Untying the knot of subsidy is like seeking for a needle in a haystack, an attempt that will break out beads of sweat. But let me start from the definition of a knot. According to Oxford Advanced Learner’s Dictionary, a knot is a join made by tying together pieces or ends of string, rope etc, and subsidy on the other hand is defined as money that is paid by the government or organisation to help pay for something. The fuel subsidy therefore is a scheme that was established by the authorities to protect low-income households as well as the rich from rising energy prices.
Interestingly, a knot of subsidy has become entangled like a bird tangled in the wire netting. Just like so many items that we export crude, such as coffee, cocoa, oil seeds, raw hides, oil etc, the resultant cost of buying these items far outweighs the cost of import. That is the knot of subsidy we found ourselves.
Recently, the Managing Director of International Monetary Fund, Christine Lagarde, called for the removal of fuel subsidy in Nigeria; buttressing her point, she said with the low revenue mobilisation that exists in Nigeria in terms of tax to Gross Domestic Product, it is important for the country to remove fuel subsidy and as such we would be able to move funds into improving health, education and infrastructure.
She also looked at figures since 2015 and claimed that no fewer than about $5.2tn had been spent on fuel subsidies, an amount that would have otherwise been spent to improve other priority sectors like roads, electricity, hospitals and social infrastructure.
While the above statement is a fact, the continued importation of daily refined petroleum products has led to local price hike due to import factors and the unstable exchange rate. Consequently, the subsidy bill also jumps up but it is practically impossible for the Federal Government to remove subsidy for an economy like Nigeria’s that is heavily reliant on oil where the price of goods and services go up anytime there is an increase in fuel price. It will be suicidal to remove subsidy at once without any provision of alternative cushioning measures. The questions therefore are:
Do our leaders know that the fuel subsidy payment deprives Nigeria of funds needed for socio-economic development?
Do they know that the subsidy payments have discouraged genuine investors in investing in the downstream sector?
Do they know that the subsidy amputation can solve our energy issue?
Do they know that the subsidy fuels illegal exports and smuggling?
If the stakeholders are in the know of the above questions, then, what is the right thing to do?
The expectation of the social and political backlash from vested interests must first be dealt with. Will signing the petroleum industry bill help? With every kobo available to the federal pouch important, it will help if the World Bank can assist with the blockade of illicit fund flows abroad. Similarly, the developed nations can help to track and repatriate illegitimate funds stashed away overseas.
It is unfortunate and sickening that as large as our country is, we cannot boast a functional refinery at full capacity. What is happening to the Warri refinery? What is going on in the Kaduna refinery? What about the Port Harcourt refinery? Nigerians are eagerly waiting for a day when we will be able to explore, produce, refine and export oil and gas. At the moment what we are hearing is the Dangote refinery, we hope when it’s fully operational, it will put an end to the subsidy jingle and we can adequately refine for local consumption. When that happens, it will shorten the landing cost and it will be a huge relief to all Nigerians.
A nation that lies to herself is enchained in the cacophony of self-deception. The removal of subsidy takes a concerted effort of all the stakeholders which can be done over an extended period of say four years by which the Federal Government would have created awareness to prepare for its removal.
More importantly, if we get the exchange rate right, get our refineries functioning and fix our monetary policies, we can have our naira appreciate and then untie the knot of fuel subsidy.
Olusanya Anjorin, Lagos.
olusanyaanjorin@gmail.com
+234 8032826650
Punch
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