By Emmanuel Oladesu,
Nigeria’s obdurate petroleum tycoons have never missed any chance to exploit fellow citizens. They would rather make a mincemeat of fellow compatriots to make unholy money. They do not perceive fellow Nigerians as equals who deserve a decent life but as commodities that bring in cash, however dirty it enters their pockets. At the slightest opportunity, they bare their fangs for a pound of flesh of the hapless people for the filthy lucre.
This is what the fuel subsidy represents.
Currently, filling stations have become public enemies. Their owners are laughing all the way to the bank at the expense of hapless Nigerians – car owners and commuters. Marketers are mounting absurd resistance to an inevitable economic policy that has halted the fuel subsidy regime which enriched only the affluent and pauperised the hoi polloi. This is antithetical to patriotism and rational reasoning.
The result is the transitory morass.
For two decades, government on one hand and ordinary Nigerians on the other hand were locked in debates over the desirability of spending trillions of tax payers’ money on a policy that has largely benefitted a few. No bold steps were taken by successive administrations until lately. Even while benefitting maximally from the subsidy, occasional fuel chaos is unleashed by those who deliberately plunge the country into artificial scarcity.
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Over a decade ago, former President Goodluck Jonathan mooted the beautiful idea to end subsidy. But, there was shortage of will and capacity. His administration did not embark on an effective enlightenment of the populace on the compelling need to stop the economic drainage. Yet, experts continued to warn that the subsidy regime was unsustainable.
Two former Central Bank governors – Charles Soludo, now governor of Anambra State, and his successor, Lamido Sanusi – warned about the grave consequence of sustaining the subsidy wastage.
Sanusi said it was not sensible for Nigeria to budget N1.2 trillion for subsidy in 2021 when the budget for federal roads was N200 billion. The argument of the eminent banker was that for every $1 billion Nigeria spent on fuel subsidy, it was $1 billion against education, $1 billion from healthcare provision, $1 billion out of power, $1 billion drained from provision of infrastructure. He noted that what supporters of subsidy were saying was that for poor Nigerians, cheap fuel was more important than education, more important than healthcare, more important than stable power supply. Sanusi said if that pattern was maintained for 30 or 40 years, Nigeria would be permanently bankrupt.
Obviously echoing the then Kano prince, Soludo also advised the government to study the cases of successful subsidy removal and replicate them in Nigeria. He said it was necessary for the country to begin to mainstream the case studies and utilise the lessons learnt from those that worked and then replicate them. The Anambra State governor warned that if subsidy was sustained, the Central Bank would continue to lose money.
The three major presidential candidates – Asiwaju Bola Tinubu of the ruling All Progressives Congress (APC), Alhaji Atiku Abubakar of the Peoples Democratic Party (PDP) and Peter Obi of the Labour Party (LP) – were on the same page on subsidy removal. In different ways and varying degrees, they demonstrated a good grasp of the economy. They acknowledged that subsidy was killing the economy.
Describing subsidy as fraud, Atiku, who once chaired a committee on subsidy, said what Nigeria should do after removing it totally is to channel the gains back into the economy.
Obi, who spoke on Channels Television, described subsidy as an organised crime. The former Anambra State governor noted that the Muhammadu Buhari administration had set a terminal date for subsidy. He promised that if elected, his administration would not allow the subsidy drainpipe to stay a day longer.
The Nigerian National Petroleum Corporation Limited (NNPCL) has also expressed worry over needless subsidy. The corporation announced that the Federal Government was owing it N2.8 trillion cash arising from subsidy payments. Its Group Chief Executive Officer, Mele Kyari, recalled that since the provision of the “N6 trillion in 2022, and N3.7 trillion in 2023, NNPCL has not received any payment whatsoever from the federation”.
Indeed, former President Buhari’s administration made no provision for the contentious subsidy beyond this month. It is necessary to note that what President Tinubu did was to inform Nigerians that the pecuniary aid no longer existed.
The effort of the government is to prevent fuel shortage and lift the burden of subsidy without incurring adverse effects. But since resistance to subsidy removal was anticipated, there was the need to broaden the communication channels and enlighten stakeholders, particularly the organised labour, including drivers’ unions, on the immediate and transient effects, when the policy on subsidy removal is implemented.
