Case for fuel subsidy removal

Former British Prime Minister, Baroness Margaret Thatcher, seemed to possess the uncanny gift of clairvoyance which is now the saving grace of the British economy decades after she left office in 1990.

The economy was manufacturing based with the power base been situated in the north of England and the unions as strong as the Rock of Gibraltar. The production and exportation of cars like Vauxhall and Morris Minor was at its apogee but the Iron Lady foresaw the future in the creation of a service based economy and barely six months later, she abolished exchange controls in the London Stock Exchange which saw a massive influx of foreign capital into Britain.

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She sturdily followed this up in 1986 when the stock exchange got completely deregulated and London was transformed into a global economic power hub at par with New York. Agreed, the north of England suffered as economic power shifted to the south but things panned out in the end. Imagine the fate of Britain now in the face of increasing competition from Japan, China and South Korea that has rendered the Vauxhall and Morris Minor obsolete.

There have been debates raging on for a long time as to whether the fuel subsidy should go. The country has been largely polarised into two camps – the Nigerian Labour Congress/Trade Union Congress who are clamouring for the continuation of subsidy under the guise that it is the few benefits the masses enjoy and the apologists of the laissez-faire system who believe the market forces is king.

The tragedy is that 90 per cent of Nigerians do not even enjoy the so called subsidy as the ‘gains’ is largely restricted to Abuja, Port Harcourt, Lagos and a few commercial cities. The rag tag and bob tail in the hinterlands buy petrol from N100 and above. Some especially in the north pay as high as N300 per litre. Many of the parasitic rich still pay the same price as the oppressed impoverished. Where then is the fairness?

It is an unsustainable economic drain that gives rise to round tripping and a needless carryover of expenditures annually. Subsidy payments gulped about 25 per cent of the 2013 budgets. The five year Presidency of Goodluck Jonathan saw a whopping $7bn sunk on subsidy. In May 2012, media giants, Thomson Reuters reported that $6.8 billion was sunk into a mind boggling scam during which Jonathan was pressurised to prosecuting some top officials.

The subsidy payments between 2009 – 2011 were fraught with endemic corruption and entrenched inefficiencies. Importers were being paid for 59 million litres a day while what was actually consumed was 35 million litres. Mismanagement and graft on the part of the government officials within that period cost the government $6.8bn – about a quarter of the country’s annual budget. Nigeria spent N2.58trn on fuel subsidy in 2011 – 900 per cent more than the $24.5bn in the budget with the excess being over half of the 2011 federal budget.

The Nigerian National Petroleum Corporation is accountable to no one. It once owed the federal government, $7.4bn in unremitted funds. The former Petroleum Minister, Diezani Alison-Madueke was both on the board of the NNPC and the Petroleum Pricing Products Regulatory Agency – the supervisor of the subsidy regulation. The number of subsidy beneficiaries has kept increasing by the day. From five in 2006 to 19 in 2008 and 140 in 2011 – all jostling for space to partake in the free bonanza. Many firms existed only on paper and collected subsidies for petroleum products they didn’t import.

Buhari’s insight into his agenda for the oil and gas sector which is the goose that lays the golden egg is rather wobbly. “I have received a lot of literature on the need to remove subsidy but much of it has no depth.” The wish of a subsidy free nation appears to still be worse than the combination of a mirage and a pipe dream.

The appointment of the Harvard-trained Dr. Ibe Emmanuel Kachikwu to the helm of the NNPC is akin to a Daniel that has come to judgement. He has not been shy to hide his disdain for the gargantuan fraud called subsidy and has expressed his desire not only for its removal but for the sale of the refineries as well.

As Buhari has promised Nigerians to constitute his cabinet this month, it is our hope that fuel subsidy removal will be a key thrust of his administration which will endear him to the hearts of Nigerians decades after his government would have come to an end.