The Vanishing Subsidies

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BY RICHARD ODU

In two weeks of President Ahmed Bola Tinubu’s administration, three subsidies vanished from the national economy – petrol subsidy, as well as subtle subsidies exisiting in the foreign exchange market and in the education sector. The one that got the people vexed most was that of petrol, the liquid that keeps the nation on wheels. While the others are yet to fully impact on the economy of the nation, the removal of petrol subsidy instantly shook the country as prices of commodities hit the roof tops instantly.


According to the National Bureau of Statistics (NBS), Nigeria’s inflation rate stood at 22.22 percent in April, this year, against March figures of 22.04. This meant a .18 percent rise. We recall that the fluctuations in the petrol pump price began early this year when it oscillated between the official N165 and N500, despite provisions for subsidy until June 2023. One does not need to be a super economist to reason that the rising rate of inflation is a result of the rising petrol pump price.


When President Tinubu poured petrol on the raging fire of fuel subsidy removal on his day of inauguration by pronouncing it gone, petrol rose above N500 per litre. This means another round of spiral inflation in months to come if nothing is done to mitigate the problem.


Truly, Nigerians had prepared their minds for the fuel subsidy removal. However, the president’s speech drew flaks as if a time bomb had been detonated. What the people had expected was a quiet defusion of the bomb rather than the shocking blast. An Igbo adage says that it is not proper for a blind man to flash his bad eyes in the open. In other words, such hasty pronouncements that send shockwaves into the polity, just as it did in this case, are handled with caution. Besides, emerging facts were that the subsidy ceases at the end of June, according to the provisions of the budget. But the pronouncement was made on May 29.
Indeed, successive governments had tried to impress it upon the people that the government had been magnanimous to its citizens by subsidizing the cost of the petroleum products that they use. Several times these governments had threatened to remove this subsidy. But the masses insisted that it is their right, citing various subsidies that exist in other countries.
The military government of former President Ibrahim Babangida at some point introduced what he termed palliatives and went ahead to adjust the petrol pump price, saying that the subsidy had been removed. The drastic devaluation of the naira at that time made a mess of the grounds he gained.


Subsidy simply means that as the international market price of fuel is often beyond the reach of the people, the government intervenes by fixing pump prices lower and paying the difference, aware that fuel price is a major determinant of the price of other goods and services that are transported across the country.


The subsidy palaver climaxed when the Goodluck Jonathan administration attempted to take it away as it had constituted an avenue for high sleaze in the nation’s petroleum corporation. Reportedly, subsidy was claimed for products not supplied. During that period, the slogan “Occupy Nigeria”, which meant a series of mass protests and demonstrations until the government changed its mind, surfaced. Undaunted and convinced that it was the best way to go, Jonathan went ahead to remove it at the risk of his political career, shooting the price of petrol to N140 per litre about ten years ago.


The nation virtually caught fire. The Nigerian Labour Congress (NLC), alongside prominent members of the society, vehemently resisted it and there were series of negotiations with that administration after which the price was pegged at N97 per litre, meaning that a bit of the subsidy was brought back.


Trust politicians, it became a campaign issue for Jonathan opponents who went as far as declaring that there was nothing like subsidy, that it was just corruption going on in his government. They boasted, among other promises they made, that petrol prices would crash as soon as they got to Aso Rock. Eight years after, the story he become more awry than ever.


What irks the people in the whole affair is that a nation that had three major refineries of repute, refining crude that is easily obtainable from the nation’s soil, suddenly found itself importing the petroleum products at huge costs and in a regime where the value of the naira had dipped so drastically. If the common knowledge that some past rulers of the country had built refineries outside the country is indeed true, then no one would blame the people when they think that these powerful past and present rulers have their hands in the sordid situation of the country with regard to petroleum products.
Years ago, when it became public knowledge that our refineries were no longer working due to some convoluted turnaround maintenance deals in which money was consistently paid to some powerful persons for work not done, an official of the government told the nation that refining was being done abroad and that there was a deal to swap crude oil with the refined one. Crude is what we have in abundance, making the deal a cushioning one, just in the interim. The implication was that money was not explicitly involved in the importation of the petroleum products. What really happened to that arrangement?


Again, many years after our refineries had grounded, why was there no visible and frantic effort on the part of the immediate past government to fix these refineries and stop the importation that drains our foreign reserves?
The situation gradually led to the springing up of illegal refineries in the south south region, a development that had serious environmental implications. We recall again that former Vice President Yemi Osinbajo had flashed a solution to this in the way of licensing a few of these illegal setups as modular refineries and bringing them under government control. This proposal is yet to take off, just as the various licensed private and state government refineries are yet to assume form, except Dangote Refineries that is proposing to begin production in August. Again, we are yet to see the commitment of the Tinubu administration to getting refineries to work.


The two sides of the subsidy issue had left Nigerians in a quandary. If removed, the spiralling effect of the higher cost of petrol would send food and other commodity prices to the rooftops, thereby increasing the poverty level of the masses as well as raising the inflationary rate. If not removed, the hawks in government collaborate with unscrupulous businessmen to suck public coffers dry, using subsidies as conduit pipe.


Some had suggested that the subsidy be transferred to other areas such as health and education. That in itself is more susceptible to fraud as funds injected would almost be difficult to track or even quantify, just as in the days of military President Ibrahim Babangida who invested the saved funds into the transport sector.


It appears that the more we look at subsidies, the more confused we become. Just when the President cracked the hard nut on May 29, analysts came up with a new supposition that no one was paying anyone any subsidy since the direct-purchase-direct-sale policy was introduced in the NNPC by the Buhari administration. The presidential committee looking into the case at the moment must see it as a responsibility to clarify these emerging issues.


Now that the subsidy, whether existent or not, has been bid farewell, our focus should mainly be on exploring alternative sources of energy which is the way the world is gliding towards. However, the speedy resuscitation of our refineries to meet the people’s appetite for petroleum products is imperative, as well as the improvement in electricity supply to cut excessive consumption of petrol and diesel in private generation of electricity.

As we talked about the removal of petrol subsidy within the week, two other subsidies slipped off the hands of Nigerians. In the frontiers of foreign exchange, the government unified the exchange rate of the naira to the dollar and other currencies and liberalized the market such that one can source for the currency elsewhere without the Central Bank approval. The unification leading to a single rate market takes away the subsidy in forex purchase in the two-rate regime, saving money for the government and stopping the inheren sharp practices.


Another is in education. The Students loan Act is in preparation to withdraw government funding of universities. The fear here is higher fees that might not be remedied by the stringent loans being peddled. As the three subsidies have vanished, no one knows the next to go. Nigerians are yet to see the effects of these policies on the masses. And with the fake federalism on the table, where the mighty FG has total control of resources, systemic removal of subsidies are likely to affect the masses adversely, except restructuring takes place fast.


Oil has been at the centre of Nigeria’s problems since it was discovered in 1956 at Oloibiri, in the present Bayelsa State, putting the country among oil producers in 1958 when its first oil field produced 5,100bpd. It has sent us into a war and made enemies of brothers. It has continued to spill our blood and rendered us lazy enough not to look for alternative sources of revenue. It has brought out the oppressor inside us and created feudal lords that are mindless of the people’s feelings. It didn’t spare our agriculture and aquatic activities. Because of oil, the nation is disunited. On a very Candid Note, this must change.

Dr. Odu can be reached through dirimrich2018@gmail.com, or SMS 08115711108

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