Fuel subsidy withdrawal: Here we go again

For the umpteenth time, Nigerians are gearing up for another hike in the price of premium motor spirit (PMS), better known as petrol, and the excruciating painful fallout this action by the Federal Government will bring on millions of their citizens.

As usual, various government officials have been making a case as to why the ‘subsidy’ has to go and the “immense benefits” such a withdrawal will bring on the long suffering people of the so-called ‘giant of Africa’. Since early this year, officials have gone into overdrive, harping on the negatives spending money on keeping PSM artificially low is having on the people and the economy in general.

In March, the Nigerian National Petroleum Corporation (NNPC) said the cost of subsidising fuel was nearing $300 million a month warning that it was a huge drain on the resources which could have been ploughed into other critical sectors of the economy. By September, the Corporation, which is the sole importer of the product, said petrol subsidy payments had gulped N714 billion in the last seven months, shrinking monthly revenue accrued to the federation account, because the NNPC has been deducting subsidy payments from oil and gas proceeds due to the three tiers of government since it is not catered for in the 2021 budget.

The deductions have become the biggest factor contributing to dwindling federal allocations to government accounts, according to the NNPC. According to reports, between January and August, the corporation made a contribution of N429 billion to the federal, state and local governments with a deficit of N1.25 trillion.

Then at the end of last month, the Minister of Finance, Budget and National Planning, Zainab Ahmed bluntly came clean that fuel prices will go up next year, when she told the nation that the Federal Government will cater for subsidy on petrol only in the first six months of 2022. She said this at a panel session during the 27th Nigerian Economic Summit (NES#27) in Abuja. Ahmed said that complete deregulation of the downstream oil and gas sector will start by July 2022, which means that after that market forces will subsequently determine the pump price of PMS.

“In our 2022 budget, we only factored in subsidies for the first half of the year; in the second half of the year, we are looking at complete deregulation of the sector, saving foreign exchange and potentially earning more from the oil and gas industry,” she said. Also speaking at the session, Doyin Salami, Chairman of the Economic Advisory Council (EAC), said he had argued for a long time that the subsidy needed to go. He said that the Petroleum Industry Act (PIA) made the payment of subsidy of petrol illegal.

“With the PIA essentially it makes illegal petrol subsidy and yes, there is a period where NNPC and the new regulatory agencies must calibrate themselves, but at the end of this period – and I think it is about six months, which explains why the minister has said for the first half of the year, there is a provision,” he said. Acutely aware of the possible resistance to the removal of the subsidy, Ahmed followed up by saying the government was contemplating paying Nigerians transport allowance. Speaking during an interview on Channels Television, Ahmed said fuel subsidy is costing the country resources that should have been used for education and health.

She described fuel subsidy as a “major drain and waste” on the country’s economy, adding that it is crucial that the country exit from the fuel subsidy regime. But wait a minute, have we not heard all this before? In fact, I have written quite a number of articles about it, detailing how governments had repeatedly pushed for removal of subsidy, arguing that that was the only way they could provide proper infrastructure and other amenities for the people Twenty-one years ago, this is what the then President Olusegun Obasanjo said in justifying his decision to increase the price of fuel from N20 to N22: “Government subsidy on petroleum products has never made economic sense and never will.” And by the time he left in 2007, the pump price was N70 after he had increased it a staggering eight times!

Yet here we are 14 years later still talking about subsidy with the government making the same age-old worn out arguments as to why it has to go. Ironically, despite Obasanjo’s admonition and what most governments after him have said in justifying the removal of subsidy, our roads and other infrastructure are still in bad shape, while our hospitals are still nothing to write home about and we are still groping in the dark because we still do not have regular power supply. Virtually all administrations since Obasanjo left in 2007 have made the same arguments about how fuel subsidy is preventing them from carrying out their responsibilities to the citizens. But where has all the savings made from the price increases gone – that is the million naira question that millions of Nigerians would love to know. It is the failure of the people to see any drastic improvement in their living conditions that is making them more than anything very sceptical of any fuel price hike.

Instead of feeling the benefits they are only seeing the lifestyles of their elected members and other office holders improving by the day; despite the government’s appeal for belt tightening from the citizens in the face of dwindling resources. Sadly, despite borrowing trillions of naira to remain afloat the current administration is not showing that it is different from previous governments when it comes to spending. For instance, as the government deals with budget deficits year after year, it prefers to pile debt rather than cut back on a costly lifestyle that has eaten away at national budgets for decades. A key beneficiary of that extravagant culture is President Muhammadu Buhari. The president preaches prudence in government spending in public, but the budgets he signs off annually tell a different story.

In 2022, the president’s office will spend N1.6 billion on new vehicles – the fourth largest by any government office. That comes just a year after the office spent nearly half a billion on the same item. Since coming to power six years ago, the president’s office has spent N5 billion on vehicles – enough to build 500 health centres at N10 million each. It has spent billions more on food, uniforms, and travels, maintaining a huge presidential air fleet, president’s hospital and more.

The expenditures are an example of how Nigeria’s federal and state governments annually channel scarce public resources into projects that sustain their flashy lifestyles while critical programmes that should benefit citizens are perpetually underfunded. Commenting, Eze Onyekpere of the Centre for Social Justice, whose organisation launched an initiative to identify wasteful items in the 2022 budget, said: “The revenues are simply inadequate to fund fundamental expenditure, therefore, every available fund should be spent with the greatest value for money, tied to a high-level national policy framework and aimed at improving livelihoods, growing the economy, reducing poverty and inequality.” Unfortunately like most governments before them, no matter what we say or write; it is clear that the administration will stick to its guns and end the subsidy in July 2022 and we the masses can only brace up for the fallout.




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