By Luke Onyekakeyah
Ordinarily, the removal of subsidy on energy sources – petrol, kerosene, diesel and electricity would free up billions of naira for government to plow into other social and economic needs such as infrastructural development, give incentive for domestic refineries to produce more petroleum products, reduce the country’s over dependence on imported fuel, boost the economy and create jobs. Some of these are very contentious in the Nigerian context.
This line of thinking may be possible for stable economies and not one that is deep in crisis like Nigeria. Truth is that the removal of subsidy is an ill wind that could collapse the beleaguered and fragile economy of Nigeria.
Nigeria’s battered economy is struggling to remain afloat under
the heavy weight of abrasive corruption caused by miss-governance. There is
endemic epileptic power supply situation, dilapidated roads infrastructure,
insecurity, etc. There is no functional economy anywhere in the world where
energy is not subsidized to boost production and social wellbeing of the
citizenry.
Energy availability is the backbone of a vibrant productive
economy. One cannot expect investors to set up manufacturing firms and at the
same time produce the energy needed to power the industries. That would be
wrong headed.
The immediate and long term negative effects of subsidy removal
include increase in the prices of goods and services, increase in transport fares,
high inflation and reduced purchasing power for the masses, social unrest and
protests, rise in fuel smuggling and other illegal activities. It was thought
that subsidy removal would halt the booming smuggling of Nigeria’s petrol
across the borders but that is not the case as the diehard criminals have not
ceased from operating their illegal trade because there is increase in the
price of petrol both in Nigeria and across the border.
The problem we have is not subsidy per se because all over the
world governments subsidise several social and economic services in order to
lessen the burden on the citizenry. Our problem is unbridled corruption
surrounding the subsidy regime. The onus is on the government to deal with
corruption for subsidy to function and serve its purpose. When they failed to
deal with corruption, they decided to remove subsidy altogether on the pretext
that the rich are the ones benefiting from subsidy.
In
the United Kingdom (UK), government subsidises health insurance, technology,
housing, education, electric vehicles and sustainable solutions to provide
financial help via loans, grants, and tax credits, among others. The minimum
financial assistance threshold in the UK is 35,000 pounds for individual over a
three financial year period.
In the United States of America, the Environment and Energy Study
Institute found that the US government alone spends $20 billion every year on
direct fossil fuel subsidies. Of that around $16 billion goes towards oil and
gas while the remaining $4 benefits the coal industry.
The five common subsidies that countries take up for their
citizens include export subsidies, agriculture, oil subsidies, housing and
healthcare subsidies. There are also transport subsidies, especially, for
senior citizens and education. It is pertinent to ask which of these does
Nigeria subsidise for her citizens.
Since petrol subsidy was removed on May 29, 2023 during the
inauguration speech of President Bola Ahmed Tinubu, the entire economy has been
thrown into crisis. The situation is like removing the life wire of a sick
person on life support.
Usually, oxygen mask serves as the last resort in a last ditch
effort to save a dying man. Once it is removed, the person gives up. In
Nigeria, petrol, diesel, kerosene serves the same purpose in sustaining the
economy. A lot of businesses in Nigeria are barely struggling to remain afloat.
The mass unemployment is due to the fact that there is near zero production.
Majority of industries that flourished in the 60s,70s, 80s and 90s have all
closed shop due to harsh economic environment, particularly, the absence of
regular power supply. Petrol subsidy has remained the last the last thread of
life support. Now that it has been removed, the economy is on a downward spiral
with nothing to hold it anymore.
Since the subsidy was removed, the unemployment has worsened. Thousands of tricycle and bike operators have parked up due to their inability to buy petrol at N540 per litre. The cost of transportation has quadrupled. Traders, market women, farmers, etc have given up on their trade. Artisans like vulcanizes, hairdressers, tailors, technicians of various descriptions are unable to operate because of the high cost of petrol.
The government is
planning to give palliatives to citizens to cushion the effect of subsidy
removal. Reports say President Tinubu is proposing to pay N8,000 to a section
of the population per household. But there is mass discontent over the amount
which can hardly buy anything in the market given the skyrocketing price of
goods and services in the market. A 50kg bag of rice is costing N40,000 and a
paint of garri (the commonest food for the people) is sold for N1800.
There are also reports that government is implementing a 40 per
cent salary increase for civil servants. The question of what use is the salary
increase that is to be wiped out be high inflation. And what is the percentage
of the employed compared to the unemployed.
Truth is that with mass poverty, millions of poor people can’t eat
one meal a day. Many who are sick in our malaria endemic environment can’t
afford to buy the commonest anti-malaria drugs. There is high mortality rate in
the population arising from hardship. Criminality is on the rise as that
appears to be the only way out.
It is absolutely wrong for Nigeria to join nations that have
stable and more productive and better managed economies to remove subsidy.
There is nothing that the citizenry enjoy as benefit for being Nigerian. As an
oil producing nation, Nigerians are supposed to enjoy subsidy on oil. There is
fear that with the absence of stable power, added with the removal of petrol
subsidy, the economy cannot be expected to make any headway on the path of the
much needed productivity.
*Dr. Onyekakeyah is a commentator on public issues
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