Fuel subsidy removal happens to be one of the political catchwords which this government used to gain power when seeking to topple the People’s Democratic Party and President Goodluck Jonathan’s administration. The fuel price was N87 per litre after a reduction by the Jonathan government from N97 per litre as part of political trickery to woo the electorate. The promise by the All Progressives Congress then was a better deal that the price would be reduced to N40 per litre because the production cost was very low. The APC did not see why there should be anything called fuel subsidy before taking over governance but one year later, in 2016, they moved the fuel price to N145 per litre in the name of removing the subsidy. In the name of market forces or economic gimmickry, the fuel price was moved from N145 to N125 per litre in March 2020 stating that the international market price had fallen and by May 2020 there was a further downward adjustment of between N121.50 and N123.50 per litre but revised to N140.80 to N143.80 per litre in July 2020. That was the time Garba Shehu announced that the regime of the President, Major General Muhammadu Buhari (retd.), had finally removed fuel subsidy which other governments could not do. So which fuel subsidy are they planning to remove again?
As of the time of writing this piece, the price of petrol is between N162.50 and N165.50 per litre while that of diesel, used mainly in industries, is over N250 per litre. Implying that the price increases since this government came into power in 2015 hover around 100 per cent and even more for other petroleum products. The fact that there are adjustments of prices in relation to international price movement implies that there is no subsidy anymore. Under this regime, the price of fuel has moved from N87 per litre to N165.50 per litre and they are still talking of subsidy rather than talking of refineries working at almost full capacity. The government is talking of removing subsidy in January instead of telling the citizens that some of the refineries will be on full production stream from January 2022. Citizens that used to complain of rising prices of kerosene and gas are now complaining of rising prices of wood and coal! Is that progression or retrogression? That is a JAMB question for Information Minister Lai Mohammed.
So long as the naira depreciates and if crude oil prices go up, which also makes the country earn more, the government will be talking of the existence of subsidy to be removed whereas the increase in the price of oil also means increased revenues from crude oil sales. It is like the harvesting period on the farm, but the children of the farmer still have to go hungry as it was during the planting period. What an irony? As the government is making more money from oil, the citizens must pay more for the same quantity of fuel, just because their government refused to do the needful; refused to make the country’s refineries work! This brings out three issues of concern.
First, what is wrong with subsidies as a benefit to citizens? Every country that regards her citizens as human beings that deserve sustainable welfare cares for the citizens by implementing welfare programmes bothering on subsidising their living conditions. Subsidy takes different forms. For instance, with the rising price of oil in the international market, the United States government knows, as a major oil importer, that the pump price of petrol will rise and negatively affect the living condition of its citizens. The President, Joe Biden, has ordered the release of fuel from the national reserve to keep the price down or provide subsidy in kind to Americans. Nigeria, an oil-exporting country, the beneficiary of the increase in rising oil prices, is planning to impose hardship on her citizens by increasing the per litre price from N165 to over N300!
Second is the issue I raised last week that Nigeria does not need the economics of tokenism but production and productivity. The Minister of Finance, Zainab Ahmed, in promoting the removal of the subsidy, if it exists, promised to give N5,000 monthly to some deserving 40 million Nigerians to cushion the negative effects of the aftermath of the subsidy removal. The reactions of Nigerians as individuals and groups should tell the government that the citizens are not interested in tokenism or what Abimbola Adelakun referred to as talakawa policy in her Thursday column in The PUNCH last week. Apart from the fact that the policy makes a mockery of the complex problems economic development entails, it is laden with corruption.
When and where did they gather the names of 40 million Nigerians deserving of the largesse? There is no allocation for the amount involved in the current budget for 2022 under consideration, so the programme involving such a huge amount is an afterthought. What is the outcome of such largesse carried out at the height of COVID-19? The government has been making noise about its inability to raise revenue; where will the fund required for the project come from such that there would be no default along the line? If that fund is used to intervene in some small and medium scale businesses in the area of industrial production, would it not have led to employment generation and incomes for the new workers? The government will also derive tax from the new employees, boosting its revenue.
Third, is the issue of refineries. There is the need to declare a plan for the refineries in Nigeria. There have been conflicting reports on these refineries. The recurring decimal is the turnaround maintenance going on to put the refineries in good shape. No production ever came out of that, rather people who joined the Nigerian National Petroleum Corporation train as middle class have been turned into billionaires. In another breadth, we have been told that there has been zero production in the refineries. Why then do we have workers withdrawing huge salaries and allowances every month when there is no production? It is better to sell the refineries to private entities. The workers should not be afraid of losing their jobs because if production is going on and expanding in the hands of the new owners, they will need the experience of those who are already familiar with the production and marketing businesses. My hunch, which I have expressed in the past, is that whatever the existing refineries are producing at their various locations presently is transported to Lagos and other ports as imported fuel with ‘subsidies’ paid.
But more importantly, why would NNPC think that the best way to get involved in petroleum production is to partner or buy shares in Dangote Refinery that was on course to release its output? If Dangote needed funds, would he not have gone to the capital market as he did with the cement and his other businesses? What really is the motive? Is that act not a signal to other potential investors in refineries that they should not dare to come into the business because they cannot make it without government support which they (NNPC) will not be ready to give? Is it not a way of telling Dangote not to be in a hurry to release its output so that they can continue their subsidy business? If NNPC is interested in a joint venture, why did it not pick on one of the existing refineries and partner with a local or foreign partner? Many questions requiring answers.
The International Monetary Fund, during the past week, lent its voice to the issue of removal of the subsidy on fuel by the Nigerian government. The following questions are imperative. Is it that the IMF was not aware of Garba Shehu’s pronouncement in 2020 that the government had removed subsidy? Or, does the institution still believe that there is subsidy and Nigerian citizens are not entitled to enjoy benefits of bumper harvest from oil sales just as American citizens are being shielded from the hardship of rising oil price through release from American oil reserves? Is IMF saying so such that we can put the issue of subsidy with the attendant corruption component to rest forever? Or is it happy with the depth of poverty in Nigeria and the need to deepen poverty despite its open criticism with the World Bank on increasing poverty in Nigeria and Africa as a whole? Something is fundamentally amiss.
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