I have also lived in the United States for over 2 decades and appreciate the fact that not all policies coming out of the “belly of the capital beast” are reasonable, genuine and for the good of the American people.
United States-based Nigerian professor and social commentator, Farooq Kperogi, has always been on point when it comes to social and economic issues affecting our dear nation. However, when it comes to the issues of President Bola Ahmed Tinubu’s recent decision on oil subsidy removal – He is wrong, and his comparison of Nigeria and the “belly of the capital beast” (USA) is a non-issue and dead-on arrival.
I have also lived in the United States for over 2 decades and appreciate the fact that not all policies coming out of the “belly of the capital beast” are reasonable, genuine and for the good of the American people. It is instructive to note that the President Tinubu did not speak of agricultural subsidy but fuel subsidy– which is fossil fuel subsidy in the US. The issue of fossil fuel removal in the US depends on which side of the political divide you belong to. It is imperative to state that every Democrat elected government is for fossil fuel subsidy removal why every Republican elected government who are for “Big Oil” is against fossil fuel removal. Take for example, On March 2023, President Biden of the US proposed a budget that will scrap oil and gas industry subsidies. Also, President Obama while in office tried to eliminate oil and gas subsidies – his proposal was killed by the republican majority in congress and democrats from oil producing states with lobbying money from “Big Oil.”
Comparing oil and gas subsidies in the 2 countries is like comparing oranges and apples. In the US oil and gas subsidies which was introduces over a century ago include provisions ranging from incentives for domestic production, write-offs and deductions tied to foreign production and income and approved accounting methods that can reduce the stated taxable value of assets. Some of the deductions, like the deduction of intangible drilling costs were originally put in place in 1916, when energy markets, technology, and our understanding of fossil fuel impacts were starkly different. In 2005, President Bush a republican president stated the obvious when he stated that, “with $55 oil we don’t need incentives to oil and gas companies to explore.” The Nigerian government introduced oil subsidy to cushion the effect of rising global oil prices in the 1970s. Oil subsidy has metamorphosed into a growing liability to Nigeria’s budgetary allocations for almost four decades. A large portion of NNPC’s withholding is spent on fuel subsidy payments, which are vulnerable to misappropriation and excessive spending. KPMG the global audit firm for example found that in three years, NNPC paid itself roughly $6.6 billion to fund the subsidy on 15.6 billion liters of products that “apparently were not available to the Nigerian market.”
The erudite professor also mentioned President Biden’s recent intervention of oil price hike, which is commendable but should not be elevated to subsidy. What Biden did was the release of about I million barrels of oil a day from the nation’s Strategic Petroleum Reserve which was responsible for maybe a fraction of fuel price. Gas prices should not be determined by President Tinubu or any government regulation but market forces.
I call on the President Tinubu’s administration to look into the issue of citizen’s welfare raised by the professor - wages should be increased, provision of infrastructure like roads, cheap public transport system, education, health services and security among others.
President Tinubu on his decision to remove fuel subsidy, should take solace in the words of Laurence Overmire that, “Wise leaders know that serving the best interest of all will lead to a healthy and prosperous society. That’s why they work to bring people together not tear them apart, to serve the common good.”
Felix Ayanruoh is an Energy, Infrastructure, Project Finance, Commercial and Transactional Attorney based in the US.