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Fuel subsidy: Good politics

By Ray Ekpu
08 February 2022   |   4:15 am
The decision by the Federal Government to postpone the scrapping of subsidy on petrol is a good political decision. Even if the government chooses to deny it, the truth of the matter is that if there had been a strike...

Fuel Pump PHOTO: istock

The decision by the Federal Government to postpone the scrapping of subsidy on petrol is a good political decision. Even if the government chooses to deny it, the truth of the matter is that if there had been a strike in the 36 states and Abuja as Labour had planned there would have been both an earthquake and a tsunami combined. But this is simply the equivalent of postponing the evil day. The day any government in Nigeria decides to remove petrol subsidy in one fell swoop there will be wahala except appropriate steps are taken to cushion its ruinous effect on the nearly 100 million extremely poor people who are living under poverty line.

As I said earlier it is a good political decision because the country is at the edge of the precipice now with terrorists, bandits, arsonists and armed robbers having a field day. And with Nigeria, the poverty capital of the world, going through severe pains as it nurses the wounds that have weakened this sleeping giant, a nationwide strike would have been worse than the EndSARS revolt that didn’t even cover the entire country but jolted the government unsparingly.

The Federal Government has decided to shift the decision on petrol subsidy for 18 months. By the end of 18 months from now the Buhari government would have been dead and out of our sight. Muhammadu Buhari would have returned to his hometown, Daura to look after his cattle and enjoy the company of his grandchildren and would be wondering what history will say of him and his administration in the months and years ahead.

Since his receipt of the baton of leadership from President Goodluck Jonathan in 2015 President Buhari and his team have announced subsidy removal four times. Four times they have met with a brick wall and had had to make a quick retreat to an as-you-were position. Removing subsidy on petrol is not an easy decision to take. Subsidy was removed on kerosene without the sky falling because people who use kerosene can use firewood and candle if they can’t afford kerosene so there was no revolt. Subsidy on diesel was removed and there was no riot or revolt only undecipherable murmuring. That was because diesel is largely used by companies and the well-off so they could take the pain inflicted on their wallets by the increase in price. Petrol is a different matter altogether. It is used by motorists, buses, kekes, okadas and generators including the I-better-pass-my-neighbour variant. So almost everyone, rich and poor, rural and urban dweller, is a consumer of petrol or of the service it provides. If you have a car you need petrol to run it. If you ride a bus you pay for the petrol that runs it. If you take keke or okada the rider charges you what he thinks will cover the price of petrol that makes the vehicle run. So petrol is everybody’s favourite fuel for domestic and industrial use.

In the last several years, Nigeria has been borrowing money from an assortment of sources to meet its infrastructural obligations. As at June last year the government’s debt profile was about N29.46 trillion. The budget deficit in 2020 was N5.6 trillion. This huge deficit must have tempted the government into thinking that the easy solution was the removal of subsidy on petrol. According to the NNPC, fuel subsidy is about N1.8 trillion annually. Recently, the NNPC presented a proposal of N3 trillion to the Federal Executive Council (FEC) as the bill to meet the funding provisions of the incremental petrol subsidy. As petrol subsidy is now to be retained the government has hinted that it will have to resort to more borrowing to keep the government running. Even at the present debt level, the government has received very harsh criticism for not utilising available alternatives instead of piling up debts for future generations. Government apologists are quick to tell us that government is under-borrowing and hasn’t yet reached a dangerous threshold.

The amount of petrol consumed in the country has been a subject for debate for years. The NNPC says that 42 million litres of the 102 million litres (41.8%) of the subsidised petrol to Nigerians is smuggled out of the country. The Managing Director of NNPC, Mr Mele Kyari, said recently: “We unwittingly subsidise fuel for the whole of West Africa.” That might be so because petrol sells for about a dollar per litre in such neighbouring countries as Ghana, Niger, Mali, and Cameroun while it is sold for less than a dollar per litre in Nigeria. But why is smuggling not checked when Nigeria had invested N20 billion in technologies to eradicate smuggling and we have an army of security personnel at our borders? Besides, as I have argued before in my previous columns no one can smuggle large quantities of petrol from Nigeria to other countries using bush paths or NADECO route. Impossible. So if those paid to check smuggling choose to cooperate with smugglers they should be held accountable.

