The Subsidy Hell Hole

By Lewis Obi 

THE trouble with petroleum subsidy is part­ly that by its nature it is a little complicated trying to put it in everyday language. This difficulty has accounted for the difficulties governments have had trying to get well-meaning citizens to support its removal. Even the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, tried on TV to explain how he and his people arrived at N145 per liter. He ended up confusing ev­eryone who tried to understand his reason­ing. It used to be easier when the issue was simply the cost of crude, plus cost of refin­ing, plus cost of transportation, plus cost of equalization, plus marketer’s margins. Now the calculation has an added complication — the cost of the dollar.

If Dr. Kachikwu is right that N145 is enough to secure for the country a steady supply of petrol, with a possibility that when the new system settles down lower prices would follow, then the government deserves support. The assumption of the government that everyone understands its calculations is wrong. An overwhelming majority of Ni­gerians, including those who have finally discovered that subsidy payments are a huge swindle on ordinary Nigerians, do not understand how the ministry arrived at N145 per liter. The earlier that little de­tail is clarified and publicized the better for the government.

But essentially the second part of the trouble with subsidy is that it is, by its nature, political. It comes in the form of the argument that since Nigeria is Af­rica’s largest and the world’s sixth largest producer of petroleum products, it is only natural that the country should avail its citizens petroleum products at the cheap­est possible rate. Good argument on first reading until the technical inadequacies of our refineries kick in. We had three re­fineries that were calculated to meet our domestic consumption which are now producing only 40 per cent of our needs.

These refineries need billions of dol­lars to repair. That’s where the first fundamental question begins: Why did Nigeria not insist that the company which built the first refinery include technical training and transfer of technology in the agreement which came with the deal? Because that is what other countries do in similar circumstances. That way you are able to repair the refinery if it breaks down. You are able to build another re­finery by yourself if the current one has reached maximum capacity. With tech­nical expertise, you only need to know when to order spare parts in a timely fashion to prevent down time.