Yes, you heard me right: the time has come to rethink fuel subsidy. All my life I have argued in favour of fuel subsidy, but now I am shifting my position. My pro-subsidy argument has always been based on two critical factors – the level of poverty in the land and the need to enjoy the benefits of being oil-rich.
High fuel prices impact directly on the cost of living, which is never good news for tens of millions of poor Nigerians. Because our transportation system is fuelled mainly by petrol, every slight increase in fuel prices has a ripple effect on the economy. Also, I recently conducted a research on oil-producing countries and discovered that many, if not most, subsidise the pump prices of fuel. It makes sense that if you have something in abundance, you should enjoy the advantage of lower prices. I shouldn’t buy yam in Gboko at the same price with Lagos.
But I am now rethinking my position. In fact, I now believe more in subsidy. We need it badly. There is, however, a slight adjustment in my viewpoint. The problem with fuel subsidy in Nigeria is that it empowers mainly the fat cats in the Nigerian National Petroleum Corporation (NNPC), the petroleum ministry and the import/supply chain. Trillions of naira have gone down the drain in the last three years through fuel subsidy. We keep buying petrol at black market price. So where's the subsidy? Why doesn’t the state punish these fat cats? The system is polluted down the line. The amount of money involved is incredible – even an angel would be tempted. To go into it and come out with your reputation unstained is equal to becoming a saint.
One racket turns you into a billionaire; the next one makes you a multi-billionaire; and the next one makes you a billionaire in dollars. Some people have bought private jets at our expense. Some people have bought up streets and cities in Europe, Middle East and America through the subsidy racket. In plain English, therefore, only a few chaps – perhaps 2000 or so persons – have been enjoying fuel subsidy on our behalf while we see hell at the fuel pumps. And that is the point, exactly. In good times, you only get to buy fuel at N65 in Lagos, Abuja and Port Harcourt. Yet trillions of naira have been paid to marketers in the name of subsidy. The money is deducted from every state and every local government in Nigeria.
So if my council is entitled to N100 million allocation every month, N8 million or more will be deducted to fund subsidy – but, tragically, my people never get to buy the product at N65 per litre! That is what Fela would call “double wahala for deadi body”. In one instance, we are losing part of our allocation to fuel subsidy. In another instance, we are buying fuel at N80 per litre! Now does that make sense? I think not. While the 36 states, 774 councils and the Federal Capital Territory contributed over N1.3 trillion to the subsidy fund between 2006 and last year, only a few areas enjoyed the benefit of paying the subsidised price.
For instance, Akwa Ibom State was the highest contributor to the subsidy fund (2006-2009) with N122.37 billion but petrol sells for between N85-N90 per litre in the state. Rivers State contributed N112.80 billion but buys at about N100. Delta State, with N108 billion contribution, buys petrol in the range of N80-N100. In another irony, Lagos, the biggest consumer of petrol, contributed only N37 billion to the fund, the same as Katsina State which consumes far, far less. That is unfair. But, still, I believe more than ever before in fuel subsidy.
I totally agree that the trillions of naira pumped into the ineffective subsidy fund in the last three years could have benefited the economy more. I mean, Akwa Ibom could have made better use of the N122 billion it contributed to the fund. Even if it had spent just 50 per cent of it on the local economy, the people of the state would have felt the impact – in form of roads, schools, etc. I fully agree that with the subsidy regime, the deregulation of the downstream sector of the oil industry will be a pipedream. Investors will naturally shy away from a market where prices are fixed by government. Even if they are given assurances that their costs will be reimbursed in part by the government through subsidy, the natural tendency is to be very cautious. After all, government has always failed woefully to reimburse fuel importers. This contributed in no little way to the banking crisis.
If I have argued like this, why do I then say I still believe in subsidy? Am I confused or am I confusing issues? No. This is my "revised" proposition. Deregulate the downstream sector. Stop paying subsidy to importers and marketers. Instead, government should pay subsidy directly to junior and medium-level workers. A new item should be introduced to their pay slips. It should be called “fuel subsidy”. Even if it is N1500 per month, it will be far more effective and cost far less to implement. No NNPC is involved. No marketer is involved. No importer is involved. The workers can see it. They can touch the money directly. Really, subsidy is very funny in a sense. Why should a bank MD buy fuel at N65 per litre, thereby enjoying the same subsidy with his cleaner who comes to work everyday aboard a bus that also buys fuel at N65? To be fair, does the MD need fuel subsidy?
