THE FUEL SUBSIDY SAGA IN NIGERIA: A drawback resulting from government inefficiency (Part 2)

Subsidy on Fuel Brouhaha: A Nigerian Syndrome  

In reference to the history of the fuel subsidy saga in Nigeria as discussed in the prequel series to this, it is pivotal to state that the fuel subsidy saga is one that has been on for a long time and so far seems not to have an ending. This is interestingly corroborated in the widely publicized work; “Soon, We Shall All Be Trekking” on 01 March, 2009 on nigeriavillagesquare.com by Dr Reuben Abati, the Special Adviser on Media and Publicity to the Nigerian President, Goodluck Jonathan. Though, it is pivotal to note that as at the time of publication of the aforesaid, Dr. Reuben Abati was not a member of staff of the Presidency.

From the aforementioned publicized work, Dr. Rueben Abati said “It was the same argument that was used to raise the pump price of petrol from N11 all the way to N70, that was in those days when they used to tell us that a litre of petrol in Nigeria was cheaper than a bottle of Coke, and there has been no improvement in the quality of infrastructure since then. Muhtar says privatisation of the refineries is important and that government is determined to get it right this time. The Group Managing Director of the NNPC, Mohammed Barkindo says with local refining, cost associated with importation will be eliminated and retail prices will become cheaper. We don't think so. Because even if all the refineries were to work at optimal capacity, Nigeria would still have to import refined petroleum products to satisfy local demand. And can anybody rely on government's promise? The reality is that Nigerians no longer trust their governments.”

Studying the quoted words of Dr Reuben Abait reveals the lapses in governance in time past which sadly is still in vogue. Three years on, the government has shown microscopic signs of its determination to get it right even though the approach to getting it right is lucidly written on the wall for all to see.

This brings these two questions to mind;

• Doesn‘t the Nigerian Government know what to do to get it right?
• An interesting question asked by a friend of mine’s dad in the course of a tête-à tête with him as thus “why is Nigeria a country that programmes itself for suffering?”

These questions were necessitated by the fact that the call for the approach to be employed by the government to turn around the sufferings of its citizenry through a vibrant economic policy and palpable effective approach to government have been made mention of and suggested at limitless number of times but these calls sadly fall onto deaf ears due to the shallow approach by the government at dealing with corruption, an economic killer, economic terrorist and the biggest bottleneck that has impeded Nigeria from being where she is deservedly meant to be, all thanks to how richly endowed Nigeria is with Natural Resources.  

Yes! As revealed by www.nigerianoilgas.com in March 2011, the China State Construction Engineering Corporation intends to build 3 new refineries at a deal reported to be in the region of $ 23billion.

These refineries, if constructed are expected to be located in Kogi, Bayelsa and Lagos States. They are expected to grippingly have a collective refinery capacity of 750, 000 barrels per day (bpd) which logically is a brilliant feat with an achievement that would be of a pivotal effect on the Nigerian economy due to the fact that added to the currently estimated 450,000 bpd collective refining capacity of the available four refineries, Nigeria would have a projected refining strength of 1.2 million bpd which is 670,000 bbl/d more than the required 530,000 bpd estimated to be needed by Nigeria to utterly meet its local refining needs. Thus with the anticipated refining strength of 1.2million bpd, Nigeria would have the exportation of refined petroleum added to its source of foreign earnings. 

In as much as this indeed are good news and somewhat positively answers the aforementioned questions, the news of this project may end up being a forlorn attempt at putting smiles on the faces of Nigerians which is attributed to the nature of the lame government regimes prevalent in Nigeria overtime that have synonymously at the end of the day brought to vainness, the widespread jubilation of an end to the importation of refined petroleum in Nigeria. To this end;

·         A year after, nothing has been heard of these projects and Nigerians have not been briefed on the progress made in the construction of these refineries and

·         The 20 years period it took for the Port Harcourt Refinery to get constructed are two basic reasons why it would not be a surprise to at the end of the day realize that such projects where only made for the headlines, though transiently.

