After failing to remove fuel subsidy, which he once labelled a fraud, the President, Major General Muhammadu Buhari (retd.), is likely to leave his successor, Bola Tinubu, with the burden writes DIRISU YAKUBU
It is perhaps the most controversial policy attracting commentaries on various media platforms since the return to democracy in 1999. From the well informed to pub analyses, commentators have continued to bare their minds on the necessity or otherwise of fuel subsidy.
In the eight years of the Olusegun Obasanjo presidency and the five and a half years of the Goodluck Jonathan administration, there were loud calls for the removal of subsidy on petroleum products. Economists like the former governor of the Central Bank of Nigeria, Lamido Sanusi, and ex-Finance Minister and now Director-General of the World Trade Organisation, Ngozi Okonjo-Iweala, argued at virtually every forum that the continuous retention of subsidy would only ruin the nation’s economy.
Both Obasanjo and Jonathan attempted to do away with it, arguing that the accruing revenue would be invested in critical sectors of the economy such as education, power and infrastructure to enable the government to provide job opportunities for Nigerians and invariably address the scourge of poverty and backwardness.
Tough as Obasanjo was in words and actions, he often met stiff resistance from the then Nigeria Labour Congress led by Adams Oshiomhole and the Peter Esele-led Trade Union Congress. The organised labour, while calling for industrial action anytime the nation witnessed a hike in the pump price of fuel, often maintained that the removal of subsidy would invariably make life difficult and unbearable for the already impoverished citizens. After weeks or months of stand-off, the government would invite representatives of the labour unions for negotiation after which the strike would be called off.
One common denominator in the administrations of Obasanjo, the late Umaru Yar’Adua and Jonathan was that virtually everyone agreed that the subsidy regime was steeped in corruption. Allegations of crude oil theft and diversion of trucks laden with petroleum products to neighbouring countries like Niger and Benin Republic were rife, culminating in intense calls for the removal of fuel subsidy.
To allay the fears of the commoners, anti-subsidy campaigners were quick to enjoin poor Nigerians not to forget that at the resuscitation of the telecom industry in the early 2000s, not many Nigerians could afford mobile phones. The companies, which had operational licences issued to them, soon found themselves in healthy competition, which eventually drove prices down, leaving in the hands of millions of Nigerians one brand of mobile phone or the other. They, therefore, urged Nigerians to accept the fact that with subsidy, the country was bound to remain where it had been.
While seeking the votes of Nigerians in 2011 as the presidential candidate of the Congress for Progressive Change, Buhari said, “If anybody says he’s subsidising anything, it is a fraud.” A few weeks after the retired army general made that remark, his Minister of Petroleum Resources, while serving as Head of State, Prof Tam David-West, re-echoed Buhari’s sentiment, saying that all the country needed to address the perennial incidences of fuel scarcity were functional refineries and not subsidy.
David-West said, “Should there be subsidy or should there be no subsidy? My answer is capital no! If you go through the racket, I will tell you why subsidy is nothing but fraud. It is not just a one-man business, there are many interests involved in the fraud.
“When former President Goodluck Jonathan set up the Subsidy Investigation Panel and I was invited, I got my facts ready that there should not be any subsidy. The time I wanted to present my facts at the panel, Jonathan said they shouldn’t allow me.
“If you have four refineries refining your crude in Nigeria, why do you import? The time I was Minister of Petroleum, we didn’t import one litre of petrol. That time, we had three refineries. They deliberately sabotage the refineries. The amount we spend on subsidy can build 10 refineries.
“Subsidy is a scam and fraud. It is one of the greatest frauds. I think Buhari can solve it and stop it. Anyone involved in the subsidy scam should be jailed for life. Another thing is that the Nigerian National Petroleum Corporation buys at dollar price before it can sell and it has to pay for demurrage. At least 14 items are added to the refining price. That is wrong!”
The coming onboard of Buhari in 2015 offered the hope of a possible paradigm shift in the management of the petroleum subsidy regime. Famous for his anti-corruption disposition, even his political foes agreed that the gangling Daura politician would address the fraud and unleash a regime of productivity and profitability.
However, with less than three weeks to the end of his second and final term in office, data showed that the Buhari regime would have spent nothing less than N7.83tn on the fuel subsidy he once claimed was a fraud.
Survey by the Nigeria Extractive Industries Transparency Initiative revealed that the cost of petrol subsidy from 2015 to 2020 was N1.99tn. Similarly, reports compiled by the NNPC and submitted to the Federation Accounts Allocation Committee showed that petrol subsidy gulped a total of N1.57tn in 2021 and another N1.27tn from January to May 2022, while the government budgeted N3tn to cover petrol subsidy from June 2022 to June 2023.
The incoming administration of Bola Tinubu is bent on removing subsidy on Premium Motor Spirit (petrol) to free additional funds for reinvestment in critical infrastructure.
Speaking at a luncheon with business owners in Lagos in the build-up to the 2023 presidential election, Tinubu pledged to take tough decisions that would help in repositioning the Nigerian economy to compete with its counterparts anywhere in the world.
