In their daily lives, Nigerians must cope with this open ambivalence
– they have oil but they can’t see oil; they have petroleum, but they
have no petrol; they pay for light but they get darkness. There is no
better way to explain what we mean here than by telling our usual
story of the so-called subsidy on petroleum products in its most
elemental form.
Nigeria is said to be the sixth largest producer of oil in the world. But
with mismanagement, what was originally supposed to be a
blessing from God has virtually turned a curse. At every point, we
are either fighting because of the poor allocation of this resource, or
we are crying that some dubious elements have stolen the total
proceeds.
The original arrangement was that as soon as the crude oil came
out from the ground, Nigeria would sell 90 percent at the spot
market, in hard currency. The remaining 10 percent was meant to
be refined for local consumption.
At various times, Nigeria had built four refineries – two in Port-
Harcourt and one each in Warri and Kaduna, intended to refine
different products. These refineries were run aground; and they are
now old and practically comatose.
Because of our lack of refineries, foreign concerns that had
refineries began to pick up, at rock-bottom prices, the 10 percent
crude reserved for local consumption. They would refine the
products in their countries and export the refined products to us at
their own prices. By the time the product returns to Nigeria after its
triangular journey, the price has hit the ceiling and it is no longer
within the reach of many. This is where government steps in to
bring in what it calls subsidy.
Under this scheme, a country like the Netherlands, which does not
have a single drop of oil, is in the Organisation of Petroleum
Exporting Countries, OPEC, as a net exporter of oil.
The subsidy regime in Nigeria reminds us of two issues – first,
subsidy would have been absolutely unnecessary if we were doing
our own refining in Nigeria. Secondly, the subsidy regime has been
fraught with fraud and dishonesty.
Between 2006 and 2014, Nigeria paid over N7.5 trillion as subsidy
claims. Yet, we are still where we are – the subsidised products are
not available and where they are available, they sell for prices much
higher than the unsubsidised products. Put differently, we have
been subsidizing fraud.
The subsidy game has been a political one and has not been played
on the rings of economic data; and rather than being fact-driven, it
has been emotion-driven and politically played by those who use it
as a political tool.
Subsidy in itself is not a bad idea. In fact, it is defined in economics
as money paid by government or an organisation to reduce the cost
of producing goods so that their prices can be kept low. It seeks to
reduce the market price of an item below the cost of production.
Government intervenes to support desirable activities to keep the
prices of staple low; maintain the income of producers of critical or
strategic products; induce investment while reducing
unemployment.
Everywhere, subsidy is supposed to be a cushion to enhance the
welfare and well-being of the people. It is an acceptable practice the
world-over.
This writer was in Germany in the winter of 1973, when the price of
oil increased astronomically because of some major adjustments by
OPEC. Many companies would have just gone under but
government quickly intervened with a serious subsidy package.
Among other things, industry workers – including those of us
arbiters who were “pulling gburu” – were made to work two days a
week (eight days a month) for full month’s pay. That’s subsidy.
If all American farmers were to be allowed to produce at their
optimum levels, food would be surplus and totally useless
everywhere. The American government has had the practice over
the years of paying some selected farmers to stay at home, not
producing anything during the year. That’s subsidy.
In these places, the subsidy scheme is well managed and it gets to
the target population – the poor. But in Nigeria, the exact opposite is
the case: the real beneficiaries are not the poor but the middlemen
and the rent seekers, contrary to the argument usually advanced
and which has been at the heart of subsidy’s continuation, that it is
pro-poor.
As long as there are long queues in our filling stations, we are
merely compounding the problems of the poor. When people queue
and sleep at petrol stations like refugees, besides the human
degradation involved, you have also effectively reduced from their
sources of livelihood because the time spent at the stations are
wasted. Funds for infrastructural and human capital development
are frittered away on dubious subsidy claims and payments to about
40 corporate citizens of Nigeria, to the utter neglect of the rest of
us.
Truly, petrol can sell for N40 a litre but things must get worse before
they get better. Subsidy is strangulating us! We must take the
tough decision NOW – tighten our belts and let subsidy go!
Those middlemen in the current supply chain must go. Subsidy
removal must be approached through what we call “the blind man
and his yam”. If you have to pill the blind man’s yam, you must
keep whistling while you do so as a sign that you are not
introducing the yam into your own mouth.
Similarly, any substantial subsidy removal must be immediately
accompanied with the rehabilitation and upgrading of the refineries
so the people can see what you are doing with theirmoney. Once we
meet our local needs, importation will stop. When importation stops,
subsidy ends. The darkest part of the night is just before dawn.
Let’s give ourselves one year to work on the refineries during which
period, as a way of choosing the lesser of two evils, we shall allow
only the NNPC to import petroleum products directly so that we can
know exactly what we are consuming.
No comments:
Post a Comment