Subsidy removal means that fuel price will go up and the burden will be shifted to ordinary people at bus stops and in the markets. That is why experts believe that a solid framework for palliative implementation and management should be fashioned out. Moreover, the palliatives should be a wide departure from past controversial, corrupt, shoddy and failed ones implemented during the COVID-19 period and others.
Also, the huge amount spent on petrol and diesel will again jack up the cost of production. It will become an albatross to the residue of the manufacturing sub-sector. It will serve as a disincentive to investment and stifle the drive for industrialisation.
It is believed that the Tinubu administration, perceived as a new government of the people, will move swiftly to mitigate the anticipated effects.
How did Nigeria come to this sorry state?
As the nation’s four refineries collapsed, Nigeria resorted to fuel importation. Under successive governments, it has been very difficult to properly maintain them for optimal production. Although billions of naira have been sunk into turnaround maintenance, there have been no respite. All the efforts have been in vain.
It is a paradox. Nigeria is the sixth largest producer of crude oil in the world. Ordinarily, the country should be savouring the big advantage. But while the Nigerian crude is exported, the refined products are imported. A huge amount accrues to the country through exportation of crude, but humongous amounts are expended on importation of the products for home consumption. The greater gain is enjoyed by the Western world. Nigeria actually incurs incalculable losses that arise from crude exportation. As crude is exported and not refined at home, other refined by-products, including gas, asphalt, and other petro-chemicals, are lost. Indirectly, there is also ineluctable job loss with revenue loss.
The arguments for removal of subsidy sound persuasive and convincing. No reasonable government can oppose the removal. The N60 trillion subsidy annual budget is unimaginable. Some have claimed that $850 million is spent monthly on subsidy. Some experts have even called for forensic investigation into this glaringly phony expenditure. Is it correct that 80 million litres are actually consumed daily?
There are other puzzles. What is the actual amount of crude lifted? How much is diverted or stolen? Why is it difficult to apprehend the thieves? How can the amount lost to theft be determined now?
Danger looms because the NNPCL has not been able to remit much revenue into the national treasury. Yet, as the nation groans under the weight of declining revenue and increasing budgets, the privileged few live big on the subsidy regime.
Subsidy, as it also appears, discourages necessary investment in the sector. If government subsidies, how can investors compete in an atmosphere of deregulation?
At a time the economy is on crutches, much is required to sustain subsidy, but only little is available. Nigeria has been borrowing to sustain subsidy, which is to the advantage of the barons. Many experts have expressed doubts about any sense in the subsidy payments. The soaring debt is denting the image of the country and, in the nearest future, Nigeria may not be creditworthy.
Today, the foreign reserves have been depleted. The Nigerian economy is less productive, despite its enormous human and natural resources. Many people wallow in abject poverty. Per capital income is always going down. Across the sectors, companies are downsizing. Citizens are losing jobs. Youths migrate in doves, causing serious brain drain.
The combination of the crises in the oil and power sectors has pushed Nigeria backwards. Unless the refineries are on their feet and erratic power supply becomes history, the country may continue to lag behind.
The immediate past administration had proposed to increase the minimum wage of federal civil servants. At issue is whether the states can also jack up the emoluments of their civil servants who are also vulnerable.
The adverse effects of subsidy removal have to be managed. The impact may be severe on the transport sector. Thus, a mass transit system to ease the cost of transportation is important.
Palliative is the usual response. But, what is required is a structural economic design, not the penchant for dishing out money.
A workable SURE-P, sincerely implemented and not sabotaged, is another good path to tread in order to assuage the economic throes that will arise from the subsidy removal. In the past, such measures never met public expectation.
The proposal targeting households for another social intervention is good. But there are certain impediments. Having a reliable database to effectively premise the implementation of the policy on is a challenge. How will 10 million households be selected?
The International Monetary Fund (IMF) has given a loan to Nigeria to deflate the effects of the subsidy removal. The country is to pay back in 25 years. The country should utilise it well. But there is need to understanding its implication: more debts are being accumulated for the future generation.
Currently, the national debt profile is put at $171.8 billion. Borrowing without restraint and optimal utilisation for desired results is counter-productive. Borrowing is meaningful only if the purpose is for infrastructural development that will yield short and long-term gains. This is why some experts have faulted the allocation of $53 million from the loan for logistics.
The major gains of subsidy removal would be the elimination of fraudsters who profit maximally from the scam and the loopholes associated with its implementation, and ability to save trillions of naira that can be channelled into productive and developmental projects for the benefit of all and sundry.
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