A CAREFUL ANALYSIS OF PRESIDENT TINUBU'S SUBSIDY REMOVAL POLICIES AS A FULFILLMENT OF BRETTONWOODS INSTITUTION REQUIREMENTS

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The United Nations Monetary and Financial Conference, held in Bretton Woods, New Hampshire, USA, in July 1944 resulted in the establishment of the Bretton Woods Institutions, chiefly the World Bank and the International Monetary Fund (IMF). In the years following World War II, these organizations were established to support global economic cooperation, stability, and progress. In addition to promoting high employment and sustained economic growth, the IMF also seeks to secure financial stability, ease international trade, and lessen poverty.by giving member nations with balance of payments issues cash support, assisting them in stabilizing their economies(World Bank).

The implementation of economic policy reforms, such as lowering government deficits, managing inflation, and enhancing economic efficiency and governance, are major prerequisites for support from the Bretton Woods institution. Conditionality is necessary because obtaining IMF aid may be contingent on fulfilling goals like cutting back on subsidies, raising taxes, selling off state-owned businesses, and strengthening governance and transparency(Bretton Woods Project, 2023).

Nigeria's economy has always been characterized by its heavy reliance on oil earnings, which have traditionally made up a sizable portion of the country's total GDP(Ihuoma, 2023). Notwithstanding its richness, the nation has continued to experience severe economic difficulties, including as inflation, budget deficits, and poor infrastructure. Subsequent governments have frequently used gasoline subsidies in order to address these problems, stabilizing prices and easing the financial load on the populace.

However, because of this subsidy, regimes have been vulnerable to corruption and abuse, economic inefficiencies, and fiscal instability, it has been the subject of severe criticism over time. The national budget has been depleted by subsidies, which has resulted in higher borrowing and hampered investment in vital areas like infrastructure, healthcare, and education (Omotosho1, 2019). In this regard, the World Bank and the International Monetary Fund (IMF), two important organizations created under the Bretton Woods Agreement to support global economic development and stability, have regularly spoken in favor of eliminating these subsidies as a component of larger economic reform initiatives. 

The administration of President Bola Tinubu declared in 2023 that fuel subsidies would no longer be provided. This was a contentious policy move that provoked intense discussion and demonstrations throughout Nigeria(Adeniyi, 2023). The elimination of subsidies was viewed as meeting the demands of the Bretton Woods organizations, especially the World Bank and the International Monetary Fund (IMF), who had long pushed for the deregulation of Nigeria's economy's downstream sector. As a participant in the Bretton Woods institutions, Nigeria has been under pressure to enact economic changes that will advance budgetary restraint, private sector growth, and macroeconomic stability. One of the most important aspects of these reforms was the elimination of fuel subsidies, which would lessen the government's budgetary burden while boosting private investment and energy sector efficiency(Oyelade, 2022). Nevertheless, a number of Nigerian social groups, including labor unions, civil society organizations, and opposition political parties, opposed the policy decision. They claimed that taking away the subsidies would make poverty and inequality worse and make things more difficult for regular Nigerians financially.

The purpose of this study is to evaluate President Tinubu's policies regarding the withdrawal of subsidies critically in order to comply with the standards of the Bretton Woods Institution. It will examine Nigeria's short- and long-term economic and social ramifications, as well as the reasoning behind the policy and how it is being implemented. Through an analysis of these facets, the research aims to furnish a thorough comprehension of the efficacy of the policy in accomplishing its declared objectives and its congruence with the wider purposes of economic reform and development, which are promoted by the IMF and the World Bank.

1.2 Statement of the Problem

Nigeria's economy has long been plagued by dependence on oil earnings, wasteful state spending, and budgetary imbalances. The government's massive gasoline subsidy program has been a key component of its economic policy, which aims to lower the cost of living for its people (Omotosho, 2019). But this subsidy system has grown more and more unsustainable, causing significant budget deficits, taking funds away from important development initiatives, and encouraging inefficiency and corruption. Subsidies may give consumers some temporary respite, but they have had a negative long-term economic impact. Government funds have been depleted by subsidies, which has resulted in insufficient spending in vital areas including infrastructure, healthcare, and education. Furthermore, by discouraging private sector investment in the energy sector, the artificially low prices have stifled competition and innovation. (Ihuoma, 2023)

The removal of fuel subsidies has been a contentious issue in Nigeria, deeply intertwined with economic stability and social welfare. President Bola Ahmed Tinubu’s decision to eliminate these subsidies aligns with broader economic reforms often advocated by Bretton Woods institutions, such as the International Monetary Fund (IMF) and the World Bank. In order to comply with the demands of the Bretton Woods institutions (Bretton Woods Project, 2023), President Bola Tinubu's administration has instituted fuel subsidy reduction measures; nevertheless, there is disagreement over the effects of these policies on the Nigerian economy and society. The immediate effect of subsidy removal is an increase in fuel prices, which can lead to higher transportation costs and general inflation. This inflationary pressure can erode the purchasing power of consumers, particularly affecting low-income households. However, the long-term economic benefits are expected to outweigh these short-term challenges.

