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Before Another Subsidy is Removed...!

December 21, 2011

This write up is informed by the unending debates and arguments for or against the removal of Petroleum subsidy.    Some of the arguments simply scratch the surface, while others are simply too simplistic to be taken seriously.  Others hit the nail right on the head. 

This write up is informed by the unending debates and arguments for or against the removal of Petroleum subsidy.    Some of the arguments simply scratch the surface, while others are simply too simplistic to be taken seriously.  Others hit the nail right on the head. 

I support the removal of Petroleum subsidy, IF EVER THIS STILL EXISTS OR IF, INDEED, THE GOVERNMENT IS ACTUALLY STILL SUBSIDISING PETROLEUM PRODUCTS after years of removing same.   But why should I not support any effort to ensure that money is available to the Government for developmental purposes?  Why should I not support measures to ensure that money is available to create jobs, rebuild our dilapidated infrastructures, like our roads, our Health care system and Hospitals, Refineries, our Universities, our Court system and equip our Police and security agencies to become more efficient?   Our Universities and Schools, for instance, require funds to rebuild and maintain their infrastructures, equip their Libraries and pay Lecturers and Teachers decent wages. 

And importantly, too, why should I not support measures by the Government to ensure that only Nigerians are the beneficiaries of the subsidies, and that we are not subsidising Petroleum products for the RICH and the FOREIGNERS among us.   After all, the White man does not subsidise or provide Welfare benefits for foreigners in their own lands, without placing hurdles in their way.  These, for me, are the most important arguments for removing subsidies.   In other words, there are valid arguments for the removal of subsidies, including that only Nigerians should benefit from the subsidies, and not the foreigners among us, if the Government must allow the subsidies to remain.  Why should the Nigerian Government continue to subsidise Petroleum products for the Expatriates or Diplomats living in our midst?  The UK Benefit system, for instance, has been manipulated to ensure that persons from abroad do not benefit from their largess or their benefits system, which is also a form of subsidy.  Why shouldn’t we try to be more creative to ensure that the benefits of the subsidies are only enjoyed solely by Nigerians, for whom the subsidies are meant?  And if we can’t ensure this, clamour for its removal and seek some other palliatives or Benefits for the people.  

This juncture, however, is where the argument in support of the removal of subsidies ends for me.  Some questions have been playing in my mind since the proposal and arguments for the removal of the subsidies began.  The first poser is this, how are we certain that SUBSIDIES STILL EXIST?  And why is this ‘subsidy’ thing this ELASTIC or INEXHAUSTIVE?  If I can recall, the debate and arguments for the removal of subsidies started with the Babangida (IBB) regime in 1986.  (Those much older, and who can trace the history of subsidy removal beyond this time should kindly forgive me if I erred).

The argument then was that Subsidies existed and there was the need to reduce or remove the subsidies.  The argument is usually hinged on the excuse of freeing up funds.  The same argument is also being rehashed today by the Jonathan Government, over 25 years later, after the first removal of subsidies by IBB.   Nobody has been transparent enough to tell us how much subsidies have so far been removed and how much is still left to be removed.  All one hears about is that the removal of the subsidies would free up money.  But how much has been freed up since the removal of subsidies began as far back as during the IBB’s era?  What became of the money freed up or saved?  What developmental projects were these savings used on or used for?  At least we know that IBB wasted part of that money on an election that he, “all by himself”, later annulled, and thereby sunk billions. 

Importantly, we were not told how much subsidy, if any, was still left to be removed at some point in the future.   More subsidies were subsequently removed after the first one, by the same IBB regime.  The other three Governments after IBB’s or before Jonathan’s also at one time or the other argued or campaigned for the removal of subsidies, which suggests that by now there should not be any more subsidies left to be removed.   It is amazing that despite the frequent increase in Petroleum products prices that subsidies still exists till today, which the current Government is again proposing to remove.  These ‘Subsidies’ must, indeed, be ELASTIC and INEXHAUSTIVE. 