“How can we be subsidising Cameroon, Niger and Benin Republic’s fuel consumption? No matter how long you protest, we are going to remove subsidy. We can do it; we are educated enough,” he said.
Once subsidy is removed, the President-elect said attention would be turned to the manufacturing sector to engage productive inputs for the benefits of the country and Nigerians.
He stated, “My aim is to develop local manufacturing and value-added businesses. My aim is to deepen consumer lending, increase affordable housing and provide business owners with low cost loans to modernise operations and improve productivity. My aim is to reform the structural foundation of our economy. To accomplish this major feat, the government and the private (sector) must work hand in hand (hand in glove).
“Our policy will further stimulate our world-leading start-up ecosystem. I want our brilliant entrepreneurs to continue to innovate and pull our people out of poverty and lead us towards the path of prosperity.”
With the subsidy regime tentatively fixed to end in June, there are fears that spending on petrol may trigger an economic squeeze capable of affecting the purchasing power of many households across the country. The usual government palliatives notwithstanding, hyperinflation of foodstuffs, basic amenities and the cost of transportation will put a strain on the economy.
Already, there are projections that upon the discontinuation of the subsidy regime, a litre of petrol may sell for N700, meaning that on a daily basis, Nigerians are expected to spend as much as N46.2bn, or N8.4tn from July to December 2023.
Some Nigerians have continued to ask if this is how Tinubu intends to kick-start an administration, which he promised would make Nigerians smile again. Questions have also been asked if subsidy removal will not elicit nationwide protests that can make the new administration crawl rather than fly to deliver on its electioneering promises.
A professor of Political Science and former Minister of Education, Tunde Adeniran, in an interview with Saturday PUNCH, urged the incoming administration to muster the courage to remove subsidy on PMS if only to fight corruption in the system.
“Since they have all agreed that the fuel subsidy is a fraud, they should have the courage to remove it. Such would amount to a positive step in the fight against corruption. When you can’t see the direct benefits of a policy, it is better to dump it. Successive administrations have been subsidising petrol; yet scarcity persists such as the recent one that took almost an eternity to address. We can’t continue this way,” he said.
Throwing his weight behind the President-elect, Eze Onyekpere, a fiscal governance expert, said subsidy must go to pave the way for the full implementation of the Petroleum Industry Act.
Onyekpere stated, “It will be illegal and contrary to the provisions of the PIA to continue fuel subsidy. Secondly, continuing fuel subsidy is absurd considering that we are borrowing to maintain the subsidy since over 90 per cent of our retained revenue goes to debt service. It will be the height of fiscal irresponsibility to continue the subsidy.
“Fuel subsidy fuels corruption, which weakens the social fabric. Already, beyond Abuja and Lagos, there is no other city where fuel is bought at a controlled price. We are already paying more while allowing officials of the Nigerian National Petroleum Corporation Limited to collect the subsidy rent. Subsidy should go immediately.”
Constitutional lawyer, Mike Ozekhome, noted that the whole idea of subsidy was fraught with dishonesty, adding that the amount being used to service it remained unknown.
“I am not aware of any existing subsidy. No government has ever told us of the exact quantum of this alleged subsidy to know when it is finally removed. We hear it from governments that shamefully can’t build refineries to refine our God-given product. We suffer from what late Prof Claude Ake called a disarticulated economy; an economy where we produce what we don’t consume and consume what we don’t produce,” he said.
Taking a swipe at Buhari, who prior to his election in 2015, led other eminent personalities to literally shut down the country when Jonathan announced a hike in the pump price of fuel, Ozekhome said Nigerians could now realise that “talk is cheap.”
The Senior Advocate of Nigeria stressed, “Buhari was on the streets with the top echelon of the then APC in opposition to what they called ‘Operation shut down Nigeria’, protesting against the then President, Goodluck Jonathan’s marginal removal of the alleged petroleum subsidy. They claimed that it was a scam. While Jonathan did it in a few billion, Buhari graduated, ironically, to do it in trillions. Is it, not a shame that we are said to be subsidising our own product?
“Does a farmer subsidies his tubers of yam for the purpose of eating them? It is the irony of a bleeding nation. Let Tinubu first tell all of us what this so-called subsidy is all about; how much this will cost (to remove) before further asphyxiating beleaguered Nigerians.”
Taking a slightly different position, the Executive Director, Connected Development, Hamza Lawal, argued that consumers would certainly have to endure some pain if the subsidy was to give way, arguing however, that retaining it would not augur well for the nation and her people in the long run.
Lawal added, “It is expected that the removal of fuel subsidy will cause some temporary level of hardship for the citizens, especially those directly affected by it. However, it is important to note that fuel subsidy has cost the country over N8tn. The country already has a budget deficit of over N10tn.
“Nevertheless, should the incoming government go ahead to remove subsidy, it has a responsibility of finding ways of cushioning the effect on the citizens so that a good step does not come to the people as a punitive measure on the part of the government.”