Ending the subsidy regime: Matters arising
As I was saying, the decision to end the fuel subsidy regime was momentous. A decision this big would naturally invite what we call matters arising. These are issues thrown up when a new policy comes into effect and our comfort zone is invaded.
For instance, under the new regime, we are paying more for fuel and electricity at a time the coronavirus pandemic had forced us to earn less, much less. It is anybody’s guess how soon electricity supply would improve even as we pay much more for it. This is why labour is beating the battle drums in protest and might complicate matters if its leaders carry out their threat to call their members out on strike. Matters arising pose some critical challenges for the Buhari administration. They should not be ignored because the new policy comes into effect with teething problems.
The current government attempt to dichotomise electricity consumers on the basis of hours they receive light per day can only confuse the people. What, for instance, do you do with a situation in which people are still denied electricity for days and weeks at a stretch? It is not normal for people to pay more for what is not available.
These are some of the matters arising for which measured steps must be taken now to ensure that they do not scuttle the new deregulated regime. The mere deregulation of petroleum prices would achieve less than its intended purposes and could be sabotaged by the law of unintended consequences, leaving the sour taste of a hollow victory in our mouths. After all, we know that market forces can be manipulated in many ways. But the government must resist the temptation to have an overbearing supervision of the new system so we do not end up moving fast on paper but standing still in reality.
The fuel subsidy regime was a deeply entrenched system in the country. It lasted for more than a generation. Such a system does not give in easily to new policies. It would leave its detritus on the system. It was a policy based on the flawed logic that we are an oil-producing nation and we, as citizens, need to enjoy that status attained by our country by paying less for fuel. It was a political decision that never for once protected the people against the vagaries of government decisions meant to shore up the image of almost every administration.
Petroleum resources became the big gamble for every administration, military and civilian. But the people suffered the burden of frequent increased fuel prices and the cost of transportation and food. These invited palliatives to cushion the effect of increases in fuel prices. But nothing worked; we continued along the same path until the chickens found their way home and began to roost – to our collective shame and embarrassment. Whatever might be the pressure on the government, ending the subsidy regime must be made to work. By the way, if the oil refineries were working at even half their installed capacity, would any talk of subsiding our fuel prices?
Generator importers and fuel importers morphed into powerful cartels, able to sabotage all policies in electricity and the petroleum sector suspected of affecting their lucrative business interests. Surely, it would be unfair to blame the gods for the billions of dollars invested in energy and yet there is nothing to show for them by way of improved electricity supply. Buhari can force us to look inwards here by ending the importation of generators. The heavy investments in this vital sector of the national economy would become less opaque when the rich and the poor alike lose their comfort zone. And while the president is at it, he should tell us by way of facts, not political facts, how soon electricity generation and distribution would substantially improve. The economy would show no marked improvement so long as we cannot get the energy regime right. Paying more for electricity without electricity is a recipe for economic disaster.
That we all, governments, companies and individuals, depend on generators of all sizes from even third world countries, tells you something about the power of the generator cartel aided and abetted by men and women in the public sector who would rather reap from the agony of their fellow men and women than do right for their nation. Everything about the investment in electricity is opaque. The more you try to see, the less you are allowed to see. All these importers have tentacles in every federal administration. It would be unrealistic to think that the princes and the princesses of the system would simply accept the fate that has befallen them and walk into the sunset. They are likely to fight back in diverse ways by subjecting the people to unnecessary difficulties to make the government panic and advise itself to take us back to, to borrow from the bewigged community, the status quo ante.
The history of how our relationship with the precious crude oil is a history of scandal and embarrassment. We lived through the scandal and the embarrassment of an oil producing country, once the fourth in the league of nations blessed with crude oil, exporting its crude and importing the refined products at a heavy cost to itself for many years. We lived through the scandal of a nation with four oil refineries, none of which is or was producing at half of its installed capacity. And none of them now pretends to be producing anything. Enough, if you would excuse the cliché, is clearly enough.
Millions of dollars were wasted on the so-called turn-around of these refineries but nothing was turned around; we could only hear the turn-around experts laughing to the banks at the expense of our nation and ourselves. These refineries constitute an unnecessary waste in the system. But every federal government wrung its hands, wondering what to do with them. It is obvious that none of them is of much use now. No more money should be wasted on them in a so-called turn-around. The government can sell them off as scraps or leave them until thieves vandalise them and strip them of whatever they find useful and leave the carcasses standing there as monuments to a well-thought-out industrial policy that went awry in a nation not strange to good policies ending up in the rubbish bin.
In dealing with matters arising from the new policy, at least two steps recommend themselves. The first is a total clean-up of the petroleum sector. This, of course, is not going to be easy. But it must be done. Without fuel subsidy, the huge crowd of fuel importers who are given fuel import licenses because they are well-connected with import licence-issuers in government, will succumb to the natural law of lack of oxygen and thin out. There should be no fear that their getting out of the system would mean less imported fuel and possibly fuel scarcity. This is not likely to happen but it is something the NNPC would do well to take into consideration in managing the post fuel subsidy regime.
If everything were equal, this would be the time for the Buhari administration to set in motion the process for ending fuel importation over a given period of time. Nigeria must end the embarrassment and the scandal of an oil-producing nation being dependent on imported fuel. But all things are not usually equal. This is one good instance. Our oil refineries are moribund. You cannot programme a phased-out fuel importation while you are importing fuel.
But the government cannot leave matters as they are. Something has to give to make the new policy meaningful and serve the purpose it is meant to serve. As we wait for Dangote refinery and the two modular refineries in Bayelsa and Edo states to come on stream, NNPC can limit fuel import licenses to the major players on the field with the capacity and experience to import fuel and restrain market forces from going wild.