Restore subsidy, address corruption in NNPCL to solve 60% of our problems- Pat Utomi

A professor of political economy and management expert, Pat Utomi, speaks on the economic situation in the country, particularly the current fuel crisis. The former presidential aspirant under the platform of the African Democratic Movement in 2015 and staunch supporter of the ‘Obidient Movement’ under the auspices of the Labour Party in the 2023 general elections said if he had the opportunity to become the president of Nigeria, he would return the fuel subsidy removed by the present administration and rescue the country from the economic hardship that the citizenry had been plunged into

Did you see the recent outrageous fuel price increase announced last week by the NNPCL, which has fuelled fury and pain among the Nigerian populace?

This issue is more complex than seeing or not seeing it coming. When you get to this kind of situation that we have gotten into, you need a lot of planning. Earlier, we didn’t do the right planning before the fuel crisis.  We did not clarify our strategies. Consequently, we have run into serious problems.

First and foremost, the typecasting of what subsidy is all about has put us in a bend. I would probably have begun by trying to clean up the mess in the industry, the NNPCL. The NNPCL is one of the world’s opaque and most unreliable organizations. I have been writing and talking about it for a whole generation. A good part of what we call subsidy was graft. There is what we call smuggling; if you look at how the numbers oscillate, how much we consume and then what we consume just before COVID-19, the numbers multiplied significantly when movements dropped under COVID-19. Then you will tell anybody serious that it is not because petroleum was consumed. There are statistics from governments in Pakistan, California, and Nigeria, where everybody has a car, regarding the ratio of what we consume. In Nigeria, we have plenty of vehicles. Note also that very few of the poor population have cars. I look at the units of petrol that they say we consume. Before we punish citizens by passing on inefficiency to them in private, we must clear up the corruption in the system; that alone will bring down the thing dramatically. You have to choose strategic use of resources.

Is removing subsidy a good idea?

Removing the subsidy was not a good idea. Sometimes, you need to drive production and quality of life at a certain level, so you commit to some level of subsidy. We know that agriculture is massively subsidized in America and Europe. But this is a subsidy that drives production and puts more money in the hands of people who produce, enabling the system to keep running. But when you massively subsidize consumption for pleasure and stuff like that, when people don’t have to think about how they use their resources, you are not doing what is best for the system. We are stuck here because we should have dealt with the heart of the matter first.

What should have been done?

First, if you had cleaned up the NNPCL and reduced the system’s so-called corruption, more than 60 per cent of the problem would have been solved.

Is it too late to do that? Where would you start if you were given that job to do?

I can do it if I am given the job. I have been saying it for years. If you go to the World Bank and the IMF, they will throw policies at you with templates- no problem. It is a good understanding of economics. However, every situation is different. Let us go back to Asia during the financial crisis in 1997. One of the things I am hearing now is that Washington’s tax-to-GDP ratio is terrible. They need to increase taxes dramatically. The average person in the Western world who pays those taxes has no other commitment besides themselves. The average Nigerian middle class is a social net that the country doesn’t have. They pay school fees for x number of people, and the extended family depends on them. If your book doesn’t come in taxes, then the person does not understand economics. How do you programme them and take them into account in computing? How do you change taxes and all of that? This is the kind of conversation you must put on the table. If you take the numbers that they throw at you from the NNPCL and they say, therefore, jack up prices, you will just be bothering overburdened people. When investments are not taking place, you need to free up money for savings and investments. People cannot save and invest; they are in a vicious circle going downward. We need a serious reflection on where we are, the processes, and what we must do first. There is a sequencing problem, but we are not managing it properly. That is why it is so hard on people.

The problem is that the government is speaking about this matter for the first time. The Vice President summoned the ministers, the NSA, the GM of NNPCL, and others to explain the issue. What is your take on this?

We really need to discuss the matter seriously and engage on it. Security is a critical issue. All the stories about the petrol on the Nigerian border are quite disturbing. With simple technology, you could see every car that uses Nigerian borders, not to mention petrol tankers. So, when they tell you this is how much petrol is consumed in Nigeria and this is how much is smuggled, it is a major security issue.

Is there complicity?