Given the incessant removal of subsidies, and the clandestine manner or lack of transparency associated with it, the follow up question is, what has happened to all the savings realised from the removal of previous subsidies?  With all the savings made from the removal of previous subsidies, plus the Gulf War oil windfall that many have been clamouring for a full disclosure from IBB, and the increased revenue realised from the sale of Nigeria’s Crude oil, all these have not translated to a corresponding infrastructural development and economic growth.   What has happened to all the monies and savings?

Unless the Government can explain to Nigerians what became of the savings and how it was spent, I do not support the removal of subsidies at this time, as much as I do not wish that the Nigerian Government should continue to subsidise Petroleum products for foreigners and expatriates living among us and the rich.  Until the Government gives a good account or full disclosure of what the previous gains or savings were used for, which, by the way, Nigerians deserve to know, the people should resist the move to remove Petroleum subsidies as currently being proposed.

The issue of corruption is another problem that the Government must address first and quickly too.  If during the last exercise of the removal of further subsidies, the then Government advanced the same argument that it needed to free up and set aside money used to subsidise the Petroleum products, what happened to that money?   Getting simplistic here, if it is as little as N10 (per litre) that was saved by the Government from the removal of subsidies, it means the Government would have saved about N10 million every time a million cars purchase a litre of Petrol.   The figures start to stack whenever they buy up to 100 litres of petrol a week or a month.  What happened to all that money saved through the withdrawal of the last subsidies?   Nigerians deserve to know!

Moreover, the prices of petroleum products and fuel have increased globally due to the interplay of market forces and the increase of Crude oil prices by OPEC and its members, of which Nigeria is a major player.  In other words, the Nigerian Government has continued to benefit or make so much from the sale of her Crude oil during this period.  What has also happened to all the monies that have accrued to the Government?  Why isn’t the money being used to revamp and rebuild our infrastructures?  Unless, of course, this has been swallowed up by the fangs of corruption? 

Recently the National Assembly named and shamed some individuals and companies for profiteering at the expense of the masses.  While the National Assembly’s motive for doing this is still unclear to me, some people have, however,  inferred corruption.  How true this is, only time will tell.  I view that exercise by the National Assembly as comical.  As the arm of Government responsible for Legislating and making Laws, they should not only be naming and shaming but legislating against thievery and Corruption.  The Law enforcement agencies too, should also not be waiting for either the President of Nigeria or the National Assembly to command or instruct them to do their jobs. They  all have their Job Descriptions.  If every INSTITUTION in Nigeria functions properly and the way they should, the country will not experience the problems or issues that we experience regularly. 

The above are some of the issues that the Government needs to first address before convincing anybody with the argument of freeing up or saving more money.  Nigerians deserve to know why the savings made from previous subsidies removal have not been judiciously used for the benefits of the people, the economy, to rebuild our fallen infrastructures and institutions, and create jobs, and why we must further free up more money, and for whose benefits?   Yes, the question must be asked, for whose benefit is this money that the Government is planning to free up?   If they cannot provide reasonable explanation or give answers to what became the lot of the past savings then the Government must rethink the situation.

The Government must first ensure that certain things are in place before contemplating such removal.  Given Nigeria’s peculiar situation and the harsh reality that Nigeria is far from being a perfect society, majority of those opposed to subsidy withdrawal are very much concerned and troubled about the macro-economic effect and the inflationary tendency that such venture would occasion.    Nigeria is an imperfect society, with an imperfect market, and her people can act funny sometimes, especially when it comes to their interpretation of the interplay of market forces.  The Government needs to first of all address this problem before unleashing what, no doubt, would cause grave hardship on the people. 

What do I mean by this?  I have lived in the UK for very long now, and I know the system quite well enough.  Since living in the UK, I have witnessed the price of petrol (Unleaded) increase from only about £.29p per litre in 1994 and it now sells for around £1.30 a litre.  In other words, petrol prices have increased by about a pound (or N250).  However, in that time the prices of other goods and services have more or less held their own and remained the same or increased marginally.  Another example is salary increase, which usually happens annually to cater for inflation.  Those two factors do not, by themselves, necessarily bring about a corresponding increase in the price of goods and services.  In other words, the Stores in the UK or the Traders or service providers do not increase the prices of goods and services simply because of fuel pump price increase or wage increase. 

