Removal Of Petroleum Subsidies : To Do Or Not To Do - THE DAILY CRUCIBLE

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Friday, November 26, 2021

Removal Of Petroleum Subsidies : To Do Or Not To Do





The Daily Crucible | Published Friday, November 26, 2021

By Dr Uche Diala 

I have carefully read and listened to arguments for and against the removal of vestiges of petroleum products subsidies by the Nigerian government and the defence of prices of petroleum products by the NNPC. All sides of the argument have real and credible points. I will attempt to weigh in on the conversation from my own personal perspective to deepen the conversation and I would be willing to listen to and engage with others. This is only my personal view on the matter.

I have read arguments about the propriety or otherwise of removing the subsidies especially some speak about the timing considering the state of affairs and economies worldwide, not only in Nigeria. 

Rightly some have mentioned the hardships such a move would cause on Nigerians (read average Nigerian or "poor masses" as some are wont to say).

Some supporters of the current President Buhari have even advised that while this action is neccesary, President Buhari should not be the one to do it, citing the political consequences and the expected push backs, not only from well meaning Nigerians but from mischievous elements in the country. Such folks have adviced the President not to listen to the advice of world bodies like the International Monetary Fund (IMF) on the matter.

These are all cogent arguments, but it is important to lay some common facts before I proceed:

1. Nigeria has some of the lowest prices for petroleum products across the world; even as many Nigerians still consider the prices high and this has been sustained for decades. 

These prices are neither realistic nor natural because they are products of a subsidy regime or a price defence by the NNPC which has to consistently meet the shortfalls between actual landing cost of products or market prices and government set pump prices.

2. The subsidy regime or culture and other price modulation practices have bred untold corruption in the system and are so fraught with corruption for so long so much so that whatever gains the citizens might enjoy due to the relatively lower prices are lost by the short changing of the same masses and the nation due to corruption.

3. These subsidies and importantly the component of it lost to corruption and inefficiency have starved the nation over the decades of critical funds needed to invest in key infrastructure and services which would have made life better for Nigerias and reduced the impact of higher or realistic product prices. Infrastructure like a good and efficient transportation system viz, roads, railways etc not to talk of its negative effect on the economy. 

4. These subsidies and lower prices end up subsidising products prices for neighbouring nations as a reasonable quantity of our lower priced products end up in neighbouring nations where prices are controlled by market forces as it should.

A number of key questions therefore arise therefrom:

1. Do we as a nation continue with these listed above? 

2. Are Nigerians and Nigeria better served with the status quo or would we really be better served without the corruption prone subsidies, price defence and manipulations?

3. If we answer those questions any which way, what must we do to ensure that we get a better deal going forward for the benefit of us, the nation and future generations?

In progressing, all arguments duly considered and noted, I would say that we must proceed but we must strike a balance somehow between doing the needful and doing the needful. The needful being removing the subsidies which ought to be done in my considered view and the other needful being protecting the masses which ought to be done too.

I really do not succumb to the worn out narrative of "suffering masses''. I empathise with the suffering masses of which I am one but I am also a realist. When you get a reprieve from one angle, you are surely paying or will surely pay for it from another angle. Maybe an even higher or not commensurate price; if you consider it carefully. I strongly believe Nigeria and Nigerians are losing more from these subsidies and price modulations than we are gaining; everything duly, objectively, factually and dispassionately considered. 

Nigerians have become so used to unrealistic prices of petroleum products because successive governments keep defending the prices. The same masses complain of poor or non existent infrastructure and also lampoon the government for that. Where do we draw the line?

Furthermore, I do not think this is about taking the advice of any world power as some infer. It is about an idea which time is long overdue and about doing what is right and good for Nigeria and Nigerians in my humble view. I doubt that sustaining the status quo of subsidies or price defence by the NNPC is any realistic and sustainable way to go. I equally believe that there is no better time than now or from now. Yet it must be done right with all things, especially the citizens (common masses) duly considered. 