My "pay packet" proposition, however, will seem to cover only government workers. What of workers in the private sector? Should government make money available to their employers so that it can be passed into their salaries as “fuel subsidy”? My answer is no. These employers will just start behaving like marketers. They will have so many ghost workers on their payrolls in order to make outlandish subsidy claims. And some may not even pass the payments to genuine workers. I suggest, instead, that private sector workers should enjoy personal income tax reliefs, which should be equivalent to the fuel subsidy in the pay packet of government workers. But there is still a loophole in my proposition – what about self-employed workers? Are they not entitled to some subsidy too? Well, they are. The only thing I can think of now is also by way of income tax reliefs. Government should also make mass transit infrastructure more readily available. The rail transport system in Kaduna State is working – so why can’t it work in other parts of Nigeria? More buses on the road through government support (BRT is working in Lagos) will also be beneficial, most especially to those who do not own cars.
The major reason I support deregulation is that it has the potential of creating a new economy for Nigeria – akin to the deregulation of the telecoms industry. With more investors invading the downstream sector, I can see an explosion in the petrochemical industry. There are about 3000 by-products from crude oil which we are currently not tapping because we only drill crude, export it and then stupidly import the finished products. Just imagine the thousands of new jobs that will be created by the new downstream economy. Engineers will be employed, as well as accountants, technicians and cleaners; not forgetting graduates of business admin and mass communication. Insurers and bankers will get more business. The opportunities are limitless.
This is how I conclude: I support fuel subsidy but I also support deregulation. A fraction (maybe 10-20 per cent) of the trillions of naira being burnt on subsidy should be paid directly to government workers as fuel subsidy (it’s called cash transfer); tax incentives should be given to non-government workers to the equivalent of the subsidy enjoyed by the public sector workers; transportation infrastructure should be rapidly improved for the benefit of all; massive private investment in refineries and petrochemical industries should be encouraged with every incentive possible. The fat cats should go and look for another racket elsewhere.
And Four Other Things…
When There’s a Will…
Have you ever sighed and declared, in despair, that Nigerian politicians are hopeless and Nigeria is doomed? You’re not alone. It’s happened to me a lot of times, but I always managed to come up with another argument: Nigerian politicians know the right thing – it is just selfishness that has crippled them. If they decide to sit down and do the right thing, Nigeria would be the envy of the world. The way the political class jettisoned narrow interests during the week to fill the power vacuum created by President Umaru Musa Yar’Adua’s prolonged absence really impressed me. It shows that with resolve, our salvation is not impossible. I wish to God that the politicians would also devote their energies to tackling the serious infrastructural problems in the land. They can do it!
Nothing Goes for Nothing
Were you not surprised that the state governors suddenly became apostles of empowering the Vice-President? They had, at a meeting earlier in the year, said they favoured the status quo – meaning we could go on without an Acting President. They actually said Vice-President Goodluck Jonathan should continue with what he was doing (which, to be honest, meant nothing). But they held another meeting two weeks ago and came up with a resolution to back the proper transfer of power to the VP. The governors had been affected by the President’s absence: the excess crude proceeds could not be shared. With Jonathan assuming full powers during the week, $2 million was shared from the account by all tiers of government on Friday.
Aondoakaa for Trial?
Just before the removal of the Attorney-General, Chief Mike Aondoakaa, was made public on Wednesday, policemen had invaded his office and made away with sensitive documents. Why? Information has it that the Economic and Financial Crimes Commission (EFCC) will soon go after him. Wouldn’t it be ironic that this is the same EFCC Aondoakaa worked closely with to frustrate the trial of corrupt ex-governors? This life!
Jonathan Joke
This was a joke I received by SMS during the week: “In your own interest, no matter the position you are offered in ANY organisation, if your deputy is named ‘Goodluck’, please decline: Goodluck was assistant head boy in primary school; the head boy got expelled, he took over. Goodluck was assistant senior prefect in secondary school; the senior prefect died, Goodluck took over. Goodluck was deputy local government chairman; the chairman got implicated in corruption and got removed from office, Goodluck took over. Goodluck was deputy governor to DSP Alamieyeseigha, we all know that story. Goodluck was vice to Yar’Adua: PERICARDITIS! A friend of mine just called off his church wedding, why? His Best Man is named Goodluck. He is insisting on traditional wedding…” Readers beware: much of it is a joke.
SIMON KOLAWOLE
Email: simonkolawole@thisdayonline.com, 02.14.2010
