Ayokunle Odekunle: We must not miss this golden chance to do away with subsidy

On a humid day in January 2012, I was seated on one of the wooden chairs in the Large auditorium of the Nigerian Law School, Victoria Island Lagos enduring of those long lectures when i decided to go through my phone to see ‘whats up’ and lo and behold, Nigeria was on fire or perhaps put appropriately, Lagos (and some parts of Nigeria) were on fire.

“What has Goodluck Jonathan done again?”, I wondered aloud because his name was all over social media at the time. Then I saw that there was a massive protest against his infamous decision to remove subsidy of fuel by Government.

I was both happy and sad. Happy that perhaps, authorities of the Nigerian Law School were either going to allow us go home as a result of the restlessness in the Country or maybe the protesters would come all the way from Ojota to set us free so we’ll join the jamboree.

But alas, classes continued. I wept.

On the other hand, I was saddened by the fact that perhaps, because of the dislike for Goodluck Jonathan, his party, lack of understanding of what subsidy was/is about or perhaps because people just wanted an extension of the Christmas/New Year holidays, they had decided to oppose (unreasonably, I must say) the planned removal of subsidy.

Goodluck Jonathan bowed to pressure and returned to status quo and I wrote that we were going to revisit the issue in future and wish we had acted differently.
Here we are.

Proponents of the fuel subsidy argue that Premium Motor Spirit (PMS) remains one of the backbones of the Nigerian economy, contributing to making production processes in the country or impossible and that since the epileptic power supply of the country also makes it close to impossible for businesses to run sustainably without petrol, it is necessary for Government to subsidize fuel. This might explain why government is doing so much to subsidize fuel for its citizens. Nonetheless, this is becoming rather counterproductive.

The average Nigerians does not only know how the subsidy works but also does not quite understand why they still pay more than the regulated price for the in-demand product. According toreports, the country spends on average a whopping $7billion on fuel subsidy annually. As if to substantiate the reports, Dr IbeKachikwu also affirmed that Nigeria spent about 1trillion naira on fuel subsidy in 2015 alone. This is quite unfortunate when it was realized that most people, especially those outside major cities pay close to the cost of unregulated petrol which is about 150 naira per litter.
I am sure residents of Ibadan, Osun, Bayelsa and other cities outside Lagos can attest to the fact that they almost always never get to buy fuel at N86:50K. So to these people, of what use is ‘deregulation’?

Economically, subsidizing fuel has been largely unsustainable. NNPC loses approximately 12.5 billion naira per month by maintaining 100 percent responsibility on fuel importation at subsidised pricing using crude oil as a means of exchange. In a bid to sustain fuel supply, NNPC resorts to using federation cargoes to import fuel thus hindering fuel foreign exchange earnings on the part on the part of the government. An import bill of 600 million dollars a month for PMS has become challenging due to the shortage in crude oil exports. Vandalism and oil bunkering as well as destruction of infrastructure in the Niger Delta is making a mockery of the financial and social common sense of subsidy.

Another key reason to eliminate this economic death trap is the enormous corruption infested in this sector. Subsidy ensures that fuel prices in Nigeria are lesser than in neighbouring countries. Unscrupulous marketers have resorted to exporting subsidized crude oil to neighbouring countries to make extra profit. Asides this, fuel scarcity is one of the key results of subsidization. When the government is unable to pay subsidy, marketers refuse to distribute, thus putting pressure on the strings of the government purse and also causing stagnation in the economic flow of the country.

Understanding that the high dependency on fuel is a result of the inefficiency of other key sectors in the country such as the transportation sector, the electric power sector and so on, it becomes straightforward that government could reduce this dependency by spending a little more time and funds bringing these sectors to their feet. The much needed intervention in the agricultural sector can also be financed if monies spent on subsidizing fuel is diverted to it. The mere fact that several key sectors which are more important to the survival of the average Nigerian citizen could be more efficient if more funds are pumped into them is enough to call it short with subsidization. The health, education, infrastructure, agriculture and a host of others would be key recipients of such favours.

As the country continues to show stronger inclinations towards diversification, it would be wise to free up funds that could drive other important sectors that can help the country’s GDP growth rather than continue in its failed attempt as efficient and even subsidization of fuel for its masses. I can only imagine how well other sectors of the economy yearning for attention are going to be if the funds being wasted on subsidy of fuel are diverted into making them working.

According to an International Monetary Fund (IMF) report, more than 40 percent of the fuel price subsidies in developing countries are enjoyed by the richest 20 percent of households while only 7 percent is enjoyed by the poorest 20 percent. This further proves it illogical to continue to pump the country’s funds into this sector of the petroleum industry.

While the men of yesterday (Me inclusive) may understandably feel aggrieved that the men of today were unreasonable and malicious when yesterday, they opposed the removal of fuel subsidy by Nigerian president of yesterday, Goodluck Jonathan, it is important for the men of yesterday to know that yesterday is gone. And it is in the interest of our country’s today and tomorrow that we today allow the Government of the day remove subsidy of petrol as it would augur well for the today and tomorrow of both the men of yesterday and the men of today.

Should we miss this golden chance to do away with subsidy, we may never have the chance to make things better. And tomorrow, our kids would read up on how the men of yesterday (us) bungled their future in 2012 and 2016.

We shouldn’t let that happen.

Written by Ayokunle Odekunle

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