The Unanswered Questions On Fuel Subsidy Removal

Ever since the Nigerian government officially announced a few months ago its plans of removing the subsidy on petroleum or premium motor spirit (PMS) by January 2012 , the debate for or against this policy has raged on and is only increasing in intensity by the day. Those for the policy, mostly from the camp of the Executive arm of government argue that fuel subsidy hardly benefits majority of Nigerians, that it only serves to benefit an exclusive class or “cabal” of petroleum importers; and that in the face of dwindling revenues in this tumultuous global economic climate, the close to N1.3 trillion spent annually on subsidizing fuel is unsustainable when it could be channelled towards development projects and provision of infrastructure. Those against the policy argue that removal of subsidy, which is one of the only way most Nigerians get their “share” of massive oil revenues, will lead to an over 100% increase in the price of fuel with a rippling effect on the entire economy and thereby bring untold hardship on the common man.

In all this intense debate, certain questions have remained unanswered  particularly from the camp of the government, not just on whether subsidy should be removed or not, but on what exactly this policy entails and its consequences,. The government has been exceedingly secretive, vague and ambiguous over its exact plan of action to this end that is how such funds/proceeds would be utilized in realizing all the lofty promises of infrastructure provision and investment in capital projects, how the government would address the inevitable inflationary pressures that would occur and what palliative measures would be put in place to minimize and cushion the harsh effects of these inflationary pressures on the  populace and on the economy.

Even the most nonchalant and blasé observer of events in Nigeria would agree that the government has done a very poor job in political communication and engaging stakeholders and common Nigerians on this subsidy issue. Nigerians became acquainted with government’s plans to remove fuel subsidy from rumours a few weeks after the inauguration of President Goodluck Jonathan, which the government denied several times, before the bombshell was dropped in the National Assembly. As if that wasn’t bad enough, the government to date has neither made any concerted effort to properly engage Civil Society, academics and the general public nor does it have a coherent policy document or blue print with a clear break down of the amount of PMS consumed daily/monthly/annually; the quantity of PMS refined and produced domestically vis-a-vis the amount imported; the exact amount of subsidy that covers what percentage of PMS; the exact manner in which the “cabal” is fraudulently benefiting from fuel subsidy at the expense of Nigerians; measures to be taken to combat this fraud and bring these perpetrators to book; a projected timeline of how subsidy would be removed and how the funds would be utilized; the short, long-term and medium-term effects it would have on the economy; a timeline of rehabilitation of existing refineries and how many new ones would be built over what period of time and how the supply structure of fuel would be overhauled. In the absence of this policy statement, most of what many informed people have learnt about the fraud and opaqueness revolving around petroleum subsidy has emanated not from the government, but from the efforts of academics and journalists such as Farooq Kperogi, young activists such as Kunle Durojaiye,  former head of state General Muhammadu Buhari,  a Former Federal Director of Budget Chief Omowale Kuye(ofr), all of whom have shed light on the issue.

While the government has repeatedly stated that subsidy only benefits a few middle class to upper class Nigerians at the expense of common Nigerians, it remains very sketchy how government intends to utilize these funds to the benefit of common Nigerians. We have learnt that the proceeds from the removal of this subsidy would be used in building infrastructure, schools, hospitals, roads and refineries. The Vice President Namadi Sambo on Friday 13th December while engaging some members of Civil Society said a subsidy savings management programme would be unveiled with which Nigerians can monitor the judicious management of these funds. As this was only announced after the subsidy-removal debate had raged on for months with barely a month to the implementation of the policy proper, one could rightly assume that this came as an afterthought to the government in a ploy to assuage angry Nigerians as the plan is bereft of detailed explanation. Given the notorious inefficiency, leakages, corruption, waste, mismanagement and excessive bureaucracy that characterize the management of public funds, what assurances do Nigerians have that the management of subsidy proceeds would be any different from the norm?

