Opinion: What rubbish subsidy removal?

ny Stanley Ilechukwu

I’ve been listening to all the arguments for and against the “subsidy removal”of the Buhari led government and it’s just hilarious. From that of the current government, whose hand has been forced to execute this “removal” due to the economic backlash necessitated by the uncertainty and the half-thought out policies it has churned out over the course of the last eleven months, to those who partook in the 2012 #OccupyNigeria protests either out-rightly flip-flopping or trying to revise their reasons for the protest. A shout out too to politicians and “activists” who rode on the back of the protests to gain popularity but have now had a “damascene conversion” and currently are for “subsidy removal”. What rubbish!

Let me state categorically that the current policy IS NOT a subsidy removal. What we have now the government, having realized (I think) that their forex policy has instituted a two tier exchange rate system, has made it impossible for independent marketers to source forex at the official rate, import PMS, sell and make a profit, decided to review the PPPRA template and increase price, with a cap, to reflect a presumed interbank exchange rate of N285/$. Unfortunately, this won’t end the fuel scarcity as the current black market exchange rate is N360/$, effectively rendering the PPPRA template useless. What rubbish!

We might not be paying subsidy at the moment but trust me, once the two major variables that affect PMS prices increase, international crude oil prices and exchange rate (this has already increased), the subsidy will return and by the current trends, this would occur in 6 months or less. When that time comes, will PPPRA review again and increase price or will the government finally bite the bullet and take their hands off price regulation and focus solely on quality regulation? Only time will tell.

Now to some historical context. In 2012, the government decided to do away with subsidy and completely deregulate the downstream but we protested and kicked against it. People had lots of reasons for this despite the arguments put forward by Deziani Allison Madueke, Ngozi Okonjo-Iweala, Sanusi Lamido and President Goodluck Jonathan.

The arguments for deregulation were hinged on the massive corruption in the whole process and the difficulty in policing every aspect of the chain due to the number of stakeholders involved, its unsustainability both then and in the future, the opportunity to free up funds for other developmental initiatives and most of all, the fact that a deregulated sector would encourage needed private investment in the sector which would not only lead to more jobs but would ultimately turn Nigeria into a petrochemical hub.

Those against the policy did so for a variety of reasons. For some, it would have led to an increase in the cost of living which was unacceptable, some were of the opinion that Nigerians should not bear the cost of government inefficiencies, for some, it was an opportunity for political relevance and for the rest, they would rather Nigeria burns than accept any policy coming from the other side. Currently there is a new twist to reasons behind the 2012 protest. The revisionist reason called trust. They didn’t trust the government to use the savings judiciously so they protested to prevent the savings in the first place…confused yet? What rubbish!

Where do I stand in all these? Well, I am a strong proponent of market economics in almost every aspect of human interaction except in the healthcare sector where free market policies might not give the most optimal results. I was in support of subsidy removal in 2012 and would still support it now if the sector is completely deregulated. By deregulation, I mean the complete removal of price caps, dissolution of PPPRA, an open market which neither hinders entry nor exit and a strong quality regulatory mechanism. Until this is done I do not support the present “subsidy removal”.

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