By Anthony Agbo
Nigeria has been confronted with the economic quagmire of petrol subsidies for the past 20 years. Though the programme dates back to the 1970s, the fact that it has since become a conduit for the corrupt few around the corridors of power has been concealed by our stupendous national wealth, which eventually yielded to the mismanagement of successive governments. With our national wealth depleting faster than a rocket set for orbit, it became clear that this programme was unsustainable.
Regardless of this obvious fact, many continue to hammer on the dangers of abolishing the programme and the possible negative impact on the ordinary person on the street. These doomsayers have big mics, too, and they talk straight to the nerves of ordinary Nigerians who swallow their bait hook, line, and sinker. The result has been the engineered uproars we see each time the matter is discussed.
Looking across the different
interest groups, I have observed that regardless of the perceived benefits to
our society’s various facets, marketers and ordinary Nigerians need help to
account for these benefits. Instead, it has been more about the fear of
removing the subsidy leading to a worse situation than we already are. In other
words, the focus has been on averting a worst-case scenario, despite no
apparent benefits.
With the subsidy, government is
supposed to keep prices low and ensure that the product is available.
Government was supposed to pay the difference between the landing cost of the
product and the pump price to marketers to achieve a desirable
price.
On the contrary, government has paid huge amounts, reflecting increasing consumption patterns, but the product is scarce and mostly available in black markets. Marketers also complain of unsettled waybills by government, and even where they are settled, the numbers still need to be more encouraging. So, one is led to ask the question: “Who really benefits from this programme?” Subsidy as an idea is good but subject to all the conditions for successful implementation at work.
The government’s
capacity to conveniently carry the subsidy burden has to be clear, and
implementation has to be transparent. This is important because if you operate
a free enterprise economy and attempt to set prices simultaneously, you will
end up creating a black market in the system. To effectively implement a petrol
subsidy, government must be able to continue to provide an alternative
incentive to investors. Otherwise, they will find alternative means of getting
motivation for their investment, as we have seen in the inordinate volume of
products pouring through our borders to neighbouring countries.
I can hardly recall when we had
petrol available in filling stations at a regulated price for six months
uninterrupted. Over the years, the black market has replaced the official
petrol market. Many petrol station operators close their stations during the
daytime and sell to black market operators at night. The only filling stations
you can go into, buy fuel, and go out just like that, are in relatively remote
locations that sell at prices slightly lower than the black-market price.
This is because marketers claim that
government has not lived up to its end of the bargain and is not providing
adequate cover for the losses they incur by selling at a regulated rate; yet we
read the humongous amount government claims to be spending to subsidise the
product year after year.
The prevailing black market
situation also meant that the average Nigerian bought petrol at N350 instead of
the N165 intended by government. At the Government Accountability Series
earlier this year, the Minister of State for Petroleum, Timipre Sylva, was
quoted as saying he would not feel bad buying fuel at N300 a litre, alluding to
a possible deregulated pump price around that corridor.
Also, in a recent presentation
to the National Assembly, the Minister of Finance, Zainab Ahmed, estimated the
current subsidy amount to be N245. Add this to the official pump price at the
time of N165, and you will arrive at a deregulated price of N410. Many
Nigerians have already been buying fuel in the price range of N300 – N450 for
most of 2022 and early this year. So, I ask: What are we afraid of? The
potentially worse situation we fear so much is already here.
So, if government removes the
subsidy today, what difference will it make? All things being equal, the
product’s availability will improve if players are permitted to source products
independently. More players will also encourage competition, lowering prices in
the medium to long run. Secondly, the funds siphoned through the subsidy can
now be redirected toward improving other sectors of the economy, namely:
health, education, transport, and security. These sectors have far greater and
more widespread benefits for the ordinary person than the subsidy.
Thirdly, it will mean one less
motive for forces that have kept our refineries from functioning for many years.
If government truly wishes to remove petrol subsidy, it would embark on an
aggressive national orientation campaign to educate the common man, who has
been used as an instrument by the real beneficiaries of this fraud to agitate
whenever removal is contemplated.
But this is difficult for
government since any credible campaign will also indict them. I remember the
War Against Indiscipline campaign of the 1980s and its impact on society.
Though it was a pre-social media era, the message got to every nook and cranny
of the country, and it received massive buy-in from the populace until another
coup truncated the process. Today, such a campaign will not only be far
cheaper, but it will also be quicker and easier to achieve. People need to know
their real enemies and be well guided to make the right decisions for
themselves and their country.
Very few people are exposed to
and understand the workings of the Nigerian economy as well as the governor of
the Central Bank. At a forum organised to debate the removal of fuel subsidies
in Lagos in 2012, a distinguished former governor of the Central Bank of
Nigeria, Sanusi Lamido Sanusi, exposed the fraud that has gone on for far too
long in the petrol subsidy. He also warned of the dangers facing our country if
we do not retrace our steps. Of course, we carried on as if he did not make
sense. Almost 11 years later, all his predictions have come true, and we still
behave as if no lessons have been learned.
Following the passage and
signing into law of the Petroleum Industry Act in August 2021, the Buhari-led
government announced an end to petrol subsidies to take effect in January 2022.
They retracted and announced an 18-month suspension that will terminate in June
2023. Even as there is a seeming build-up of this dated approach, the
reputation of the government (both past and present) on the matter leaves one
with little or no faith that this will eventually materialise. Government’s
excuse for going back on the initial take-off date of January 2022 was the 2023
elections and the national population census.
They claim that implementing the
policy at the same time these activities are taking place is the wrong timing.
Given the notoriety of handling petroleum subsidies so far, my understanding of
election time as wrong timing is why many feel it must be removed by all means,
like yesterday. Notwithstanding all the noise about the $800 million World Bank
loan preparatory to removing petroleum subsidies, I can’t help feeling that
while the drawdown on the loan is as inevitable as day and night, the goal post
for the actual abolishment of subsidies will shift yet again. I hope they prove
me wrong.
*Agbo, a banker and certified
accountant, is the CEO of UNIGAS Global Energy Ltd., wrote via: anthonyagbo@gmail.com.
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