From these reasons, there is need for the government to turn a new leaf and carry its citizens along through an up to date brief on the progress made on such projects. If appropriately carried out with respect to the construction of refineries, this would go a long way at influencing the effectiveness of government by making the refineries to be speedily constructed and most importantly put the minds of the citizens at rest, thereby spurring the government to act fast and efficiently water the expectation of its people with the refineries being brought to light..

The reason put forward by President Goodluck Jonathan, though seeming somewhat refined in its disposition as compared with the historical excuses brought forward by past regimes is one I perceive to be characterised with a sell out capability of hitting the box office, courtesy the expected gullibility of Nigerians, the usual experience that was expected though dashed this time around. Noteworthy, all excuses put forward are in itself not disparate from the past. 

In addition from the  Dr. Reuben Abati post, he was of the view that “one major excuse offered by the Minister of Finance is that in the face of huge budget deficits, the Federal Government can no longer sustain an annual subsidy of about N640 billion in the downstream sector. In the past three years, a total of N1. 6 trillion has reportedly been spent. The question to ask is: How? Where is this subsidy that government talks about? How was it disbursed? It is not enough for government to talk about huge subsidy, it must explain what constitutes that subsidy. Now, they argue that if government can have access to this N640 billion per annum, it can then use it on infrastructural development. Well, we have heard that before”.

From the foregoing, it is conceived that the excuses put forward by successive regimes have been nothing but a shadow of its predecessor and if history is anything to go by, it is expected that the effectiveness of the status of the newly refined excuse of subsidy removal will follow the path of its ancestral excuses, thus with its effectiveness being next to naught. But President Jonathan may just be the miracle worker bringing an end to this detrimental attribute.

In as much as a handful of Nigerians have called for the present administration to be given a chance to prove itself as being different from its predecessor and not having what I will dub “the systematically transmitted syndrome of ineffectiveness in governance”, it is not a surprise to find most Nigerians throwing the words of the president to the air just like the exhaust of carbon monoxide from a power generator which this time produced the biggest protest ever witnessed in Nigeria thereby being dubbed the Nigerian Spring, one likened to the protests popularly referred to as the Arab spring that swept part of the Middle East in 2011; notably Tunisia, Egypt, Libya, to mention a few and Syria which is still ongoing as at the time of this publication.

Though reasonably, the President of the Federal Republic of Nigeria and every other President in the world deservedly need time to work but what sadly makes Nigeria different with respect to the level of retort by Nigerians in January 2012 was the fact that Nigerians had ran out of time with patience, all thanks to the deceit in the past, courtesy the abrupt misappropriation of funds by preceding governments. Anyone who is a respecter of history, most times makes such history as a basis for his or her predisposition, necessitating the conclusion that the removal of subsidy on fuel this time is no where different from time past. After all the time to work given to past Presidents to enact the dividends of fuel subsidy removal courtesy the expected use of the funds to provide the necessary infrastructural facilities was a sham ending Nigerians in misery. 

At this juncture, it is pivotal to state that Dr Reuben Abati now sings a new song, an ironical remix to his earlier words as posted in niageriavillagesquare.com. The reason for his nod to the subsidy removal is perhaps attributed to the verity that he has forgotten his earlier remarks so soon or apparently due to him now being an employee of the government he vehemently criticized. 

During the course of the resistance by Nigerians on the Presidential “New Year gift”, I got so saddened each time I watched or listened to the President and his cohorts say in the defence of the subsidy removal that it is the right step towards ensuring that such money are better appropriated and thus spent towards providing the necessary infrastructures in Nigeria. This perspective is one that reaffirms the kind of government prevalent in Nigeria, a country with a history of government that has repeatedly painted itself to be an employer of shallowness to good governance. Other governments of other countries that are oil producing countries, notably OPEC member countries have their crude oil refined to utterly meet its local consumption need and also part of its import need but in the case of Nigeria, the contrary is the case. 

Added to these, subsidies which should not be a big deal are being provided to ward off the economic hiccups that inhibit the standard of living of their citizenry thereby also serving as an advantage to easing the cost of living of the low income earners.

