REMOVAL of fuel subsidy in Nigeria is beginning to look like a jinx even when it has become apparent that continued retention is clearly unsustainable. As at March this year, the NNPC indicated that the country was spending an average of $300 million a month on fuel subsidy. Given the current dwindling revenue stream coupled with the huge debt burden, the country’s economy might collapse under the weight of mounting challenges if something urgent is not done about fuel import and intervention by government.
Talks about removal of subsidy on refined petroleum products have been on for more than two decades, living through four administrations; but none has summoned the courage and political will to completely remove the subsidy because each time it is contemplated, workers’ unions will rise up in arms and threaten fire and brimstone.
Civil society activists will swarm the public space with reasons why it should not be tampered with. The major reason has always been that the masses will bear the brunt of such action. Over the years however, it has become obvious that the policy rather favours industry players and stakeholders much more than the poor masses that are always show-cased.
It goes without saying that the country is suffering from energy crisis today because it exports primary energy sources and imports processed products. In fact, the rising cost of refined petroleum products has become a source for concern to rational thinkers because although Nigeria is one of the world’s biggest crude oil producers, it imports rather than refine products for local consumption.
The nation’s over reliance on its natural resources as income, especially oil and gas, might be part of the reason why local processing of products was never given deserving attention. Rational thinking should have emphasised the utilisation of oil and gas products at home as these constitute about 15 per cent of the nation’s GDP, even though they contribute about 85 per cent of government revenue.
Although government had started with partial removal of subsidy on kerosene and diesel, it however continued to subside petrol, a development economic experts insist is not the way to go. Everyday products including petrol, diesel and kerosene are refined outside even though the crude is sourced within.
Because of this process of taking crude oil out and bringing in refined products from outside, landing and bridging costs add to the product cost, which government then subsidises to make the refined products affordable for the people.
The supposed good intensions of government have been severally abused by importers, marketers and corrupt government officials who see it as a veritable avenue to enrich themselves. The treasury has been thoroughly fleeced because payments are being made for products not supplied; and in most cases, invoices are over-inflated leading to great losses for the country.
Vandals have a field-day stealing crude oil and engaging in local refining of products while marketers indulge in hoarding and smuggling of products across national borders where cost is high, thereby making huge profits at government expense.
With all these things going on, the essence of the intervention has been defeated and it has become obvious that sustenance will only be to the continued advantage of racketeers and profiteers in the industry; and definitely not in the interest of the common man or the country’s economy.
Government would therefore need to urgently find more pragmatic ways of dealing with the situation by curbing the fraud in the system, making products available at a cheaper rate and terminating the subsidy regime which has obviously become a drain on the country’s meagre resources.
It is rather curious that a country with such a huge hydrocarbon deposit and which produces crude oil in large quantity would be importing refined products, more so when it has four giant but redundant refineries. Although recent effort at reviving these ailing refineries is late in coming, the process is nonetheless necessary; and must be fast-tracked to relieve the country and the people of the perennial threats of product price increase, as a means of lightening the burden imposed by subsidy.
However, necessary as it has become, removal of subsidy without providing remedies to cushion the effects of the fallouts is likely to have far greater implications. While options for a permanent solution are being explored and considered, government must attack those viruses within the system that have continued to perpetuate this situation. It must deal with those subterranean issues and clean up the system that has made this whole thing a vicious circle.
A process of gradual removal of the subsidy and a well considered cushioning of the effects must commence immediately as a first step to eventual removal. There is no viable alternative to local refining of products; we must know how to ride our horse.
Even though existing refineries are in the process of rehabilitation and newer and bigger private facilities are in the works, the industry should be expanded further to accommodate small scale investors who may wish to establish smaller refineries and catalytic crackling plants to refine fuel for local consumption within the immediate areas of location.
This will not only help in product availability in the short term at cheaper rates but would drastically curb activities of itinerant crude oil refiners who steal crude and also degrade the environment. Unfortunately, in spite of the holes the subsidy intervention has punched in the country’s revenue bag, government has been foot-dragging in finding a lasting solution to the issue.
This whole subsidy thing is deceptive and government must admit and address it. It has so far displayed a disturbing lack of political will to take the bull by the horns. It keeps looking out for the right time to do so.
It must be noted that there will always be “good” reasons why subsidy on petroleum products should not be removed; just as there is not likely going to be any right time to do it. So government must summon the will to put the necessary safeguards in place and the courage to knock off this subsidy thing within the shortest possible time because, going by prevailing circumstances, the policy is definitely not sustainable. Further procrastination would only amount to postponing the evil day. The time to start the process is now!
