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