But alas, in the case of Nigeria, asides making subsidy a big deal the income of the average Nigerian by the standard of the minimum wage is put at N 18, 000 ($ 114)/ month an amount that is too meagre to make life worth living for the common man. 

With the level at which the Nigerian government complains about subsidies, having a dilly dally approach to it, I tend to presume that the government probably at some point misplaced the meaning of subsidy.

At this juncture, I perceive Government Subsidy to be an economic action taken by a serious minded government towards ensuring that certain goods of abrupt necessity and economic importance are made available to its citizens at highly affordable rates without regards for the prices of these goods at the international market or in the competitive pricing realm with regards to other prices that obtains elsewhere, in other parts of the world.  

This further entails the need for the government to ease the burden of economic hardship on its people by shifting a certain percentage of the burden to itself (the government) through the appropriate employment of the right economic policy, precisely subsidies should be eschew from international pressure.

An overview of effectively implemented Government Subsidies by other countries

As reported by africafocus.org the government of Malawi “in the 2008/2009 spent $186 million to subsidize fertilizer and seeds for poor farmers, tripling the previous year’s figure of $ 62 million. Malawi’s success in this program, against donor advice, has made the country a grain exporter and helped contain food costs. This action has been a turnaround for Malawi, bringing to history her food deficit and making her a country producing surplus grain and overcoming food shortages”.

 

Further inquest into this pointed out that the aforementioned was achieved through the Malawi Government Agricultural Subsidy Programme tasked with the primary responsibility of increasing agricultural productivity and food security.

Also, the United States of America provide huge subsidies to soy farmers which have largely contributed to the 25% increase in soy planting in the US since 1998, though notably leading to a consequent collapse in world oilseed prices as observed by organicconsumers.org. These said, in June 2009, downsizinggovernment.org pointed out that the U.S. Department of Agriculture distributed between 10 billion and 30 billion in cash subsidies to farmers and owners of farmland each year.

Furthermore inica.org pointed out the need for African countries to take a cue from its developed counterparts and embrace subsidies on Agriculture in order to help boost their production. According to inica.org; “for the development of agriculture and upliftment of the farmers in Africa agricultural subsidies is a must.” The government of Swaziland too intends to subsidize agriculture which in the long run will lead to increase in productivity and thereby increase in food grains”. 

Moreover, in her desire to be a world leader in electric cars, and have a high patronage, www.mnn.com reported on Sunday, January 29, 2012 that the Chinese government was at the verge of offering its citizens a staggering $ 9, 400 (USD), to buy an electric vehicle which cost $ 21, 000. This represents a 44.76% off the actual cost of acquiring the vehicle. This in itself is a subsidy by the government of China towards the promotion of the patronage of its local produce thereby meeting the needs of her citizens.

Further to this, subsidy could be conspicuously used as a means to supplement the low income of individuals. An example is the government of Libya which provides subsidies on rent and utilities added to the minimum wage being received which according to Wikipedia.org is put at 130Libyan dinars/month (N 16, 370) for a single person, 180dinars/month (N 22666.2 ) for a married couple and 220 dinars/month (N 27703.15) for a family of more than 2.

The importance of subsidies on the productivity level, then the economy cannot be overemphasized. The link; www.un.org/ecosocdev/geninfo/afrec/vol16no2/162agric.htm puts it “one of the many economic differences between developed and developing countries is that developed countries subsidize farmers while developing countries tax farmers.” This indeed is where the government of developing countries to which Nigeria belongs to get it wrong. Though Nigeria subsidizes farming but sadly it has had little or no effect on the agricultural stance or contribution to the economy due to it negligence and very trivial attention in all spheres of agriculture which used to be mainstay of the Nigerian economy.

One of the reasons why Venezuela is thriving economically is primarily because of the huge subsidies on its petroleum product which makes its PMS the cheapest in the world. Contrary to this, it is very shameful for the Nigerian Central Bank of Nigeria (CBN) Governor to have publicly said in an interview in defending the reprehensible subsidy removal from fuel that the Federal Government cannot continue to be Father Christmas and thus have to stop/completely remove subsidy from Petrol.

