Fuel subsidy: A tale of 2 halves and justified lack of trust

The government has postponed the removal of oil subsidy, either out of fear of public revolution like Occupy Nigeria or for other political reasons, some of which may be borne out of the personal interests of those who benefit from these stormy times.  Occupy Nigeria started on January 2, 2012, as a mass movement against […]

The government has postponed the removal of oil subsidy, either out of fear of public revolution like Occupy Nigeria or for other political reasons, some of which may be borne out of the personal interests of those who benefit from these stormy times. 

Occupy Nigeria started on January 2, 2012, as a mass movement against a plan by the administration of President Goodluck Jonathan to withdraw subsidy and raise the price of petrol from N65 per litre to about N141. The protest that started in Lagos soon spread to virtually all corners of Nigeria, grounding economic and social activities. The Nigeria Labour Congress (NLC) at some point even declared an indefinite strike over the issue. Eventually, the government and the unions came to a truce and the price was reduced to N97 a litre. 

Were we inching our way to a repeat of Occupy Nigeria, or Occupy Lekki Season 2? Before the announcement suspending the subsidy removal late on Monday, the NLC and the Trade Union Congress (TUC) had already planned a nationwide protest on January 27, to register their displeasure on the plan. In these days of heightened restiveness and highly combustible social tension in the land, it is a sign of political maturity and dexterity to explore all possible avenues to achieve a ‘Yes’ at the least cost in terms of social disruptions. 

It is becoming quite clear that two things, perhaps amongst others, matter most to Nigerians and these two subjects unite them: football and subsidy. They want our national team, the Super Eagles, to win trophies. Anything or anybody that interferes with that is not a friend. We have just witnessed this when we lost to Tunisia in the ongoing African Cup of Nations. The other subject of collective interest is petrol subsidy and perhaps its derivatives. It is petrol that keeps Nigerians moving, from village to the city and vice-versa. It is petrol that sustains their social and economic life. Many Nigerians, both urban and rural dwellers, watched the Nigeria-Tunisia match on petrol-powered generators. So, anything that tampers with their access to petrol is regarded as a common enemy. 

The reality is that fuel subsidy is perhaps the only widely spread social infrastructure in this country that everyone directly or indirectly benefits from. 

That is also part of the reason its administration has remained so problematic. Because petrol is now perceived as a public good in this context, the government has found it impossible to introduce any measure of rationality in the implementation of the subsidy programme. If that was possible, then only those who really need petroleum subsidy would be allowed to buy at the subsidised price. Unfortunately, the Nigerian elites are still the biggest beneficiaries. Despite that they have the ability to pay for it.  

Beyond the opaque administration of the subsidy and the attendant corruption that has historically marred its administration, the elite gets the biggest share of the cake. They consume more of the subsidised fuel than the poor as they move around in big-engine convoys. 

The poor man gets his share implicitly through presumed lower transportation costs and little fuel he uses for his I-better-pass-my-neighbour generator since it has almost become a myth to fix Nigeria’s power problem despite trillions of Nigeria spent on it. 

So, the impact of subsidy removal on Nigerians is simply not a matter of transportation fares rising and the government isolating poor citizens to give them N5,000 monthly stipends to keep them going. That plan by the government did not fly as Nigerians quickly lectured the officials that it was impracticable as the option would have cost more than the burden the government wants to get rid of. 

So, what is right; to remove or not to remove? 

Economically, Nigeria’s fiscal resources are in shambles and indeed the country may again be spending more than three-quarters of its revenue on servicing debt, a phenomenon which is fast consuming the country and sending a worrisome outlook on its economic future. 

In fact, the 2022 budget assumes subsidy removal after the first half of the year, so the budget may be underwater with this new stance. This was clearly conveyed by the state governors as they spoke to Nigerians at the National Economic Council meeting last week. 

Now, clearly, all eyes are on Dangote Refinery. That gigantic edifice was in the news again last weekend with the visit of Dr Akinwumi Adesina, the President of the African Development Bank. He described it as the best-industrialised project to come out of Africa. He knows what he meant, having seen what goes on in the whole continent. 

Even at that, the Dangote Refinery and indeed other upcoming petroleum refineries in the country would find it irrational to supply the local market if the subsidy is not removed, except if NNPC sells crude oil to them at a subsidised rate. 

Subsidy on petroleum products in Nigeria is known as one of the melting pots for corruption in the oil sector, which explains the strong and persistent arguments for its removal. This argument is anchored in part on the hope that such savings can be channelled towards creating palliatives in some other means, especially through subsidising productive activities that encourage or stimulate growth. 

Incidentally, that sounds like a policy recommendation that may work in an environment where public officials are sincere and transparent and not in an environment where instruments of government would claim that millions of people have benefited from a programme on paper yet it is difficult to find these people anytime you try to conduct a survey to track impact. Ghosts are the most beneficiaries of Nigeria’s social infrastructure spending. Sadly, it has always been and still is. Perhaps when the government demonstrates they are born again and become sincere in their programmes, Nigerians would truly take their words for a fact! 

It would have been tenable to remove the subsidy if the savings would be judiciously spent on infrastructure that creates opportunities for the masses and not just a mere transfer of wealth from one elite group to another through another opaque and corrupt programme. We can recall the days of Sure-P, just as we are conversant with the purported impact of current social investments. It is shameful that Nigerians justifiably find it difficult to trust the government.