Nigerians started the year 2012 with a rude gift from the federal government. The President Jonathan-led administration had abolished the regime of petroleum subsidies, triggering a huge leap in pump prices. What followed was a series of protests that finally forced the government to backtrack, howbeit, not completely. The events of Jonathan’s final week in government show that despite the arguments and reservations about the subsidy policy, one thing is certain—it is not helping Nigerians.
Petrol scarcity is a “rich tradition” enjoyed by Nigerians as a frequent festival of national punishment. However, in the past six years, under President Jonathan’s administration, the festival was impeded. Petroleum products were generally available nationwide. Nigerians never expected that a major festival was being planned to cover for the missed episodes.
The organisers of the festival started a dress rehearsal in the run-up to the 2015 General Elections. Queues began building up at petrol stations across the country. The tempo increased on Monday 18th May 2015. Nigerians realized that the queues were getting longer, as the available petroleum products seemed to be declining. By Sunday 24th May, the fuel scarcity festival had reached a feverish peak. Major telecoms operators and banks issued statements bemoaning the scarcity of essential products. Nigerians wondered why such a punishing festival had to hold at a transition period.
What happened? A group of businesspeople were owed billions of naira, and felt that the only way to force a payment was to ground the economy. What better way to make a public statement, than to ground air and road transport services, trigger nationwide blackouts, ensure that banks and media houses adjust operational schedules, allow patients to die in candle-lit hospitals, and push the Nigerian public towards the edge of a precipice, a few days to the government’s transition.
We may argue about the morality of the oil marketers’ action. However, we must acknowledge one thing. They were being owed a legal debt. We, the democratic government of Nigeria, had pledged to pay a certain amount to them, in order to ensure that we, the people, could buy petroleum products at a controlled price. We gave them that inordinate power. If there were no subsidy, the oil marketers would have had no legal right to make us a laughing stock in the world. Subsidy brought us here, and only subsidy can take us away from this mess.
Why are we having this debate about subsidy? In 2012, the federal government said that subsidy was an albatross that was weighing down the economy. Despite budgeting about ₦200 billion for 2011, out of a budget of about ₦4 trillion, over ₦1 trillion was spent on settling subsidy claims. The government came to a swift conclusion—subsidy had to go. This decision inspired the 2012 New Year gift.
The Nigerian public, marshalled by labour unions and civil society organizations, responded swiftly. The government was accused of being weak and choosing the easy way out of its conundrum because it lacked the political will to stamp out corruption in the implementation of the subsidy regime, and ensure transparency. One major issue was the allegation (later proven) that a significant number of subsidy claims were fraudulent. The government was paying for petroleum products in non-existent ships docked in imaginary ports. Nigerians were adamant that this could only be possible under conniving government officials.
Nigerians felt that the government was trying to punish them unfairly for its incompetence. Many persons saw the subsidies as the “only” gain of the common person from a corruption-riddled government. As the price of petrol rose from ₦65 per litre to ₦141, transport fares skyrocketed. Many Nigerians were stranded in their villages where they had gone for vacation. The protests continued, increasing in tempo until the government gave in to negotiations, and the price of petrol was reduced to ₦97 per litre. Nigerians shouted for joy. The oppressive government had been defeated. Subsidy was back!
In retrospect, considering the present state of things, many would agree that the subsidy regime should have been ended. It makes no sense to spend about a quarter of the annual budget paying subsidies for petroleum products. Thanks to dwindling revenue from the fall in crude oil prices, the government is facing a hard time raising funds for essential services like payment of salaries. The ₦200 billion being owed the oil marketers is no small sum. A temporary settlement has been agreed on, but the monstrous subsidy would rear its infamous head again, if not tackled headlong.
We can choose to wish away our problems. We can choose to raise several arguments and counter arguments. We can remain adamant that subsidy should remain until the refineries are fixed. We can demand that subsidy should remain while corrupt loopholes are found and obliterated. We can demand that the power sector should be stabilized before subsidy is removed.
Any argument brought forward in support of the subsidy regime is just an attempt to postpone judgement day. Why would an investor choose to build a refinery, when importation offers quicker returns? Do we expect officials of agencies like the NNPC to identify and seal the loopholes from which they enrich themselves? Let us ignore the argument that removing subsidy is a weak man’s solution, and just accept the fact that continuing the handouts called subsidy is killing the economy.
It is instructive to note that former President Obasanjo also attempted to remove petroleum subsidies and deregulate the downstream sector. Bowing to public pressure, he only succeeded with diesel. Several economists, world leaders, and institutions like the World Bank (not always in our interest) have advised against continuing the subsidy regime.
Let us not fool ourselves. Removing subsidies would be painful. Prices would rise; transportation would immediately become more expensive. However, we should recognise that a mother forgets her labour pains when she sees the face of her child. In the midst of acute scarcity, Nigerians have been buying petroleum products at prices that far exceed what would obtain in a subsidy-free regime. If only we can allow subsidy to be removed, endure the temporary pains, while we wait for the rewards that would accrue to us.
Without subsidies, we cannot guarantee the pump price of petroleum products. However, we can be sure of product availability. We can be sure that with proper government oversight, deregulation would lead to increased competition that would bring down prices, and not encourage price fixing by oil marketers. We can be sure that investors would see greater reward in building refineries instead of importing refined products, thereby bolstering our economy, and creating jobs. We can be sure that such refineries would spawn a number of petrochemical-allied businesses. We can be sure that more funds would be available for capital projects. Above all, we can be sure that no group of individuals would have the means nor the motive to exploit essential products to bring down the economy of this country.
It is my hope that the incoming administration of President Buhari would bring up the subsidy issue again. It is my hope that his government would follow the right process by ensuring that the public understands why subsidy has to go. Transparency is key to achieving this. It is my hope that useful palliatives would be planned for Nigerians in the transition period. Finally, I hope that Nigerians would have learnt enough to support the removal of subsidies, and set this country firmly on a pathway to growth.
These are the musings of a concerned Nigerian.