Most importantly, it remains unclear what palliative measures would be put in place to cushion the inflationary pressures on Nigerians, that would inevitably abound from this policy. As the Minister of finance, Dr. Ngozi Okonjo Iweala announced, the price of PMS per litre would go up from the current official rate of N65 to more than N120 and upto N150 ($1). In the absence of a coherent, logical and clear-cut policy document, government has not made projections on how long this price increase would last before market forces kick-in and bring down the price, what projected impacts the increase would have on the lives of Nigerians and on the economy, what precise inflationary pressures would be the consequence and whether this inflation would be short-term, medium-term or long-term and how government will ensure that such inflation would not have a deleterious on Nigerians and on the economy. Though the Honourable Minister said “palliative measures” would include the launch of the Subsidy Reinvestment and Empowerment Programme (SURE) , maternal and child services, youth employment programmes, urban mass transit, “infrastructure” projects etc, these proposed programmes remain vague and disjointed because they would simply be a duplication of functions of already existing ministries and parastatals. It is difficult to envision how “maternal and child services” would for instance curb inflation.

Given that the entire Nigerian economy is an oil-based enclave economy in which every sector literally depends on petroleum while the  perennial problem of power supply has ensured that industries, banks, schools, hospitals, factories and households, are all powered by generating sets fuelled by diesel or petroleum, it doesn’t require a super macro-economist to extrapolate and deduce that an increase in petroleum prices by 100% would lead to a corresponding increase in all goods and services by same percentage: foodstuff and consumer goods, school, hospital and banking services, transportation fares and everything else. This inflation is inevitable, yet the government has kept mute over how exactly it will cushion these anticipated impacts. Are there going to be special social benefits to be handed out to Nigerians? If so what form would it take and how would it be disbursed?

This unnecessary tension in the polity and controversy surrounding the planned subsidy removal could have been largely avoided if only the government had been more adept and tactful in its political communication with stakeholders and with Nigerians. That there is monumental fraud and inconsistency surrounding fuel subsidy is undisputed, anyone who has keenly followed the debate in the past few weeks would attest to that. However the manner the government has approached the issue with secrecy and lack of consultation at the onset, only now engaging some members of civil society not to engage them critically, but just to win them over even so without a clear policy statement is fuelling the fire of this controversy and making the real motives of government suspect. It remains to be seen how things will pan out in the next few weeks and how long government will continue with this futile and maladroit approach in trying to win over Nigerians to buy this highly unpopular, ill-thought out and controversial policy decision.

By Zainab Usman of zainabusman.wordpress.com

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5 Comments

  • If the Government is truely by the People, to the People & for the People, They should forget about the subsidy removal because the People doesnt want it at all and this will cause nothing but MAKE LIFE MORE DIFFICULT TO THE MASSES, INCREASE THE RATE OF UNEMPLOYMENT, ARMED ROBBERY, SCHOOL DROP OUT & DRUG ADDICTION.

  • FUEL SUBSIDY TO BE REMOVED QUICKLY BEFORE THE NIGERIAN SHIP CRASHES. LOL

    ….From one pestilence to another: the petroleum industry deregulation plague is on its way, there is no going back! …It is the best way for Nigeria to save money, shore up her responsibilities to the citizenry and survive, THEY CLAIMED. Wonderfully sounding examples, like that of the telecom sector deregulation are been cited by the Goodluck boys and girls (Ministers and political appointees). What surprises me is how these wise men and women have failed/refused to see the ridiculous differences in these examples.

    Price will go up but things will eventually normalize, THEY SANG into our dull ears. But, before things normalize, what happens in between is not anyone’s concern or should it not be considered. They tell us how government has failed in enterprise but they refused to tell us whose hands are in these publicly acclaimed failed governments, who are the individuals behind these consistence failure. Half truths, everywhere!

    GOVERNMENT CANNOT RUN ANYTHING COMMERCIAL, except the printing & minting of real money, …..ehhh, plus the disguised CLUB HOUSES that are branded government houses, Ministries, Agencies and Paracetetals where the monies are shared to the privileged few.