However, that is not the case in Nigeria.  In Nigeria, as soon as there is a wage increase, the Market woman who sells Garri, Rice and Beans also increases her own wares, despite the fact that the increment is meant to help workers cope and increase their spending power.  The typical market woman or trader, instead of feeling excited that the wage increase would mean more spending power by workers, which in turn would benefit their business, rather, chooses instead to take the excitement away from the salary increase by inflating their prices.   It beats me why they do this!  The typical Nigerian wants to selfishly maximise their profits, not caring whose Ox is gored.  The 'Danfo' Bus drivers or the ‘Okada’ riders also increase their fares arbitrarily at the slightest opportunity. 

The same thing happens when Petroleum products are increased, whether through artificial scarcity or through the removal of the perceived subsidies.   The Market woman or Traders and the transporters ('Danfo' Bus drivers and the ‘Okada’ riders) increase their fares astronomically, whether they are affected by it or not.  And in Nigeria, once prices go up, they continue to spiral upwards and never come down.  The percentage increase is also another matter, as these people fix their own prices willy-nilly.   Even if the subsidy (if this still exists) is removed and the Petroleum pump price is increased by as little as N10.00, the Trader and the Market woman and the ‘Okada’ riders and the 'Danfo' Bus drivers fix their own prices and increase it by as much as almost 100%, if not more. 

This however, is not the case in the UK.  Even though the cost of fuel (Unleaded) has increased since 1995 by over 300%, the minicab fare to the shortest distance (or drop) has only increased marginally in that time from £3.00 to £5.00.   Unlike the ‘Okada’ riders and the ‘Danfo’ Bus drivers, who are selfish and greedy, that is not the case with the UK minicab driver.  Yet, they have experienced and suffered a much higher fuel pump price increase than their Nigerian counterparts.

The above scenarios, unfortunately, typifies the type of imperfect market that we have in Nigeria.  And I hope that President Jonathan has not forgotten this too quickly.  Hope he has not forgotten how he once used to buy the same products from the local markets or from the woman down the Street.  And I hope he has not forgotten too soon how the average ‘Danfo’ Bus driver or the ‘Okada’ riders behave towards Nigerians and fix their prices arbitrarily and without any control.  The Government needs to consider the ripple effects of their proposed venture.  These are the grievances of the people, in case the Government is not aware.  Therefore, before the ‘subsidy’ (if this still exists) is removed, the Government ought to consider the effects their actions would unleash on the poor and long suffering masses. 

Everyone desires that the Government has sufficient spending power to rebuild the society and the systems, revamp or rebuild infrastructures and our dwindling institutions, and also create jobs.  However, equally too, the people need a Government that is creative, transparent enough and has the gravitas and the balls to deal with corrupt people and the rogues amongst them, and not seek an easier way out by punishing the people with more hardship.  The Government should view the subsidies as some form of Welfare Benefits for deserving Nigerians, as imperfect as it seems. 

Having said this, I abhor the fact that the Nigerian Government should continue to subsidise the lifestyles of the Nouveau Riche and the foreigners and expatriates in our midst.  It is now over to the Government to rethink this venture and put their thinking caps on (or form a think tank) and explore more creative ways of dealing with the situation, and yet not cause hardship to the ‘common’ or ‘average’ Nigerian or worsen their lot. 

I dare say, too, that it is time also for the people, Nigerians and the masses to also don their thinking caps and suggest or propose solutions to assist the Government to deal with this quagmire or predicament, as it is.  It is puerile, the case or argument made sometimes by some people that the Government must have the answers to every problem, and it is not their place to offer solutions for the Government.  That is nonsense and childish, and it is symptomatic of being daft or idiotic!  Anyone with ideas will not keep it or hide it or wait for the Government alone to provide solutions.  Besides, the Government is made up of Nigerians, and people like you and me, and we all have our parts to play.  We all must join hands with the Government to find solutions to problems.  I rest my case!  Happy Christmas and a prosperous New Year to all!

Osi Okponobi
[email protected]

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