By: Emmanuel Okpokwu Ogenyi.
Debates about the propriety of fuel subsidy are as old as when Nigerians started having to grapple with the steady availability of refined petroleum products. The problem became acute as with the realisation that keeping pace with the amount required for subsidy was no longer feasible. The feasibility is tied to the sheer cost of paying these subsidies – they run into a as much as one quarter or even a third of the annual budget in recent years.
Since the past decades when the concept of subsidizing petroleum products first took root a lot have changed to alter the consumption pattern and volume. Nigerians now have more cars per family. The population has grown. Petrol powered generators are now ubiquitous driven by a power sector that has collapsed many times over. Neighbouring countries like Cameroon, Niger and Chad have found out that it is cheaper to buy diverted petrol made affordable by the Nigerian government. The nation’s refineries are aged to the point where series of expensive Turn Around Maintenance (TAM) can no longer return them to viability. We have also developed the taste for imported stuff and petrol is no exception. The combination of these factors means the volume of petrol and other refined products needed to run the country daily have spiked and the subsidy required to make that volume available went through the roof.
Even with the realisation that sustainability was a problem, previous attempts to break this dependency on fuel paid for by the government met with reactions worse than brick wall. It is always a sentimentally and emotionally charged topic. The Occupy Nigeria Protests of 2012 are a reminder of how touchy the issue of subsidy is being the one thing in recent history that united Nigerians to take to the streets across different cities. The subsidy stayed after those protests.
One other lesson that came from those protests was the monumental corruption that was exposed as questions were asked as to why so much was being spent on subsidies. In fact, there is the school of thought that used mathematical analysis to prove that what was being subsidised was corruption as the there was no evidence that there was need for supplementing the per litre cost of petrol for Nigerians. The incumbent government, whose party was then in the opposition, was categorical in saying that there was no need to for the subsidies to exists although the government was again boxed into a corner to keep the payments in place.
In all the previous debates, a recurrent position is the need to build local refining capacity since whatever is being paid in subsidy has connections with the additional cost incurred on shipping, exchange rate differential, demurrages, storage, haulage and other costs that would have been none-existent if products were refined locally and delivered via pipeline infrastructure. But to the extent that government continues to subsidised imported petrol there was simply no incentive to solve these problems while the downstream sector remains unattractive for further private investment.
It is important to note here that diesel (AGO) is no longer subsidized and has been so for several years. Interestingly, all the heavy duty trucks, articulated vehicles and generators that use it have never been seen on queues waiting to buy diesel. Because it is driven by market forces there is no incentive to hoard or to use it as a tool for blackmail since any marketer that attempts that would be shooting itself in the foot. Rather being hoarded, the liberalisation of the supply and sale of diesel exposed another shortcoming of subsidies, Kerosene that is heavily subsidised is being used to adulterate diesel by unscrupulous person that cash in on the N50 per litre price thereby making it impossible for the poor to enjoy the policy of making the cooking fuel affordable.
With the weeks of fuel queues being experienced recently, it is time for the government and the populace to have a collective rethink. It should not take too much to accept the truth: we erred in keeping subsidy for this long and it is okay to eat our words if it will restore sanity, so let us throw this subsidy thing overboard. It is time to immediately end the subsidy regime. We should thoroughly research anyone that comes forward to tell us not to jettison the practice at this time because those feeding fat from the corruption embedded in it will do the needful to secure their meal ticket. It is up to the rest of us to express our desire to be finally free from ticking petrol shortage as one of the hassles we have to face on daily basis.
In this piece, it would be time wasting to begin enumerating the benefits or demerits of subsidy as Nigerians have exhaustively done that over the past decade. Even if the demerits outweigh its merits, practicality says we should simply embrace this harsh option of abandoning this wasteful expenditure item in the interest of our economic survival. A new factor has rendered all the feared demerits of subsidy removal inconsequential.
The new factor that has been added to the mix is a government that has shown the will to fight corruption. The counter argument that ‘subsidy should stay since corrupt politicians would likely still steal the money’ no longer holds true. Citizens can now be sure that the funds that would have been spent on subsidy can be spent on other sectors like agriculture and agro-processing, which are the actual areas in need of subsidies if the treaties with bodies like the World Trade Organisation (WTO) would permit that. Cheaper food does make far more sense than cheaper petrol. It will also be uplifting to see the other sectors come alive again with resulting employments that would be created.
If we scrap subsidy on petrol now, in a few months we will realise that like hotel, luxury transport operators and haulage businesses absorbed the pricing of diesel other businesses and private cars would have absorbed whatever price changes the removal of subsidy would bring with it. We only need to look back and recall how we feared that sectors that rely on diesel would collapse but they now outperform those reliant on petrol even though the former is priced higher.
In the past, we were able to keep the subsidy in place against prevailing wisdom; this time around we must face the reality that an on-going global economic uncertainty, our continuing lack of refining capacity, a distressed naira and our threatened economy do not give us the luxury of being stubborn when faced with the threat of a total shut down.
The citizens may not know or they may simply refuse to accept that it is end of the road for this wasteful and destructive practice. But those managing the economy know better and they are the ones to save us from ourselves. Even if it is going to cost President Muhammadu Buhari and his All Progressives Congress (APC) the next election he should give the gift of ending petrol subsidy to Nigerians because a few months down the line we will appreciate it better than the anti-corruption fight since it is actually at the root of all other forms of corruption in Nigeria.
Should President Buhari refuse to remove subsidy on petrol then Nigerians must demand from him that it is what they want from him as their elected leader and it is what they must get.
Ogenyi is National President, Conference of Minority Tribes and contributed this piece from Igumale