The focal point of this research is determining if President Tinubu's measures to remove subsidies, which are motivated by the demands of the Bretton Woods Institutions, will adequately solve Nigeria's economic problems without placing an excessive burden on the people, and the potential impacts on Nigeria's economy and populace.

1.3 Objectives of the Study

This study's main goal is to evaluate President Bola Ahmed Tinubu's plans to remove subsidies in order to comply with the standards of the Bretton Woods Institution, with a particular emphasis on the policies' effects on Nigeria's politics, economy, and society. The study specifically seeks to accomplish the following goals:

Examine the main points of President Tinubu's plans to remove gasoline subsidies and see if they comply with the demands of the Bretton Woods institutions. 

Examine the short and long-term impacts of subsidy elimination on various population segments.

Assess how President Tinubu's policies regarding subsidy elimination are in line with the conditions and proposals for economic reform put out by the World Bank and the IMF.

Determine the obstacles and restrictions posed by the policies aimed at eliminating fuel subsidies in tackling the systemic problems within the Nigerian energy industry.

1.4 Research Questions

What are the main points of President Tinubu's fuel subsidy reduction programs, and how do they comply with the Bretton Woods institutions' requirements?

How will the elimination of subsidies affect various demographic segments in the short and long terms?

How do President Tinubu's measures for eliminating subsidies compare to the conditions and proposals for economic reform put out by the World Bank and the IMF?

In tackling the structural problems in the Nigerian energy industry, what are the obstacles and restrictions posed by the policies aimed at eliminating fuel subsidies?

1.5 Significance of the Study

This research is being conducted at a time when interest in the subject is high. Consequently, this research will add to the current discussion over how international financial institutions influence economic policies in developing nations. The study contributes to the body of knowledge already available on subsidy removal policies in developing nations, especially when considering Nigeria's economic difficulties and need for foreign financial help. This study is significant because it sheds light on the expenses and effects of eliminating gasoline subsidies on overall pollution, particularly for low-class individuals.

The focal point of this study is the examination of compliancy of President Tinubu’s subsidy removal policy to the demands of Bretton Woods Institution while seeing from the prism of both short and long term impacts of this policy. This study will make explicit the economic reforms proposal of Bretton Woods Institutions and how subsidy removal policy of President Tinubu is in alignment with this proposal. This study will propose a summary of if this avowed policy has amidst it obstacles tackled the systematic problems within the Nigerian energy industry.

1.6 Scope of the Study

Important topics including time span, policy analysis, economic impact, and alignment with Bretton Woods Institution standards are all specifically covered in this study. The study's primary focus is Nigeria, with a particular focus on the effects of the federal government's policy to remove fuel subsidies on the country's economy and society. The study's primary focus will be on the years from May 2023, when President Tinubu took office, until May 2025. Special attention will be paid to the implementation and immediate effects of the policies aimed at eliminating subsidies during this time. The study will examine President Tinubu's reasoning for eliminating gasoline subsidies in particular as part of larger economic reforms.

The study will also evaluate how the elimination of subsidies would affect government revenue and spending trends. It will do this by tracking changes in inflation rates, foreign currency reserves, and other macroeconomic variables that are impacted by the elimination of subsidies. The research will additionally examine the degree to which Nigeria's policies for eliminating subsidies are in line with the suggestions and requirements for economic reform issued by international financial institutions, mainly the World Bank and the IMF.

1.7 Limitations of the Study

The study may have missed longer-term consequences or more significant structural changes brought about by subsidy removal policies because of its emphasis on immediate implications. The analysis of political dynamics and stakeholder reactions might present some challenges, as varied opinions and sensitive political contexts may be difficult to be accessed. The availability and accuracy of data from governmental agencies, international organizations, and other pertinent stakeholders are critical to the study's conclusions.

A study's examination of stakeholder reactions, public opinion, and political dynamics may be impacted by political sensitivities or biases present in the information sources or in the access to other points of view. Without taking into account any other policies or variables that might affect the efficacy of the policies, the study assesses the effects of policies aimed at eliminating fuel subsidies in isolation. The economic realities of the era in which this research is being done should also not be overlooked.

1.8 Research Methodology

This study uses a research technique that combines descriptive and historical methodologies to assess President Tinubu's subsidy removal policies. The descriptive approach concentrates on providing accurate data and characterizing the traits and effects of subsidy removal policies, whereas the historical approach looks at how the policies have changed over time and their historical context. 

The analysis is based on previously published works, reports, and data from reliable sources, such as government papers and documents, World Bank and International Monetary Fund reports, academic books and journals, newspaper articles, and internet publications. The study looks at the political, economic, and social aspects of the historical setting in which the policies removing gasoline subsidies were put into place.

1.9 Definition of Terms

The Bretton Woods Institutions: These is a pair of international organizations that were established in 1944 as a result of a historic agreement reached in 1944 in Bretton Woods, New Hampshire, USA, by 44 countries to advance economic stability and collaboration on a worldwide scale.

Subsidy: A subsidy is a kind of financial assistance that is frequently given by the government or an organization with the intention of assisting particular economic sectors, enterprises, or social groups.