. The people would always complain if they feel shortchanged by their Govt.
Now, under PMB we had the benefit of quietly ending subsidy because, the dark cloud of low price of oil had a silver lining that allowed the marketers the opportunity to bring in products at a price lower than the official rate. So Subsidy as we knew it ended.
So what is happening now?
To fix the current supply gut we are experiencing, the NNPC adjusted their price modulation to make it easier for Independent Marketers to bring in products without burdening NNPC & CBN for FX. They fixed the price to also make the industry profitable to attract investment. This strategy is brilliant but therein lies the Challenge.
Since this is a price modulation and not a removal of Subsidy the difference in price should have been staggered to reduce the resultant effects of this sharp increase. The Govt was just about to inject N350billion into the economy from the budget on Friday to stimulate the economy; you can say goodbye to the liquidity effect of that stimulus because it would be lost in the wave of inflation currently taking place since Wednesday.
We had already experienced an inflation that moved into double digits from the crashing of the Naira. We are already groaning from incessant power black outs, increase in prices of almost every consumed commodity.
Now we have to face a sharp almost doubled increase in prices across board. The inflation effect of this new policy is twofold:-
1. The pressure on the dollar in the black market will cause its own inflation like it did earlier when the naira tumbled to 330 - $1.
2. The doubling of transportation cost across board will also bear its own increase in prices and eventual inflation.
So prepare for double inflation.
The price modulation is brilliant but the timing and its execution is insensitive to the already burdened masses.
P.S: By already shooting for the top price marker, what happens when the price of crude rises to $60 and above which is likely to happen in the coming months? Then the Marketers we have enriched with very high profit margins from this price modulation would come back and say modulate upwards to accommodate increase in price of oil.
GOD help Nigeria.
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