Some persons might argue and indeed have argued that President Buhari by reason of his unique personality is the right person to take what would be that definitely painful and unpopular decision and I would agree with such persons. In addition to that reason, President Buhari is in his second and final term as President. Such tough and unpopular but necessary decisions in every democracy are better taken by a President who is not looking for a new term in office or re-election.

One realistic fact is; if President Buhari does not take that decision, the next President, no matter his or her political will would most likely not take it in his first tenure because of the obvious political consequences, thereby defering our woes. That is a political reality. 

Since President Buhari has undoubtedly become Nigeria's political 'sacrificial lamb', I would say let him take the bull by the horns and take the flaks that will follow it. Posterity will judge him fairly in time; after the fact and the deed had been done.

This (subsidy removal) has become even more imperative now with the recent passage of the Petroleum Industry Act (PIA), part of which makes subsidy removal a legal and policy neccesity; after years of dilly dallying and buck passing.

All that said, there would be a critical need to find a way to proactively balance and manage the expected fall outs and no doubt hardships that would be faced by Nigerians including myself, at least in transitioning and adjusting to that new reality.

These Would Include In My View:

1. Proper education and sensitization of Nigerians on the necessity for and inevitability of that move to make them understand, appreciate, accept and own the benefits or positives as well as the expected negatives and challenges that the move will surely occasion, yet make them understand why it is an inevitable move and why the positives outweigh the negatives on the long run.

Sadly and I must restate that this is something the current Administration has been very poor at doing - effective information and communication to and with the masses with the total failure and near absence of the National Orientation Agency (NOA). That Agency must be quickly, urgently, deliberately and drastically re-jigged; if we are to embark on such a momentous and historic undertaking as weaning Nigerians of cheap petroleum products occasioned by fuel subsidies and defence of petroleum products prices over the decades, especially in view of our somewhat exaggerated sense of entitlement. 

2. Appropriate palliatives, shock absorbers or cushioning measures that would somehow alleviate the pains Nigerians across board would surely suffer in the course of that transition from unrealistic and artificial prices to market driven and more realistic pricing of petroleum products. 

I do not personally believe that the proposed N5,000 "Transport Grant" by government would make any realistic impact. I am also yet to be convinced that it can be effectively delivered or implemented, going by the inherent corruption in the system and even our recent experience with the COVID-19 palliative and other Social Investment Programs (SIPs). The government needs to seriously think about that, fine tune it and or come up with something that would be a better, more effective and efficient buffer.

In conclusion, it is high time that we (Nigeria) did away with the ubiquitous petroleum subsidies and price defence regimes and culture but the road and path to that must be well thought out and through.

The government can think of a phased or gradual but definite, dilligent, orderly and irreversible removal of the subsidies, moving along with the citizens.

The current efforts at recovering and reparing our state owned Refineries as well as the private sector led and government supported investments in Modular Refineries and the Dangote Refinery are part of the road map to that inevitable decision in my view and those must be sustained and quickly delivered on as part of a larger road map to an effective and sustainable removal of price restraints.

Unless and otherwise we shore up our domestic refining capacity, removal of subsidies, whether in part/phased or in full would be catastrophic and the fall outs difficult to manage. Let me also quickly state here that I believe that government has no business in the refining business.

Like I already implied, I strongly believe that there may be no better time to do this (subsidy removal) than before the tenure of the current Administration elapses and no better person to midwife that than the current President Muhammadu Buhari for obvious reasons, some of which I have stated above.

All that said, it is very important, indeed crucial that we as Nigerians decide what we really want; for once, with all due respects. We need to decide whether we want the comforts of today and for today which only kick our problems down the road and for future generations or the immediate and transient pains of today which would birth gains, reprieve and a better nation tomorrow for us and our coming generations. 

It is really a choice for us to make. I would be glad to read your own objective thoughts on the matter.

God Bless Nigeria.

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