The removal of subsidy saga

By Abdulwaheed Ibrahim Omar 

THE issue of fuel subsidy removal has been on since the ‘70s. It is true that government subsidises to the citizens on fuel purchase in order to stabilise the price of the commodity and to ensure affordability.

Oil being the most widely used commodity (other than food stuff), bears the highest determining factor when it comes to price fluctuations. Successive governments keep telling Nigerians that the fuel subsidy payment is impeding progress in other sectors of the economy. 

They claim that when subsidy is removed, more development projects will be executed for the welfare and well-being of the society. 

One thing that stands clear is the fact that none of the successive governments ever made sincere declarations regarding the amount that constitutes "subsidy".  

When in 2011 the Jonathan administration wanted to increase fuel price, they claimed that if subsidy was removed government would have had more money to enable it execute more capital projects.  Specifically, they lined up over 30,000 kilometres of road for construction; rail lines construction stretching from Lagos to Kano, Port Harcourt, Sokoto, Warri, Maiduguri and other places. 

Health, education and other sectors were also lined up as beneficiaries of the subsidy surplus. When Labour analysed the claims, it turned out that whereas the total cost of the projects would have been in the region of over N12 trillion, the subsidy removal would only fetch government additional N1.3 trillion.

In fact, the Minister of Finance had earlier explained that the money that was to accrue from subsidy removal would be split among the tiers of government, thereby bringing the share of Federal Government to a mere N400 billion. 

It is worth noting that to execute the project that government earmarked from the savings of subsidy removal, that paltry N400 billion would have to be multiplied a whopping 30 times. It is easy, therefore, to see that subsidy money is not the solution to our economic problems. 

Rather, the subsidy plays a major role in easing our social problems. Let us try to understand the principle of subsidy. In this case, subsidy simply means government paying for other services on the product in order for the marketers to maintain certain level of price regime that is considered reasonable enough to prevent the escalation of prices of other items in the country. 

Subsidy is not peculiar to Nigeria. In fact, developed countries pay multiple of subsidy to various aspects of their citizen's welfare and well-being. If to remove subsidy by government means to allow international market forces to determine the price of fuel, it is my candid opinion that Nigeria is not ready for the consequences.

Let me give a small scenario for us to figure out how to deal with the situation when it eventually manifests itself. Assuming the barrel of crude oil sells for $80 and therefore the local price per litre is N250, when the international crude moves up to $100, the domestic price will be expected to move up to about N300. 

This will definitely make almost every other thing to move up. The major implication here is inflation which lowers the purchasing powers of the majority. 

Poverty level grows higher and living standard of the people lowered. Government might still be happier with such a situation in the sense that more money comes into government coffers. 

But where the reverse becomes the case, will government be ready to live with the situation as it should? Can government be able to control the activities of the marketers when the need arises? 

An example of reverse scenario is in a case where international crude prices crash - let’s say to $25 per barrel, will government be willing to ensure that the domestic fuel price is also crashed proportionately? In this case, the price should ideally come down to about N40 or N50 per litre. 

One obvious thing is government’s loss of resources. In a country where prices frequently go up but very rarely come down, it will be a herculean task to get our capitalist entrepreneurs and marketers to conform with the standards.

 It is interesting to hear that government will pay N5,000 per head per month to 40,000,000 Nigerians. I dare to say this is not even practicable. First, who are the 40,000,000 that qualify? What are the terms for qualification?Why are the other Nigerians numbering over 160,000,000 excluded? 

How can anyone believe that government will be diligent in this payment that is not backed by any law, when salaries and wages that are legally binding are not being paid diligently? 

Think of some cases like school feeding programme. Where are we now? Aside all these, what does N5,000 cover for an adult, especially a married one with children.  More importantly, we may see N5,000 as good money today.  

But remove subsidy and fuel sells for N300, the N5,000 will be worth less than N2,000. Every government from the ‘70s contemplted removing fuel subsidy, but in the end voices of reason prevailed and the idea jettisoned. 

May the voices of reason continue to prevail for Nigerians to enjoy the much talked-about dividends of democracy.                       

Omar, a past president of the Nigeria Labour Congress, NLC, wrote from Abuja