In 1962, according to Alhaji Adamu Wazirin Fika, the Government of the Northern Region faced a shortfall in revenues from falling world commodity prices. At a crisis meeting of the regional ministers, the first decision agreed on was that the salaries of the ministers should be cut by 50 per cent.
Today, even
as the polity is becoming more heated due to worsening economic conditions and
plans by government to remove the subsidy on petroleum products, President
Goodluck Jonathan in his wisdom led a retinue of three executive jets and a
contingent of some 120 people to Australia for the Commonwealth Heads of
Government Meeting (CHOGM); the Head of the Commonwealth of Nations, the Queen
of England, went by British Airways (BA).
This scene
should set the tone as to whether the fuel subsidy exists at all and if
government is justified in its plans to remove it. Does the Federal Government
truly provide a subsidy on petroleum products consumed? If there is, should it
be removed at this point? Why not? These are just a few of the myriad of
questions bothering the minds of most Nigerians on this issue. What then is
subsidy? Does it exist? If so, is it justified? In what ways can the interest
of the ordinary Nigerian be best protected as far as the subsidy conundrum is
concerned?
Broadly
speaking, any mechanism that is designed to reduce the cost of an activity
(input and/or output) below market prices can be referred to as subsidy. The
policy of subsidy by government may be to keep prices low, to maintain incomes,
or to preserve employment and to influence investments and consumption patterns
in an economy. There are two approaches to this fuel subsidy debate – one
saying subsidy exists (Opportunity Cost – the government’s view), while the
other (Resource Endowment or Aluko- Buhari view) denies its existence.
According to
the Aluko-Buhari Approach, there should be no reason why Nigerians should pay
import-parity prices for petroleum products since we currently pay more than
the actual cost of producing and refining the product. The position nor subsidy
in whatever form. But as local demand grew, there was some justification for
government intervention in the process especially after the civil war when
local consumption continued to grow and demand outstripped supply leading to
shortages.
The Oputa
Panel of Inquiry which examined the root causes of the nationwide shortages of
petroleum products made wide-ranging recommendations which laid the foundation
for the present involvement of government in the importation, refining and
management of local consumption of petroleum products.
Though
government intervention sorted out the problems in the short term,
inefficiencies in the system began to manifest. At the time, the issues that
were to later change the management of the local consumption of petroleum
products thus bringing forth subsidy were not envisaged. For instance, there
was no conception that Nigeria would be unable to meet domestic consumption.
And even if we had to rely on importation, as it later turned out, the devaluation
of the naira was not considered. The naira was at par with the dollar. But
today, the naira seems to be on a permanent slide, and at the last count
exchanged at N160 to one US dollar With the continual rise in the price of
crude oil at the international market, the fixing of pump price of petroleum
products became difficult to manage because the prices of imported products
were at a bench-mark determined internationally – and in dollar terms.
So in real
terms, it would be right to state that subsidy exists on the petroleum products
consumed locally in Nigeria. As at year 2000, it was about N1.5 billion
annually but has risen to a whooping N1.2 trillion in the first nine months of
2011 – nearly the size of the capital budget for 2011!
Beneath the surface
of these facts lies the complication on the issue of subsidy. Given the fact
that we are an oil-producing country and the level of corruption in the
refining, importation and distribution process, is it justified to give away so
much money to a few? Is the interest of the ordinary citizen better served with
a subsidy regime, or are we better off without one? Although it is
ascertainable that there is a subsidy – the point remains that it would not
have arisen if not for cumulative inefficiency and corruption within the
petroleum sector over the years.
Facing the
reality of impending subsidy removal, the question that comes up is: “why now?”
Since government is a social contract between the government and citizens, it
makes sense to demand to know if removal of subsidy on petroleum products was
part of the campaign manifestoes of President Jonathan in the run-up to the
2011 presidential elections.
On one hand,
can Nigeria afford to spend so much on subsidising fuel importation? On the
other, if government proceeds with plans to remove subsidy, there would be
inevitable consequences for most Nigerians. This would have been a simple issue
had government made adequate provision of effective intermodal transportation
system – in form of metro, bus or urban taxi system. But this is not the case.
And since most Nigerians rely on petroleum products to power their individual
generator sets, and kerosene for cooking, the effects of the subsidy removal
would be far-reaching. That points to the fact of already existing poverty and
the result is better imagined.
A government
seeking for belt-tightening among her citizens should be seen to be prudent.
What we have instead is a regime that keeps an avalanche of presidential aides
– with more appointed just two days ago. Why should ordinary Nigerians bear the
burden of government insensitivity? Where is the legitimacy for a government
that keeps its recurrent spending at least 70 per cent seeking to pass the
burden of 360 new cars for legislators to the ordinary citizen? Where are the
specific projects to which the proposed savings would be committed? What
sustainable implementation plan exists for such projects? Where is the
blueprint to increase capacity to refine what is consumed locally? Who knows
how much petrol we really import? Who can tell us how much of it is smuggled
while the cost is added to “subsidy”?
How many
Nigerians know that the country now owes more than we did at the time before
our exit from the debt trap in 2005? Does a government that has shown no sense
of sacrifice deserve to further burden the impoverished populace with a large
number of unemployed people? Can we trust this government to use whatever
savings it may get from the removal of oil subsidy to develop critical
infrastructure, stimulate the economy and create jobs? Your answer to these
questions should be your answer to whether government is justified to remove
petroleum subsidy.
Under an
administration that exhibits some prudence and sacrifice, that is disciplined
and fiscally-responsible, and led by people of integrity, I would bear the
initial pain of subsidy withdrawal while our domestic refining capacity is
revamped and expanded. Under the current leadership addicted to spending all
its earnings on recurrent expenses, any more sacrifice from us for them will
only encourage Australia-like junkets and tenure elongation! More partying for
them, more pain for us.
Culled from www.thisdayonline.com
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