    ….Countries that have deregulated are quickly cited as good examples but, they fail to check what the minimum wage is and, what the citizen’s per capital earnings are in those countries; they failed to see how the government of those countries are actively involved in their transport sector at all levels – such that the poor masses can never be held to ransom by shylock transporters who will increase 500% when fuel increases by 5%. They failed to see that the ruling class in those countries live a responsible and trimmed lifestyle, eschewing corruption – they do not waste public funds in their own luxury as they do in this country. They failed to check, the number of cars, people and the resultant logistics in their leaders’ convoys and how all of these impacts the tax payers. They fail to see the social support systems available in those countries. They fail to see how up and doing and how patriotic the regulators of the energy sector in those countries are; they fail to see that electricity are always made available to ordinary people in those countries such that the citizens can reliably cook their food with electricity (if they like), have no business with generators plus their fuelling requirements, and also have the basic infrastructures/amenities that helps them to effectively do their business and be more productive.

    Yes, there will be issues when we deregulate but it will normalize with time just like in the telecom sector, THEY SAID. But somewhere in between, families will go starving because they could not afford kero or gas to make their food. Transport fares will increase astronomically, food prices in markets and restaurants will uncontrollably increase as the sellers/operators pay transport, fuel their generators and buy cooking gas at the deregulated prices. In all these, the minimum wage will remain 18,000 per month and the small and medium scale industries will continue in penury as there are no jobs/contracts to do, even from the Ministries because the Directors have registered their own companies and do the jobs by themselves. Anyway, that where there is even anything to do, in most cases all the Director’s, PermSecs and Ministers need is just an idea, followed by quotation, an invoice and a bank account accessible to them. The poor business people will be used as they run around them chasing for business and Inland revenue/tax board will continue to tax every registered company, whether they do business or not.

    Is it really true that the only way forward is to remove fuel subsidy and, not to tamper with their huge wastes as we witness daily, not to cub their corrupt practices and unwarranted luxurious lifestyles that negate any iota of understanding of the dangers ahead that they warn us of their immanency if fuel subsidy is not quickly removed.

    Is it true that they are unable to see that they could save the masses these great troubles by first building a number of new refineries and maybe privatize them (hence Government cannot run anything) immediately, in the same time that they are removing subsidy. This will sure provide a quick starting point for the investors and guarantee minimal impact by reducing the time-lapse between when the licensed refiners will build refineries and take off for the masses to feel their impact. What this means is that the current importation will continue unabated, even in an unregulated manner, and it may take over 3years before the refineries can really take off, therefore price will remain an all-times high for that period.

    They are telling us how much good things they will do with the saved subsidy money. But, the questions is: Can we even trust agian that they will put the moneys to use as claimed. If they can do so with the saved subsidy money, why are they not able to do it with the ones that are currently in their hands.

    I think they are only trying to save more money to further fuel their corruption and luxury.

  • I am surprised the people of Nigeria didn’t see this coming with, the election year for the Presidency of USA. Apparently the Oil Tycoons controlled by the filthy rich in the USA are continuing their smear campaign against President Obama. What does it have to do with Nigeria … a lot of it has to do with Nigeria and the world. These Oil Tycoons are also controlled by the Republican Congress in the USA opposing everything the first African/American President Obama has proposed to, the benefit of themselves and their political party not, to the American people affecting global communities such as Nigeria while, the US Republicans and Congressional leaders are now on a smear campaign against President Obama which is, spreading Globally beginning with the high cost to process Oil. It doesn’t cost much to process, though politically these Oil tycoons would like for the world to think the cost is higher so, either listen to what they say and the world pays, while they continue to get rich, while the world suffers to their benefit. Bullcrap !! Its time to take back what these Oil tycoons are charging in, excess of the over priced oil to their benefit. President Goodluck Jonathan should use his intellect for the benefit to his people which is the good of the country or, suffer the consequences which maybe more attacks by Boko Haram and, now other smaller communities more, protest will develop plaguing on his position to harm the people of Nigeria. A smart president will appoint only cabinet members that will produce results towards the benefit of his people by, eliminating the corrupt FG officials presently in office. This means deplete all their assets and provide it back to the people, charge the oil tycoons a much higher lease and, utilize the trade to defer the high price they’re charging eliminating excise cost. Time to take back what belongs to the people or, Goodluck Jonathan will certainly become Badluck Jonathan. Do what’s right! Or, suffer retribution and revolt by the Nigerian people. The world, will support the people of Nigeria and not Federal (CORRUPTION) of Nigeria.
    LISTEN TO THE PEOPLE, for without the people what do you have … NOTHING! … Good Luck Jonathan … others will come, do whats wise!

