THE market system has its own rules. Though everyone is permitted to do whatever he or she wants so far as it is according to the dictate of monetary advantage, there are no absolutes. The attraction of gain, more than the appeal of tradition or censure of authority, guides majority actions. In the petroleum subsidy conundrum it seems government wants to behave like the headmaster to bully the market. The idea of buying and selling crept into the fuel supply situation in the country when successive military regimes neglected the servicing of the nation’s refineries while population increase shot up domestic demand for refined petroleum. And as it happens in a market system, it became near impossible to shut out middle men and their activities most of which tend towards profiteering.

As the price of oil in the international market shot up and domestic consumption increased, government decided to keep the price of the premium motor spirit (PMS) especially, within a reasonable ceiling. This approach of interfering with the pull and push of demand and supply is what has come to be known as subsidy. It entails government supplying the differential so as to ensure profit for the marketers (suppliers) and accommodate the purchasing power of its citizens (demand). With time, this intervention in the interplay of market forces has proved so hard for government to bear.

Many commentators complain that they do not know how and why the cost of subsidy ballooned from the N300b that President Olusegun Obasanjo spent to N1.3trn after President Goodluck Jonathan’s one year in office. None of these analysts was able to factor in the increase in population and personal wealth available to the citizens. How many families, for instance, now have multiple cars?

Accurate statistics are seldom generated in the country. Thus what has been a constant refrain is the deleterious effect of corruption. That is why it is often stated that when Obasanjo left office in 2007, the country had $23b in the Excess Crude Account (ECA) from its zero balance in 1999. The question is then posed, how come that by January 2012 the ECA account came to zero balance? The plausible suggestion becomes that “it must have been squandered on oil subsidy”

It has never been doubted that Nigeria is the biggest producer of oil in Africa. But what is shrouded in doubt is the parity of the prices of the product in the downstream sector and the international market. The haze in pricing coming from fluctuation in supply and consumption, compounds the continued government interference with the market system. Faced with this unending bug, the immediate past administration of President Jonathan, decided that the best way to clear the cobwebs about fuel subsidy was to stop it. Four years ago, the government insisted that “there is nothing Nigeria can do about the removal of fuel subsidy as all arrangements have been put in place to implement it.” Jonathan explained that his government tarried awhile in the implementation of subsidy removal “to carry along stakeholders.”

The former president was later to note that those opposing the removal were those planning to bring down his administration. It was also discovered that instead of benefiting the poor as was popularly assumed, the subsidy payment was making the rich, richer. When the federal government moved against further payment of subsidy, the action triggered nationwide protests that led to the death of seven persons. The government discovered that indeed those who wanted to supplant the administration mobilized the street protests.

But even when many citizens saw reason with the government, they claimed that the implementation was ill-timed. To make matters worse, the Turn-Around-Maintenance (TAM) of the nation’s four refineries in Port Harcourt, Warri and Kaduna was very slow in bearing fruits. While the lag continued, illegal bunkerers, pipeline vandalism and dubious importers fed fat on the skewed supply system. Efforts by the government to transform the country in the face of economic realities were defeated by politics of power and control. But the fact remained that the burden of subsidy was too heavy for the shrinking income of the nation to bear.

The lopsided wealth distribution between the South and North of Nigeria helped to diffuse the sound reason that subsidy does not favour the poor. The northern part felt that since it harbours a greater percent of the nation’s population of the poor, removing subsidy would make life severe for its people. Those in the commanding heights of policy formulation and implementation waved the banner of that narrow reason to stand against subsidy removal.

Now there is a new administration on the saddle and the role reversal has brought about new thinking that government cannot tackle infrastructure development unless it removes subsidy on petroleum products. The naysayers have turned to advocates and the refrain has become that a leadership that was less prone to corruption has taken charge. But the body language of the government does not give much confidence that it understands the issues or even that it is confident that the action it plans to take would not rob off negatively on its stock of goodwill with the people.

This lack of surefootedness has given rise to policy confusion. In one breath, the government says it wants to remove subsidy to deregulate the downstream sector of the industry and in another it wants to control the pump price of oil even as it lacks capacity to be the sole importer/supplier of petroleum products. Based on this confused policy standpoint, independent marketers, especially importers of petroleum products feel adamant to import. To worsen matters, the Department of Petroleum Resources (DPR) goes about harassing private businessmen as if the country has suddenly gone socialist. The marketers are saying their selling price is determined by the price at which they purchase at the depots.

Citizens are nonplussed as life promises to be hard. Government is at a big loss to explain to the people what it plans to do and how it wants to go about it. Lacking the boldness to confront the truth, the Managing Director of the International Monetary Fund (IMF) was invited to say good things about Nigeria’s economy and help retain public confidence in the new administration. Ms Christine Laggarde, in delivering a positive economic diagnosis of the country’s fiscal health unwittingly rebutted the claim that the economy went kaput under the immediate past administration.

The IMF boss did not say anything new from what the past administration wanted to do four years ago. Subsidy should go! But the tricky thing about subsidy removal is that the federal government lacks courage or conviction to do the needful out of fear of a possible backlash. Prices would go up, those with capacity to import should import and sell at a price that guarantees them fair return on their effort. That is the dictates of the market system. Anything short of that amounts to retaining the lies that have kept the nation’s economy prostrate. A command economy cannot find space in the present globalized financial system.

The only protection available is for Nigeria to refine the oil it needs to meet domestic consumption. Short of that full deregulation of the downstream oil sector should be implemented to stem the perfidy on subsidy. Furthermore, the Nigeria National Petroleum Corporation (NNPC) should live its mandate fully and tackle the present supply challenges of oil in the country.