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Politics of fuel subsidy, scarcity and poor leadership

By Guardian Nigeria
07 March 2022   |   4:10 am
President Muhammadu Buhari took the nation by surprise recently when he unveiled another round of overseas’ travels amid biting fuel scarcity and attendant crisis nationwide.

[FILES] Fuel Scarcity

President Muhammadu Buhari took the nation by surprise recently when he unveiled another round of overseas’ travels amid biting fuel scarcity and attendant crisis nationwide. Buhari, who doubles as the Minister of Petroleum, has not shown sufficient empathy to the plight of Nigerians. It is scandalous that the dirty fuel episode happened; it is most ludicrous that the knock-on effect has endured for a month while the president turns a blind eye. But beleaguered Nigerians deserve more than a wash, rinse and repeat approach to complicit leadership and the energy crisis as a whole.
Curiously, what started as an error of judgment in methanol threshold that is permissible in petrol has snowballed into the old winding narrative on fuel subsidy and another upward adjustment in pump price. After all, as queues at filling stations get longer across states, with tension and desperation heating up in the sun, consumers are settling for the black market rates. But the question is: where is the Commander-in-Chief and the Minister of Petroleum? Why is no one taking responsibility for the avoidable hardship on the general public? Why is the sole importer of petrol – the NNPC – opaque, insincere, all talks without remedial actions? At this time of scarcity, the petrol marketers are also pushing for a share of the subsidy’s supplementary budget of N2.557 trillion! Who is on the side of poor Nigerians?
It is clear that the laid-back disposition of the current administration is at the heart of the perennial energy crisis and why subsidy has remained an albatross on the government that promised change. But besides the administration’s floundering, Nigerians should brace up for the long-haul that looks beyond messianic leaders but enduring institutions. The general public should realise that fuel subsidy may not hold for too long even though the government is worried about the protests that may arise from its removal. The next administration after Buhari has its first problem to tackle – fuel subsidy. Therefore, Nigerians should be on the lookout for credible candidates and their promises on subsidy, especially for obvious reasons.

Most of the arguments for the removal of fuel subsidy have always bordered on the need to free resources for education and healthcare and take necessary steps towards long-needed reforms, since the country can no longer sustain the cost. Despite the validity of the arguments against subsidy, the legitimate criticism against the Nigerian government is that it has done a poor job in planning for the subsidy removal and in communicating the huge costs of the fuel subsidy and the benefits of its removal to the population. Amid trust deficit, the public perception is that of a government binging on corruption, lacks the capacity to implement compensation programmes and has not made good its promises over the years. And in a country with poor electricity supply, most of the fuel consumed is for generating sets in many households. At N160-N165 per litre presently, the majority of Nigerians are barely surviving. So, what will be their lot when prices and inflation soar without a buffer?
Ten years after protests against petrol subsidy removal empowered the present ruling party, which then was leading the opposition against the Jonathan administration, Nigeria appears far from the long-needed reform since the country has failed to make refineries work. Like 2012, the arguments remain the same 10 years after, with the government stating that the removal of the heavy subsidy will free up funds for other public services, including health and infrastructure projects and that the liberalisation of the fuel industry will benefit the economy.
Indeed, the socioeconomic research firm, SBM Intelligence, in its report titled: “Growing fuel prices and transport costs: Which way Nigeria,” stated that the costs of fuel subsidy in Nigeria increased by 890 per cent over a five-year period (2017-2021) in Nigeria even though fuel prices have only increased by 12.1 per cent. As oil nears $120 a barrel, the Minister of State for Petroleum Resources, Timipre Sylva, gave another reason why Nigeria could not celebrate the rising prices of crude oil. He said the country was unable to meet the oil production quota given to it by the Organisation of the Petroleum Exporting Countries (OPEC). At 100 million litres a day, Nigeria’s subsidy regime is becoming unbearable with higher oil prices. Already, state governors are feeling the heat in the monthly allocations from the Federation Accounts Allocation Committee (FAAC), while continued borrowings to service the government’s expenditure mount pressure on earnings. On the other hand, the fear of inflation, often considered as the enemy of the common man, and waning trust in the government’s spending plans equally make it difficult for the government to win public appeal for subsidy removal, hence the deferment to another administration.
With the coming elections, Nigerians will see politicians use fuel subsidies to win or maintain popular support for their regimes—and sometimes those subsidies will become crucial for their political survival as seen in previous administrations. At the same time, they too often defer needed reforms toward sustainability and diversification. Between 2006 and 2019, efforts to reduce or eliminate fuel subsidies led to protests in at least 24 countries. In a few of these cases—such as the gilets jaunes (“yellow vests”) movement in France and mass protests in Ecuador that temporarily forced the relocation of the government—fuel subsidy-inspired movements have threatened to topple governments in their entirety. It is, therefore, perhaps unsurprising that attempts at fuel subsidy reforms have been halting and that fuel subsidies have proven resistant to change, despite the compelling economic evidence against them.
From the foregoing, the situation is delicately poised for any administration. But Nigeria urgently needs leadership that is clear-headed and courageous enough to take the bull by the horn, and with sincerity of purpose that the public can trust. Without accountability in oil production and consumption, it is time this administration, or the one after it, sold the refineries. Pouring billions of naira into the refineries for turnaround maintenance or rehabilitation as the case may be now, has not achieved the desired results and may never happen. Why continue the same thing all the time and expect a different result?
The government needs to purge the petroleum industry too. Nigeria should have accurate figures for fuel consumption daily. Even the Senate President, Ahmad Lawan and a majority of Nigerians do not believe we consume 100 million litres daily. Why did the racket continue without a thorough probe?
As far back as 2016, Dangote Refinery had said it would be subsidy-neutral. The assumption that a private refinery will solve the country’s subsidy problems is rather misconceived and mischievous. Dangote can be in business refining 650,000 barrels a day, yet there will be shortages in the country, if the law and policy are not right. The country can no longer afford to depend on importation of fuel for its daily existence. It is time to embrace energy security policies and implement them.
The Buhari-led administration has not shown much commitment in that regard. Unfortunately, it has passed the buck to the next administration. While we wait for 2023, the corruption behind fuel subsidies needs to be properly addressed. The removal of the fuel subsidy – if successfully implemented – creates the space for Nigeria to finally develop refinery capacity and consequently increase its potential revenue from the oil sector and create jobs by supporting other sectors.
Buhari has very few months to make history beyond signing the Petroleum Industry Act (PIA). He needs to fix the rot and corruption in his ministry. Beyond the importation of adulterated fuel, subsidy is at the heart of the present fuel scarcity crisis. Everyone wants a share of the largesse. After all, a supplementary budget of N2.557 trillion for subsidy needs to be spent! For Nigerians, fuel subsidy will have to go sometime in the future before the nation goes entirely bankrupt. The sustainable inroad begins with getting it right with leadership and a reason the next general election matters the most.