The country is in a bind. It must borrow three trillion if it chooses not to discontinue subsidising petrol. Thatโs what the government has said. But, on the other hand, if it removes the subsidy on petrol, it could set itself aflame. Against the backdrop of a huge budget deficit and weak income streams, borrowing to consume is insane profligacy. But after Endsars, any provocation of the teetering masses could spell Armageddon. Are we then doomed?
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 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 more 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 1.4 trillion to service our sense of entitlement to cheap fuel. This year that figure might double.
The reason is simple: 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 160 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.
Where we have borders, they are porous. Smugglersโ boats leave for the Benin Republic every night, their bellies filled with our subsidised fuel. Trucks cross through thousands of desert roads in the north to service our brothers in Niger, Mali, Burkina Faso etc. So we have no borders. And if we create proper borders, where will we find real Customs officers?
The House of Reps 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 wonโt even end with our stepping aside from our Santa duties by stopping petrol smuggling.
There is the other problem of crooks and fat cats exploiting the subsidy window to fatten themselves and impoverish the country. With the retention of the programme in a time of high crude prices, two things might happen.
The NNPC remains the dominant importer by its access to foreign exchange. Now with a privatised Molue with gas-guzzling, oil-spitting engines, the NNPC canโt slough off inefficiencies overnight.
They once used to let cargo-laden vessels loiter, pay billions in demurrages, and put the cost on the country. With the NNPC, the love for inflated figures and their role as a cash cow for politicians, a big subsidy window will ruin the country.
On the other hand, if other players enter the game, there could be the other old trouble. In 2011, it was discovered that subsidy payments were claimed and collected for ghost cargoes carried by vessels that had been scrapped and buried before Shehu Shagari came to power. Some other folks simply forged papers, greased the palms of DPR and PPPRA officials with one million dollars per claim, and walked away with billions in awoof subsidy money.
Billions in subsidy payments for cargoes that were never imported. Deregulation is non-negotiable.But in a country where over a hundred million live below abject poverty, even the slightest tightening could be a back-breaker. The EndSars riotsโ scars are still fresh. Nobody in the government wants to risk a tsunami. But there is something else besides an Arab spring-type volcanic eruption.
The states have little or nothing to share even as crude prices soar. Petrol subsidy wipes out everything. If some states become insolvent, more people would be thrown into poverty and crime. Insurgencies and banditry have become our Achilles heel. Lucrative and therefore intractable; almost self-perpetuating.
Insurgences and banditry grow fat on ransoms. Fattened, they expand and trouble farmers. Farming becomes perilous, and hands become idle. Idle hands join those they canโt beat, and the crime industry is diversified. With armed gangs everywhere, the military sucks up the already anaemic national budget.
We are somewhere between many devils and the deep blue ocean. Our parlous state is complicated by our leaky purse and lousy revenue gathering. In 2021, we lost about 3 billion dollars to crude oil thieves.
That is 1.4 trillion naira. This year that figure, on the back of rising crude prices, could be 6 billion dollars i.e. about 3 trillion naira. In other words, the very humongous sum we must borrow to keep the frayed tempers of the poor from flaming is the money we will inevitably lose to crude oil thieves in our midst. Inevitable, because that criminality has almost been normalised. Between 2009 and 2019, NEITTI reported that we lost 41.9 billion dollars to crude oil thieves.
If we had been sufficiently alarmed, we would have laid down our lives to stop the theft. But the thieves donโt feel guilty. The reason crude oil theft has become a fixed feature of our national economy is that millions in the Niger delta do not subscribe to the idea that the oil wells belong to Nigeria rather than the locality. Illegal crude oil bunkering is so rampant one is tempted to believe that it is condoned by governments at different levels. Perhaps a way of getting some and letting trouble makers have some. Some sharing of national sovereignty.
That isnโt to say that the Navy and other security agencies donโt go after oil thieves. But this organised crime happens in the open. And the sheer size of stolen crude is so earth-shuddering that it shouldnโt happen every year if we feel truly perturbed.
However, the crude oil theft problem is not helped by stories from Zamfara and other places, where folks, in league with scavenging foreign businessmen, mine diamonds and gold and keep the proceeds.
Forty-two billion dollars in ten years would have built all the rail tracks we are now proposing while kneeling plate-in-hand before the Chinese. Dangoteโs new 600,000 BPD refinery cost about 19 billion dollars. In 2009, it would have cost much less.
With 42 billion dollars, we could have built three of such refineries, and we would have been exporting only refined products and no crude oil. The NLC wants the government to resuscitate its moribund refineries before removing the petrol subsidy. The same refineries that have become the emblems of government inefficiency in business. The NLC must do what the NLC must do.
Yet while at it, it must know when to step away from idealism and vacuous sloganeering and offer feasible solutions.But leaving nail-bitting aside, a country in financial difficulty must shed flabbiness. If the ordinary people must take a hit, they would want to see government officials living lean lives.
Holes must be plugged. Belts must be tightened. Politicians canโt go on collecting ungodly wages and allowances while the poor are forced to bleat to death in the name of patriotism. So the recourse isnโt to China and loans.
We must do away with the subsidy program; itโs totally fraud-prone. Dubious invoices and petrol smuggling. But the removal of the subsidy wonโt make sense if crude oil theft is still allowed.
The sacrifice from the poor wonโt make sense if the politicians are still engaged in exhibitionistic sybaritism. Nothing would make sense if the governments are run with a carnival mentality.
We are in a quandary. But it could be an opportunity for sober reflection and hard life-changing decisions.
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