N100bn palliative fund: Yar’adua takes an old path of failure
Though the federal government intends to develop infrastructure in the transport and power sectors as part of benefits accruing from deregulation, the Nigeria Labour Congress (NLC) feels government does not need to hike the prices of oil in the name of deregulation before it can do that. According to the Chief Economist of the central […]
Though the federal government intends to develop infrastructure in the transport and power sectors as part of benefits accruing from deregulation, the Nigeria Labour Congress (NLC) feels government does not need to hike the prices of oil in the name of deregulation before it can do that. According to the Chief Economist of the central labour union, Dr Peter Ozo-Eson, the removal of fuel subsidy is a “recipe for chaos.”
Ozo-Eson in an interview with Sunday Trust maintained that government’s claim that it would provide palliatives is a game that past administrations have played.
He explained, “Our position is for government to maintain a support scheme for petroleum products. Talking of palliatives, government has always played this game. When it increases prices and there is an uproar, it says it is going to provide palliatives. The experience of palliatives has shown that they do not address the real issue. The real issue is the cost of petroleum products to domestic consumers,” he said.
He particularly referred to the palliative measure which the Olusegun Obasanjo administration initiated in 2004 but was nowhere near success. “Within the framework of the Ibrahim Mantu committee, Obasanjo came up with palliatives which largely consisted of packages to put more buses on the road. N100 million was given to every state to purchase mass transit buses. But I don’t know of any mass transit in Nigeria. When you go and buy 12 or 14-seater buses and you say you are doing mass transit, it is laughable. When you are talking of a country with a population of about 140 million and you are looking at 12-seater buses as your intervention in transportation, it merely indicates that you do not even understand the magnitude of the problem,” the Chief Economist maintained.
For him, any intervention in the transport sector which will address the problem of fuel hike has to come in the form of massive railways infrastructure.
Ozo-Eson argued, “When you talk of mass transit in other countries, you see a rail terminal, thousands disembark at a given time, that is mass transit, and we haven’t started to do it. We do not even have comfortable city couches that commuters can depend on for intra-city transportation. So if government really wants to develop transport infrastructure that would shield the masses, to some degree, from increases in petroleum prices, then it needs a medium term plan, not this quick, uncoordinated intervention which is a marketing gimmick to try to get people to accept its position.”
He lamented that the N100 billion palliative package is too meagre to make any impact in the transport sector which has a comatose infrastructure. According to him, the roads in the country are death-traps and the number of accidents that happen on them every day is such that the amount cannot fix the roads.
“Today what is saving the Nigerian economy as the formal manufacturing sector has collapsed, and various other areas are collapsing, people are finding mechanisms of coping within the informal economy. That is what is keeping the Nigerian economy. The majority of people are finding livelihood in the informal economy and what drives the informal economy? People are using small generators to operate barbers’ shops, hair dressing saloons, business centres and so many other things. If you go to any mall in Abuja you will be shocked at the number of generators that are used to power the businesses. The cost of running the small generators will escalate if government does what it is thinking to do. What palliative will government give to them?” he queried.
Ozo-Eson stressed that the huge amount of money the federal government has claimed to be spending on fuel subsidy is due to corruption. He said NLC initiallyopposed the Obasanjo administration when it took the issue of petroleum support fund to Petroleum Products Pricing and Regulatory Agency (PPPRA) as the agency would end up not paying the subsidy due to corruption as it has been the case with NNPC.
“The challenge is to evolve and fashion a smart subsidy scheme that will not be abused by people who have vested corrupt interest. It is not the matter of resources—you are committing some resources to subsidy no doubt—but let us also realize that that is the only real benefit the average Nigerian seems to be deriving from this oil revenue. Let government not deceive us, government needs to be sincere to the people. What has happened to the people charged with corruption running to billions of billions of naira? When the people’s needs are concerned, we take the resources away. When government officials are looting resources that are set aside for development, nobody does anything. A proportion of a properly managed subsidy scheme out of total oil revenue would be very insignificant,” he lamented.
He argued that oil has become a national curse to Nigeria since petroleum products prices in the country are the highest among OPEC countries globally, emphasizing that OPEC is an oligopoly that fixes artificial prices of oil at the international market and by Nigeria deregulating 100 percent wants the burden of the artificial prices to weigh down the masses.
“So artificial price will push up to be a burden on our people? That is the result we should get for God giving us oil? That is why other OPEC countries do it differently. Other countries, because, they realize that this is an artificially fixed price through oligopolistic power, they do not allow it to percolate and then be imposed on their own people. You create a domestic difference between what you pay and what you are able to extract through your monopolistic power,” he said.
Dr Suleman Magaji of the Economics Department of the University of Abuja has, rather, been prophetic. “Poverty level in Nigeria is guaranteed to rise by next year.”
He posited that deregulation in a conventional economy is a catalyst for economic development but for the Nigerian economy that lacks basic infrastructure, deregulation would raise the standard of living beyond the level of the average Nigerian.
He explained, “In the past we have seen that increase in the price of fuel corresponds with increase in prices of essential commodities and foodstuffs because the transport sector is not developed. Virtually all the sectors will be affected because the entire economy depends on private energy,” he said.
He added that with petrol price hike of about N103 per litre under full deregulation, no palliative package would mitigate the unpleasant economic impact. “During Obasanjo’s eight years as president of Nigeria, about N2 trillion was expended in the power sector but we have not seen the impact of that on the economy. How possible will N100 billion develop the transport and power sectors?’’ he queried.
It would be recalled that during Obasanjo’s presidency, petroleum products prices were hiked 11 times. In 2004, in an attempt to respond to the uproar that greeted the hike, the Senator Ibrahim Mantu Palliative Committee was set up to among other things fashion a framework that would cushion the effects of such increase on the masses.
Accordingly, the committee recommended a reversal of the hike or at least a reasonable reduction of the prices but Obasanjo said no. Instead, he said more buses should be put on the roads and he gave out N100 million to every state to purchase mass transit buses.
Of all the palliative measures taken by government, the Petroleum Trust Fund (PTF) was the only one with a success story. Magaji said it was only PTF under the late General Sani Abacha regime that succeeded in fixing infrastructure in the transport, health and educational sectors.