On The Vexed Issue Of Petroleum Subsidy…
By Bola Bolawole
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For an opposition party that said petroleum subsidy was a scam, since it assumed the reins of power the APC/Muhammadu Buhari government has paid more subsidies on petroleum than the government it took over from!
Not only that, the way petroleum subsidy has ballooned under Buhari’s watch, year-in, year-out, has left no one in doubt that corruption of the worst order has been the name of the game. According to the Finance Minister, Zainab Ahmed, perhaps the worst Minister of Finance this country has ever had, subsidy on petrol in the 2023 budget under preparation will total N6.7 trillion!
Between 2006 and 2015, the Obasanjo, Umaru Yar’Adua and Goodluck Jonathan administrations all put together paid N8.94 trillion on petrol subsidy.
For a single year alone (2023), Buhari’s administration is budgeting close to that amount (N6.7 Trillion) as petrol subsidy! Petrol subsidy payments grew by 349.42 percent beginning from Buhari’s second term of office in 2019 and last year (2021) from N350 billion to N1.573 trillion.
Apart from unbridled corruption, rising price of crude oil in the international market and the falling value of the Naira are the other reasons fuelling the escalating cost of petrol subsidy. Rising oil prices in the international market, which should be a blessing, has turned into a curse because the country’s cost of importation of finished petroleum products wipes away any gains, leaving the country with a balance of trade deficits.
In eight years, Buhari has neither repaired the country’s comatose oil refineries nor built a single new one. Rather, trillions of Naira had been wasted on maintenance of idle refineries and the payment of salaries and emoluments to idle staff.In the face of this monumental waste of resources (and the debt overhang it has instigated), the debate has been on concerning whether or not petrol subsidy should stay.
In this column today, one of my avid readers, Anthony Obasola Shoderu, bares his mind on this vexed issue. The views expressed here, eloquent as they are, are entirely his! It is titled “Petroleum subsidy: Lest we throw away the baby with the bathwater”.
Enjoy it:
“The issue of subsidy has been one of the several hard nuts to crack in our country’s political-socio-economic challenges. Various terminologies have been employed to describe petroleum subsidy; from appropriate pricing to under-recovery. Arguments have been canvassed for its removal or continuance but mainly for removal. The current debate on subsidy is on petrol, called Premium Motor Spirit (PMS) by those in that industry. Of note is that subsidy has long been removed on Kerosene (Dual Purpose Kerosene), and diesel – Automotive Gas Oil (AGO).The Merriam-Webster dictionary defines subsidy, amongst others, as a sum of money granted by one state to another; it goes further to add: aid, grant-in-aid, subvention, or assistance. For instance, aids such as fertilizers, the use of agricultural equipment at less than cost or for free, and other aids made to farmers are to encourage modern and improved farming techniques.
An agricultural subsidy is also granted to popularize agriculture and boost literate youth participation and, of course, abundant yield. In the case of petrol subsidy, it is an assistance to cushion the effect of ever-rising cost of living, which is felt more by the general mass of the people. This is because the cost of transportation, whether of goods or persons, always goes up disproportionately each time the price of petrol is raised.The resultant cost of transportation of goods has a domino effect on all facets of living – from the price of food items and services to rents, etc. The recent disruption in the supply of petrol, leading to hikes in the pump price of the commodity, reflected adversely in the inflation figures released on August 15th. Of the figure of 18.6%, food inflation alone was 20%. The NBS noted the significant impact of petrol in that calculation.Certain national issues have contributed to the rising cost of living of the mass of Nigerians, causing them hardship. These are insecurity, lack of constant power supply, non-functional refineries, the poor state of public transportation in the country, the non-implementation of the Minimum Wage by many States, and the growing poverty in the land. The matter of insecurity in Nigeria has now become increasingly topical in view of its country-wide pervasiveness. Security challenges have long been associated with Boko Haram that has morphed into the Islamic State of West Africa Province (ISWAP), and are associates of Al Qaeda. A second deadly group is the herdsmen, believed or said to be migrant foreigner-herders of the Fulani stock. The third security irritants are the so-called bandits, which is a mix of the first two – Boko Haram and herders.Farming, whether at peasantry or large-scale level, has been negatively impacted by insecurity in the agrarian communities of most parts of the country, particularly in the north-east and north-west. The tragedy of insecurity includes the unnecessary diversion of energy, funds and other resources that otherwise should have been deployed to develop economic and social infrastructure, shortly after the COVID-19 scourge, which is now gulped by the fight against insecurity, thus further pauperizing the people.Most companies, hotels, hospitals, etc. (big, medium, and small), do not rely on the national grid for their electrical energy needs. Most of them depend on diesel-powered electrical generators while the national grid supplied electricity functions only as a “standby” source of power supply! Aside from the extra cost implication, there is also the problem of noise and environmental pollution, and climatic change hazards.Households and artisans rely on generators of different kilowatts for their power needs. Is it morally and socially justifiable to scrap subsidies? What of the economic disruption that the removal of subsidies can cause when the government is yet to fix the power and energy needs of the citizens?