But excuse me Sir (directed to the CBN Chief), Venezuela that has been subsidizing its fuel price is perhaps the “real father Christmas” and does know how to ensure that the nation’s national cake is appropriately shared with virtually everyone benefitting from the largesse of the government. In a write up by Professor Bedford Umez published on the Punch Newspapers on Wednesday, May 5, 2010 the then Venezuelan Ambassador was quoted as saying “In Venezuela, since 1999, we’ve never had a raise in fuel price. We only pay $ 1.01 to fill the tank. What I pay for N 12, 000 here (Nigeria), in Venezuela I’ll pay N 400. What is happening is simple. Our President (Hugo Chavez) decided one day to control the industry, because it belongs to the Venezuelans. If you don’t control the industry, your development will be in the hands of foreigners.”

The above quotation is indeed some words of wisdom the Presidency of the Federal Republic of Nigeria need to study closely because it provides clues to how the subsidy saga that has over the years been somewhat of a déjà vu can be riddled out and appropriately dealt with.

From the preceding, the only thing that will make subsidy removal justified is if and only if the nation is refining its crude oil to the full capacity of its local consumption and also meeting if not all, majority of its export needs. In addition the government should for no reason allow the so called cabals to add to the sufferings of 150million people, thereby holding the nation to ransom because in refining the words of the Venezuelan Ambassador, the oil industry belongs to Nigerians and not the cabals.

That said, I view the incessant subsidy removal by the government as a disguise act by the government to transfer the burden of its ineffectiveness to the members of the public, thereby making them “public” to cover up for the ineffectiveness of the government over its inability to provide oil at the cheapest rate possibly available, all thanks to the refineries not working at full capacity to utterly meet the local consumption needs of the country and most definitely, the exports needs of the country.

These actions by the government just put on view the trivial nature of the Nigerian government towards the plight of its people and the need to ensure that the masses are not made to suffer untold hardships.

Moreover, there have been many arguments with respect to if the Nigerian government will get the subsidy removal right this time around or if it it will be another act by the government that will back up its ineffectiveness. 

At this juncture, in the sequel part to this, the manner in which Nigeria operates her oil industry with respect to its supposed Santa Claus role at providing oil at cheaper rates as stated by the Governor of the Central Bank of Nigeria will be closely monitored in relation to other oil producing nations, precisely OPEC member states. 

We will further take a look at how fair and equitable the Nigerian government really is at the removal of subsidy from fuel having considered the effectiveness of Government on this issue in relation to other OPEC member countries.

This is due to the question “why is it that the government has over the years used the same tactics and excuse towards removing subsidy from petrol with its promised effects next to naught?”

In arriving at this, the 12 member nations of OPEC will be in view and the bases for comparison between these countries and Nigeria are the Petrol price per litre; Minimum Wage and the poverty level etc.

However, the Dollar ($) of the United States of America (the most widely used and convertible currency in the world) would be the currency used. 

Sources:

www.nigerianoilgas.com/?p=518  “Nigeria’s Refineries are Working Again but…”

www.africafocus.org/docs09/sub0901.php “Africa: Subsidies that work”

www.organicconsumers.org/gefood/govtsoyloans.cfm “Massive US Government Subsidies for GE Soybeans”

www.inica.org/Agricultural-Subsidies-in-Africa.htm “Agricultural Subsidies in Africa”

www.mnn.com/green-tech/transportation/blogs/thanks-to-huge-government-subsidies-china-poised-to-be-world-leader-  “Thanks to huge government subsidies, China poised to be world leader in electric cars”

www.downsizinggovernment.org/agriculture/subsidies  “Agricultural Subsidies”

www.nigeriavillagesquare.com/forum/take/30118-soon-we-shall-all-trekking-html “Soon, We Shall All Be Trekking”

en.m.wikipedia.org/wiki/List_of_minimum_wages_by_country

Bedford Umez, (May 5, 2010), “Nigerian tragedies and the way out”, The Punch Nigeria Limited 

To be continued...