The House of Representatives has raised a team of 28 members to investigate the level of petrol distribution and consumption. This should enable it to determine the true and factual subsidy level. No one believes the figures thrown around on the distribution and consumption level for petrol by the authorities. Those figures look bogus and grossly inflated because each time the price of petrol goes up the figure consumed should come down. Besides, the disposable income of Nigerians cannot be going up in an economy that has been limping for years. We have fallen into a recession twice in the last five years. Unemployment figures have been going up, not down. Hordes of people have been thrown out of jobs even by banks that make obscene profits. Some state governments are owing their workers’ salaries for months. So where is the huge petrol consumption coming from? Obviously from the fertile imagination of the beneficiaries of this mago mago business which is transacted in a very, very opaque fashion.

Neither the governors nor Labour believes those figures because there is a patent lack of transparency in how those figures are arrived at. The Chairman of the Nigerian Governors’ Forum and Governor of Ekiti State, Dr Kayode Fayemi, is asking Labour to work with governors to determine petrol consumption. He says, “we need a partnership with the NLC to confront the challenges of what the NNPC is about because there is a lot of fraud in the consumption and distribution figures that the country is getting and we can only move forward if the NLC engages all those who are knowledgeable in the field such as PENGASAN to conduct a thorough research into the sector before any further action is taken on subsidy.”

It is good that the House of Representatives has set up a committee to investigate the touted figures. For a long time we have been fed with what appears to most people inflated figures on which we pay humongous sums of money as subsidy. A thorough investigation by the House of Representatives should replace the present fogginess with certainty. The calamity is that as the price of petrol goes up the so-called subsidy increases. Right now the price of oil has hit $90 per barrel. That situation ought to bring joy to us an oil producing country but the reverse is the case because we export crude oil and import refined petroleum products. This sort of anomalous situation can only happen in a setting where people are either corrupt or incompetent or both. For several years our four refineries in Port Harcourt, Warri and Kaduna have been largely idle, producing little or no refined petroleum products. While the refineries remain unserviced or unsold and building of new refineries remain a distant dream, the petrol importers and their corrupt collaborators are milking the country dry with fake figures.

There are only two solutions to the question of the four old refineries. We either sell them or we maintain them efficiently. We have done neither in the last six years. Also, we have not thought of building new refineries to support the aged ones. Petroleum products are a strategic asset for any country that no government should toy with. But unfortunately we are toying with ours because we don’t seem to care. We now seem to be putting all our eggs in the Dangote basket as if we want Alhaji Aliko Dangote to take charge of the refined product needs of the country for the government. Dangote is doing well by building a huge refinery that will fill our refined products needs but no one expects him to sell his refined products at a less than commercial price because he is not Father Christmas.

By now a forward-looking government would have established one or two new refineries, which could export its products to its immediate neighbours and also meet the consumption needs of its population.

The government that will come into office in 2023 has the fuel subsidy problem waiting to welcome it. It will find it difficult to rub off subsidy as soon as it comes in otherwise it will have a very short honeymoon and a very nasty welcome. People who are opposed to subsidy refuse to acknowledge that other countries such as the United States and European countries have subsidies especially on farm products. They do so to ensure that their people benefit from the benevolence of their governments. There is nothing, absolutely nothing, wrong with subsidy. It is part of the responsibility of a caring government to take care of its citizens. That is why some of them have several social welfare programmes that are well defined and transparent in addition to subsidising various farm products. Here, there are hardly any worthwhile benefits that our citizens gain from our governments. They just know that the governments are there in some distant places far removed from their lives, places where they cannot reach. So what are we an oil producing country for if our people can live on the banks of a river and wash their hands with spittle?

QUOTE
The government that will come into office in 2023 has the fuel subsidy problem waiting to welcome it. It will find it difficult to rub off subsidy as soon as it comes in otherwise it will have a very short honeymoon and a very nasty welcome. People who are opposed to subsidy refuse to acknowledge that other countries such as the United States and European countries have subsidies especially on farm products. They do so to ensure that their people benefit from the benevolence of their governments. There is nothing, absolutely nothing, wrong with subsidy. It is part of the responsibility of a caring government to take care of its citizens. That is why some of them have several social welfare programmes that are well defined and transparent in addition to subsidising various farm products.

QUOTE
Removing subsidy on petrol is not an easy decision to take. Subsidy was removed on kerosene without the sky falling because people who use kerosene can use firewood and candle if they can’t afford kerosene so there was no revolt. Subsidy on diesel was removed and there was no riot or revolt only undecipherable murmuring. That was because diesel is largely used by companies and the well-off so they could take the pain inflicted on their wallets by the increase in price. Petrol is a different matter altogether. It is used by motorists, buses, kekes, okadas and generators including the I-better-pass-my-neighbour variant. So almost everyone, rich and poor, rural and urban dweller, is a consumer of petrol or of the service it provides.