  • Why does the Nigerian government find dealing decisively with the corruption that has plunged the nation into a global ridicule less important than removing oil subsidy? It is obvious that they are trying to mop up more money by taxing the helpless masses to increase the plunder available for their sharing so that there could be enough to continue to fuel their luxury and untamed appetites?

    You can see how all that come to support the government on TV are all government apologist, favoured politicians and shameless political contractors that parasite on the executive. …from one lying minister that never bought fuel to another minister that reels out polices and promises that he/she will never take responsibility for their delivery. From one hired analyst to one national economic team member that will naturally be ashamed to disclose his sitting allowance and, to one special /personal assistance/adviser on Niger delta or amnesty program; etc.

    The CBN governor that now lectures like a ‘holi-spirit’ and sounds like an angel is the same that came into CBN some years back and immediately tripled the number of licences awarded to BDC operators in a bid to bring in his own and also please his friends /godfathers without considering why his predecessor pegged it to a limited number of 50 class A operators. By the time he realised how the national reserved is depleted by this act, rather than take responsibility for his mismanagement, all he could do was to unilaterally revoke all licences with ridiculous claims. Even as that careless act of his killed genuine entrepreneurs in that sector, threw many out of job and eroded the people’s investments, he never cared but, he continued with lies upon lies to cover up his errors. The same Sanusi assured the affected BDC operators that they will get their mandatory 500m naira deposit returned to them quickly (within 3 months of the change in policy) in order to minimised their losses but, this never happened until after a full year of that promise. Yet, that was within the ‘small CBN’ that he has absolute control over its operations. All manner of things happened under his nose, including asking for bribes by CBN inspectors and this was reported to him in a meeting with stakeholder and he never acted. If he could not supervise CBN to implement those little promises of his, how is he going to supervise the Nigerian Government (executives) to implement this big one? one thing is to sell promises and another is to implement then as said. Is he just telling us what they plan to do with money saved from the petrol subsidy, how is he assuring us that he will follow through for the delivery of the promise made in the SURE document they are spending billions to promote. Am sure they are also preparing to pass the bulk or urge us to be patience when their failure in its delivery becomes obvious. That is if they are still left in that position, the new minister will explain how it is not their fault to us.

    The Petroleum Minister made a sensational visit to Benin-Ore express-way when she was minister for works with her well-ironed coverall, she cried and made remarkable promises for the construction of the road. That never happened and she is not even ashamed.

    But wait a minute, where is the money saved in diesel deregulation since 5years ago. Let us assume that diesel consumption is about a quarter of that of petrol, shouldn’t we have saved the same amount of money in five years and invested it where the people could see and trust the government.

    Ehhh…. Every nation that goes down the privatization road as Nigeria has for the past few years ends up in drastic reduction of their overheads as most of the non-performing government enterprises are sold out, the usual wage bills and subventions are severed from the national budget. Where are the savings in our privatization exercise? Instead, Nigeria’s recurrent expenditure has continued to be on the rise that it now gulps about 72% of National budget. What exactly is happening? Where are the gains of privatization?

    Here is a report of how Nigerian lawmakers earn over ten times Obama’s annual wage: http://travel.wikinut.com/​Nigerian-lawmakers-are-the-high​est-paid-in-the-world/​2fpmxk_a/ . This is just for the documented earnings, how about the off-the- records sharing. How about the executives and the game in public offices, should we talk about those presiding over ministries, departments and agencies?

    The question is: Is it really true that it is better to ignore corruption and increase the burden on the poor masses?

    My prayer is that whoever that supports corruption for what he/she benefits today should live to bear the agony of seeing his/her children and grand children consumed by the fire when it begins to burn tomorrow. Let everyone and his/her generation be vindicated by the role he/she played to put Nigeria where it is at any given time. AMEN

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