OBSERVATION: Rebirth Of Fuel Subsidy

By Ademola Yaya

WHO doesn’t know that hoe, cutlass and spade are agricultural tools? But if one decides to be blunt, each has its own name. Hence, a Spade is a Spade and a Cutlass is a Cutlass not agricultural instrument. Fuel subsidy is the support provided by government to make the price of fuel affordable for the people. Yes, the ensuing clandestine development in the Nigerian oil sector is inescapable. With the ever-increasing international price of crude oil from $70 in June to $80 in July and $95 in September, and a speculation that it will cross $100 by October, the price of petrol could no longer remain between N598 and N617 per liter, depending on the location of the purchase in Nigeria.

The reason is simple. Since we import refined crude oil products and the price of crude oil that will be refined has risen, the price of petrol, diesel, kerosene, aviation fuel and the likes will logically increase. Again, crude oil is sold in dollar and since Naira has continued to prostrate before dollar, the price of any imported item, including petroleum products must increase.

Following President Bola Ahmed Tinubu’s pronouncement in his inaugural address at the Eagle Square, Abuja, as the 16th Nigerian President on 29th May, 2023, that ‘fuel subsidy is gone’ and its immediate implementation, its withdrawal has brought untold hardship to the people and hindered economic growth with no prospect of recovery in sight. It has created unfriendly business environment caused by weakened purchasing power of the people due to declining household income that has been compromised by skyrocketed fuel price.

In a country with epileptic electricity supply, where reliance is placed on electrical generators as alternative energy (indeed, in most cases, the main energy supply source, especially in medium and large enterprises, as per diesel), deliberate increase in the price of fuel to power the generator will automatically ignite negative socio-economic impact. Increase in the price of fuel has triggered inflation that has pushed up the prices of goods and services; it has forced the entrepreneurs to make tough decisions – laying off workers – to guarantee profit which increasing fuel price is massively gulping.

In this year 2023, Manufacturers Association of Nigeria (MAN) has disclosed that 3,567 workers have been laid off. As a matter of fact, fuel price increase has worsened living condition, pulled more people into poverty, increased crime and literally killed many small businesses. Since people are already choked and unable to breathe, any further increase in fuel price from the current skyrocketed price will be unacceptable and ignite protest.

To stabilise the current price, Federal Government had to clandestinely return to subsidising the product, despite denials to that effect. It has refused to make it official because a lot of questions will be raised by the public as to the soundness of the choices made by the current government in the first place, without deep thinking and wide consultation of experts and stakeholders.

One of the reasons to justify fuel subsidy removal by government and its spokespersons was that since our fuel was subsidised, it’s very cheap compared to what was obtainable in neighboring countries. Hence, smugglers resell the subsidised product and make money from what was to be a relief to Nigerians. Mr. President and his spokespersons had submitted that fuel subsidy is a scam, benefiting only a few elite and that it could no longer be justified in the face of drying resources and that funds for subsidy would be diverted to “public infrastructure, education, health care and jobs that will materially improve the lives of millions.”

Now that subsidy has been tactically reintroduced but called ‘intervention’ or any nomenclature, are those smugglers no longer in existence or have become ‘born again’ since our fuel will be cheaper compared to what obtains in the neighboring countries? Will the N1.68trillion budgeted to stabilise fuel price for the months of September, October, November and December 2023 be safe in the hands of the very same ‘few elite scammers’ in oil sector? Have these scammers fizzled out or repented their old ways?

As against the promised investment in education with proceeds from subsidy, the cost of education has risen across boards. School fees from elementary to tertiary have gone beyond the reach of an average Nigerian. Last week, the President of Academic Staff Union of University (ASUU), Professor Emmanuel Osodeke, said parents/guardians of students across the country would find it difficult to pay new fees as a result of economic realities. In summary, he did say that in the next two years, 40% to 50% of students would drop out and become willing tools to various crimes that will make Nigeria unsafe to live. Therefore, if the new subsidy regime tagged ‘intervention’ is made official, there will be question of trust and accountability; hence, the clandestine arrangement. But for how long will this continue? Who can predict when international oil price will crash? Except the needful is done – fixing our dysfunctional refineries to produce our local fuel consumption that could be sold at fixed and affordable price – removal of fuel subsidy at all times will never bear good fruits but make life miserable for the majority; and there is no place in the world where citizens and businesses are made to bear the full cost of energy (which is fuel in our own case) simply because of the incompetence of government to man its boarders and the activities of corrupt officials in the oil administration and marketing chain that are beyond being punished for national economic sabotage!

When a government subsidises fuel, making it affordable to its people, it’s not doing them any special favour; it is a means to an end – making its people productive. Having actualised this, they are good to be taxed by same government and at the end, everybody is happy. The government’s security bills, public health bills, and others are reduced to the mutual happiness of all, especially attraction of the so-called foreign investment if the country is safe and has a healthy workforce. Therefore, the pronouncement, “fuel subsidy is gone” and its implementation is a product of trivial thinking and lack of consultation.

We must first reconfigure our mentality that subsidy by government is not a crime. In fact, it is desirable. World over, governments subsidise agriculture, energy, industry, and do financial sector bail-outs, to guarantee the productivity of their citizens. In Nigeria, the most important thing ever that requires subsidy (since we have failed to refine our crude locally and guarantee stable power supply) is crude oil products – petrol first, then diesel, kerosene, aviation fuel, etc. If government wants a quick end to such subsidy, it should thereby quickly end corruption and sabotage that makes local refining and stable power supply impossible.

Until then, government must wake up and reckon with the fact that all endeavours in Nigeria run on petrol, diesel and aviation fuel and making them affordable, however and in any way, is the right direction to productivity and prosperity. Almost all logistics and haulage; even Electricity Distribution Company offices, police stations, government houses up till the National Assembly complex and Aso Rock Villa run substantially on diesel, which cost has hit roof top!

Merely taking away money from citizens (and rendering them impoverished) and handing the money over to Federal, State, and Local Governments, in a country where money in the hands of governments (with few exceptions) never ever benefit the citizenry due to endemic corruption, embezzlement and misappropriation, is witting and unwitting destruction of the country’s economy and recipe for escalated insecurity.

The government should revert to pre-May 29 subsidised fuel price of N195 per litre which is affordable as it is the only way that can lead to socio-economic stability for production and productivity. It can then begin a gradual upwards review, periodically, based on wide consultation of stakeholders and experts, for an intermediate and long-term solution towards ending such subsidy at a time it has achieved sufficient local refining and effective manning of our boarders, with significant success in its anti-corruption fight.

Headmasters in the government should know that diversification of our economy, as against its present monolithic, crude oil rent receipt dependency, will bounce back our economic and create enabling environment for local and international investors while money made via the sales of our Bonny Light Crude Oil will be in external reserve for strategic interventions time to time. Agriculture, Mining, Entertainment and Sports – currently languishing in ignominy and to which only lip services are paid, will fetch us triple the funding that crude oil fetches, with guaranteed national revival and peace. This is no rocket science but it requires a government of the people, by the people and for the people that is not steeped in corruption and is ready to walk all progressive talks. With correct, committed leadership and political will, a better, prosperous Nigeria is possible.