Babs Oyetoro

To say the least, as a nation we are in a quandary. It appears we have lost the sense of direction because the leadership lacks the courage, moral and political will to take the right decision.

According to Dr Biodun Adedipe, who gave historical background to the economy of subsidy; said it dated back to 1966, during Gen. Yakubu Gowon’s regime. As a nation, we have nurtured the economy of subsidy for 56 years and it has become a hydra-headed monster wanting to consume everybody. President Muhammadu Buhari raised the hope of Nigerians that an end had come to subsidy regime come July 2022 but the Nigeria Labour Congress and other Civil Liberty Organisations held the government by the jugular with a threat to shut down the economy through the total strike, the government quickly chicken out.

The Buhari-led administration had no option but to suspend the removal of subsidy until 18 months. This, to a large extent, is wisdom on the part of the ruling party which is seriously planning for another general election in 2023. They would have been consumed by the fire ignited by the purported NLC strike.

The pertinent question begging for an answer is: Who will rescue us as a nation? Certainly, we need a leader that will take the bull by the horn and crush the regime of subsidy now.

The myth
We must realise that Nigeria runs a mixed economy where the government subsidises some critical aspects of the economy for the sake of the vulnerable population groups. This explains the reason for having public hospitals, public schools, provision of water and power supply, provision of transportation at affordable prices, availability of critical social infrastructure. Government plays this key role to shield the masses from the exploitative privately owned firms who are into business to make a profit at the expense of the poor masses.

The truth is that the subsidy economy is not alien to our system, but oil subsidy has become a conduit pipe where the resources of the country are drained in quantum proportion daily.

In the first place, it is absurd to import crude oil to foreign countries to refine and brought it back at exorbitant prices while our refineries are moribund. Successive governments could not muster enough courage to fix the obsolete refineries and make them function at optimal capacity.

Does Nigeria lack capacity as an oil-producing nation to build refineries where other countries will bring their crude oil here to refine? Does it take an eternity to build a functional refinery? What is novel about having a functional refinery and maintaining it?

The subsidy system is no longer achieving its intended objectives. The poor are benefiting less, and some economic sectors are becoming inefficient. What had been sung into oil subsidy over time would have been used to make Nigeria’s economy one of the best in the world. But the reverse is the case, as Nigeria is ranked among the poorest countries with the lowest per capita income.

According to Adedipe the profit from crude oil does not reflect on our GDP. It is sad. Are we going to continue like this as a nation?

The farce
As it is, the Nigerian National Petroleum Company Limited (NNPC) remains the dominant importer by its access to foreign exchange but it is ridiculous to say that the same body cannot exactly give consumption figures of petrol by Nigerians. While the figures are never the same, the group managing director of the NNPC, Mr Mele Kyari himself doubted if the amount is being consumed only in Nigeria by Nigerians. Kyari had recently blamed the rising figures in fuel consumption in the country on the smuggling of products to neighbouring countries. For instance, by October 2021, NNPC posted that Nigeria’s daily consumption of petrol was 72 million litres with a subsidy payment of N541bn for the month. The latest being in December last year, the company posted a bogus figure of 102 million litres as the quantity of PMS consumed by Nigerians.

It is instructive to note that Nigeria is almost being brought to its knees by myriads of problems ranging from terrorism, banditry, kidnapping, and what have you. We are somewhere between many devils and the deep blue ocean. Our parlous state is complicated by our leaky purse and lousy revenue gathering. Just in 2021, Nigeria lost about 3 billion dollars to crude oil thieves. That is N1.4trn.

In November and October, petrol subsidy payments stood at N131.4bn and N163bn, according to findings by Business Day. In September, it was N149.28bn. In August, the under-recovery cost of petrol was N173.13bn. For July and June, it was N103.28bn and N164.33bn, respectively. In May, the cost amounted to N126.29bn. Also, in April, March, and February, the under-recovery of petrol amounted to N61.96bn, N60.39bn, and N25.37bn, accordingly.

Fiscal Policy expert, Taiwo Oloyede posited that the plans to extend the subsidy regime beyond budget provision will put more strain on the government budget, which will, in turn, lead to increased borrowings.

Oyedele also notes that as the government seeks amendment of the Petroleum Industry Act (PIA) to sustain the subsidy, the activities of the Nigerian National Petroleum Corporation (NNPC), which according to the Act is expected to run commercially, may return to the status quo, thereby undermining the benefits of deregulation.

The reality
According to Dr Ugoji Egbujo: “We enacted the PIA to deregulate the petroleum sector and enhance private participation. Now, we must suspend the portion of that law that would have extinguished the petrol subsidy by June 2022. We are scared. But if we keep the subsidy, the states will have nothing to collect monthly from Abuja. The CBN might organise a quiet printing of money to give them some watery soup.

“In the end, the naira will be beaten to stupor and might lie south of one thousand to a dollar. We must be careful. Head or tail, we might be in boiling soup. Last year, we borrowed about N1.4 trillion to service our sense of entitlement to cheap fuel. This year that figure might double.

“The reason is simple”, he continued: “crude oil prices have risen. Our neighbours are importing at market rate and selling petrol above N400 per litre. If we insist on selling at N160 per litre, we would inevitably be inviting them to feed on our subsidy. So, we would end up providing cheap fuel for the entire region.

“The House of Representatives wants to investigate our petrol consumption rate. The House might as well plan to investigate the petrol consumption of West Africa. That is what it is. We have chosen to be the Santa Claus of the region. But the problem with subsidy won’t even end with our stepping aside from our Santa Claus duties by stopping petrol smuggling.

$42bn in 10 years would have built all the tracks we are proposing while kneeling plate-in-hand before the Chinese. With $42bn, we could have built three of such refineries, and we would have been exporting refined products and non-crude oil.

The NLC wants the government to resuscitate its moribund refineries before removing the petrol subsidy. The Same refineries have become the emblems of government inefficiency in business.

However, the duo of Mallam Bello Rabiu and Dr Adedipe also gave insight into what should be done to put an end to the subsidy regime, saying the government must ensure that inefficiency was reduced to the barest minimum.

They jointly agreed that the government must check fraud, crush the hydra-headed monster called corruption, and put an end to unsafe business practices. Mallam Rabiu said the suspension of the subsidy was politically motivated without considering the implication.

Rabiu noted that the government was jolted after discovering that she would need N3trn every year to make up for the subsidy removal which was not provided for in the budget.

He stressed that the government would have to continue to borrow to fund the subsidy removal adding that inconsistent government policy would have adverse effects on the business environment. A safe business environment will attract more investment that lead to growth.

“All this will come with the removal of subsidy because the market will become competitive; more investors will be attracted into business because they know that they are into profitable ventures.

“Besides, the government must ensure that its refineries are working, at least within 60-80 percent capacity even when Dangote Refinery has commenced operation fully. “In this case, the forces of demand and supply will determine the price and there will availability of the product everywhere.

FRSC begins “Special Intervention Patrol” to curb road crashes

“And as matter of urgency, the government must ensure that it brings down the rising food inflation, cut-off waste, block leakages, and make provision for mass transportation. “If the government put in place all these things, then we are getting ready for the removal of subsidy. Lastly, the government needs the willpower to enforce this policy”.

“We must do away with the subsidy program; it’s fraud-prone. Dubious invoices and petrol smuggling, but the removal of the subsidy won’t make sense if the crude oil theft is still allowed”, Dr Egbujo remarked.