Fuel Subsidy Removal: Issues and Lessons By Caleb Onyeabor

Newsie Events:- #Opinion
I have two takes from Nigeria’s fuel subsidy removal.
This is not the first time fuel subsidy was removed. It was partially removed in 2012 under GEJ but due to the hostile response from labour and civil society, fueled by a vibrant and agile opposition, the then government bowed into pressure and reversed its decision. Funny enough, the same vampires and werewolves who cursed and spat on the former administration are trying to convince the populace on why it is important for them to do what they stopped the last administration from doing.
This opens the veil of the kind of negative and hypocritical politics played in this country. The then APC knew that Fuel subsidy was unsustainable and a devastating policy that ought to end. They knew the then govt was doing the right thing but is always the case, pertinent issues are being politicized and used to achieve selfish political aims. If the current opposition should serve them a taste of their own tea, we will be back to square one and continue running circles. Healthy political rivalry should be like: Yes, fuel subsidy ought to be removed, the way you are removing it is wrong, we will remove it this way for better results but the reverse is always the case.
Secondly, you notice the difference between GEJ and PMB. While one removed subsidy and bowed to pressure, the other removed it and blocked his ears. I am a fan of the one who blocked his ears. That leadership style where the leader has to make difficult decisions for long term results and stand by those decisions irrespective of the interplay of forces, solely by the convictions that this is the right thing to do, is the kind of leadership style that Nigeria needs to be pulled out of its dungeon, not some annoying cog branded as democracy.
Fuel subsidy is just one. There are other tough decisions that government have to make if we set our eyes on the long term. Tough decisions that include stepping on the toes of some powerful blocs, union, and individuals who have the resources to mobilize and instigate the masses. Tough decisions on the petroleum sector, the power sector, the manufacturing sector, agricultural sector, and education too. Until we get someone who can summon the balls to take these guys head-on, take those tough decisions, and stand by it, our development story will remain the same.
Fuel subsidy is a national mistake. It is the accumulation of the failure of all the administrations that have ever governed Nigeria. There would be no subsidy if our refineries were working. There would be no need for subsidy if we could refine our crude ourselves. What the current government has done is to remove the subsidy and leave prices to be determined by forces in the international market. For a commodity that you owned and should refine locally, this is a big blunder.
You sell your crude to an international buyer at an international rate ( the prevailing price of crude) and then import refined version into your country. Seeing that the cost is now high, you then go ahead to subsidize it. That is to say, prices are going to be determined by the cost of crude in the international market and of course, the value of Mallam dollar. One, the price of crude fluctuates often, it is never stable and two, you know the position of your country’s currency as against dollars. At least for now, you should be expecting the price of fuel to be rising simultaneously.
The successive government had made the mistake, subsidy regime is a child you have to cater for even though you weren’t responsible for its birth. The pressure paying subsidy mounts on our economy is unsustainable. Yes, it should be removed. The most important question is what are the plans to eliminate the conditions that led to introduction of subsidy in the first place? At least in the last government, Mallam Sanusi and Ngozi Iweala were going all over the place telling us a brilliant plan of how the money saved from removing subsidy will be reinvested into infrastructure and refineries. I haven’t seen any of such in this administration.
I have said it before that spending billions on refineries that produce close to zero output is the worst form of economic madness going on in this country. Now the price of fuel is said to be determined by market forces under the heavy watch of a government-controlled pricing agency. I don’t understand how market forces and government agencies will sit to determine the price. How is this even possible when Oga Adam Smith told us that these market forces are invisible? The pricing agency’s responsibility is to make sure the price doesn’t become too overbearing. That is to say, if market forces cause the price of fuel to rise so high, pricing agency will bring it down.
If the pricing agency brings it down, who will now pay for the deficit? For instance, market forces cause price to be at 300 naira. The pricing agency says it is too much, bring it down to 200 naira. What happens to the 100 naira deficit? Somebody has to pay. It is certain that Marketers won’t lose. The government has to take care of that deficit, Guess what, subsidy is back. Talk about running round circles. This will be the trend unless those goddamn refineries are fixed and we are able to refine our crude here in Nigeria.
Lastly, I have seen somewhere on how it is more expensive to refine crude oil in Nigeria than refine it outside. Till today, I have not been able to understand the algorithm behind that. I think it is economic balderdash that’s against basic economic principles but if it’s true, I won’t be surprised. Nigeria’s Economy has been defying and breaking basic economic principles since 1960. “And I swear, this one pass my power”
Caleb Onyeabor writes from Enugu and can be reached on WhatsApp on +2347032829241
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