If we want to deal with that, let’s deal with it. We need to deal with security issues and the corruptions in the NNPCL to say to consumers, look, this thing is about output. Output doesn’t justify anything for playing our role. We could introduce different kinds of public transportation and quality people with other forms of transportation. In 1984, I visited Zimbabwe for the first time. I had a classmate in the US. He was the Executive Director of Zipam, who was in public administration. We returned from the US and bought a lovely house, but he could not buy a car because the house was a priority then. But he later purchased a 1956 Morris Minor. During the day, on the weekdays, he would take a bus to work. On Sunday, he brought his Morris Minor and his family to church. If we have this kind of quality public transportation, fuelling it at this kind of level and subsidizing that kind of fuelling for the sake of the party, you would surely pay a different price for petrol. Let us not punish ourselves and shut out productivity possibilities from the resources that need to go to specific areas. That is what we are doing, and if it does not work, we need to talk and sort out this problem once and for all.

Can the government rescind those decisions? If it will not, how can we manage it? Are we between the hard places of the rock, the sea, and the devil? Where are we exactly?

We are in all of those. We made some very terrible mistakes. We’ve got to work and walk our way back. But how do we act when public officials are seen as plugging? We’ve got to show dramatically that the public sector and the leadership have erred in their flagrant abuse of the public treasury. Then people will say, all these people have shared these loads. Again, I will give examples of President Obasanjo coming down to Peugeot 504. Oil prices dropped in 1976 or thereabout. We cut our coats according to our clothes. Public officials live in homes paid for by the public and power 24/7 and fly new jets. We need to say no to this. We have to come together as a society and say our country has done things with the wrong policies. We have to rebuild. This is how we rebuild- this is how we can sacrifice. You go out there, get 1,000 new buses of different qualities, put them out there, and park your car. I have seen Nigeria go through phases. When I was growing up, there was a time when Lagos was so congested that people were not allowed to drive into Lagos Island. You parked your car at Orile-Iganmu or somewhere and entered the Island as big man. These are the kinds of things we need to do now. Collective shielding- coming from the top. First, it must be the top. Shed all the load. No more motorcade. Then, people would take you seriously, and we would know the country is trying to solve a problem and our mistakes collectively.  This can be done.

How can Nigeria get out of this situation?

Nigeria’s political class is responsible for Nigeria’s misery. The country’s political class has failed the nation. Look at the choices that we have repeatedly made. Look at the kind of National Assembly that we have. Look at the behaviours of the executive class. The political class needs to come out publicly and make a public confession before the country. In South-East Asia, people would come out and do a humiliating bow for what the public had suffered due to the irresponsibility of the political class in Nigeria.

Is this a joke?

It is not. Please don’t joke about it because it is also a solution and because people feel disconnected from the political class. That is a major solution. Once people start feeling connected, we solve the problems.

If you were in President Tinubu’s shoes, how would you handle the issues, and what would you do now?

The first thing I would do is to identify the essential things that Nigerians need fuel for, and then I would subsidise those things.

Does that mean you are going to bring back the subsidy?

I don’t care what you call it.  There will be a subsidy. I just told you that the Americans have an agriculture subsidy. It is a matter of where you direct it to. Is it something that we produce that will help us rebuild? If it is something that will help us to produce and rebuild, then I would subsidize. If it made us consume frivolously, I would not do that, but I will give an example. There was a time when an American president used to run around in a Volkswagen Beetle. That was a show of commitment. Let our politicians not think that, oh, befitting. Befitting what? Public resources are limited and must be treated as something people have in short supply. They must be managed primarily and promptly by the political class.

If you bring back subsidy, will it reduce inflation or rewind prices of commodities that are skyrocketing?

There are all kinds of things that you will do that are going to reduce price pressures. Produce food. If you produce plenty of food, the price pressures will come down. Inflation will keep rising if we do not do enough to stimulate food production. In January, I gave this advice and said look, legumes take three months. If we are serious and want to prevent inflation, let us condone off some regions of the country, put soldiers there permanently, and get farmers to go in, and within three months, there will be plenty of food all over the place and prices will drop. But had anybody done that? We need seriousness. I am not just talking. That is what the problem is.