We cannot over-emphasize the need for our local refineries to function and produce optimally. Aside from generating the badly-needed employment for our people – the youth, in particular – Nigeria will also save more of her foreign currencies, stop importing inflation and pauperizing her people. Country after country provides subsidies for different aspects of life to cushion the effect of the rising cost of living on their vulnerable citizens.So much has been said and written about corruption, such that political parties hinge a substantial portion of their manifestoes on waging war on the monster; the incumbent government touted the same in her manifesto! The discussion on corruption here is strictly on subsidies on petrol as it concerns the petroleum industry in Nigeria. Concerns are about its debilitating effect on the nation’s economy and the burdened and already impoverished citizens. I suppose it is the danger corruption poses that has caused the IMF to be concerned about the nerve-wracking N6.7 trillion budgeted for petrol subsidy!
How many petrol-run electric generators and motor vehicles do we have plying the roads of Nigeria in these days of terrorism and banditry? Travelling in most parts of the country, particularly in the terrorists/bandits-infected areas, has either stopped totally or has significantly been reduced: who or what, then, are those daily consuming the concocted millions of litres of petrol, to the extent that petrol subsidy claimed N2.6trillion in January to June this year? This is daylight pandemic corruption! The National Assembly appears to be probing this vexatious matter of scandalous figures of subsidy payment. I hope its probe will not go the way of those before it!
The developed economies continue to provide subsidies to cushion the financial burden on the masses. Take the US and UK for instance: the US President Joe Biden has signed a $700bn Bill that aims to fight climate change and healthcare costs while raising taxes mainly on the rich. The bill has no other objective or name than to provide assistance or subsidy to the American people. In the UK, The Telegraph reported that “The Transport Secretary is proposing a £260 million taxpayers’ subsidy to cut the cost of bus journeys that would save £3 on a single ticket for many hard-pressed families” In response to the rising cost of living in the United Kingdom, Minister Lord Harrington has asked that monthly payments to families hosting Ukrainian refugees should be doubled.
France, Germany, and other European countries are granting one form of assistance or subsidy or another to make life worth living for their people.The way out for Nigeria includes tackling and eliminating corruption in the oil industry. Sanction and prosecute all oil-lifting companies found to have diverted or smuggled petroleum products from assigned locations/zones or beyond Nigeria’s borders without due authorization. Use electronic trackers to monitor designations of all tankers lifting petroleum products from lifting depots. Fix electricity. Increase electricity generation and distribution. Fix the nation’s refineries and improve public transportation across the nation.In conclusion, I submit that the economic hardship afflicting Nigerians, exacerbated by pervasive insecurity, pandemic corruption in high places, and dysfunctional utilities should be decisively dealt with immediately. Subsidy on petrol must not be reduced or scrapped because no normal human being throws away the baby with the bathwater”.
