Fuel subsidy!: Ghost of economic-waste chasing Nigeria’s economy
Sunny Nwachukwu (Loyal Sigmite), PhD, a pure and applied chemist with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce. He can be reached on +234 803 318 2105 (text only) or firstname.lastname@example.org
April 24, 2023168 views0 comments
It is painful that one starts with an open lamentation over this identified official corruption tool and a fraud-laden window against the economic wellbeing of Nigeria, asking the question: “When will this evil perpetrated against Nigeria’s economy end”? The Fuel Subsidy Removal Palliative to 50 million Nigerians by the federal government (Federal Ministry of Finance, Budget and National Planning) has come as a clear hoax. It appears that everyone has joined to successfully turn the real interpretation and the actual definition of Nigeria’s Fuel Subsidy Policy upside down! The controversial $800 million World Bank loan to Nigeria as palliative to cushion the effect of the proposed fuel subsidy removal by June 2023 is the most laughable action by a confused authority that is meant to be defending the economic interests of the nation, because, the palliative plan does not fit in under the principles of opportunity cost in Economics, neither does it, under the accounting principle of “matching cost”. Where do we then place this Plan? Out of the blues, we now take borrowed money to knock off fuel subsidy removal burdens as palliative; whereas in actual sense, the economy cannot finance basic education, basic health care, or basic infrastructure. And also, like the money to establish functional local refining facilities, which for its lack has exposed our economy to capital flight and importation of foreign labour through the refining of exported crude abroad. We waste our hard earned foreign exchange, doing this; at the same time, the economy still suffers from rising unemployment.
One is sorely ashamed of this kind of pitiable policy thinking and the open professional ignorance being unleashed against the interest of the state (the Nigerian economy) by just blowing money that we don’t have (the borrowed $800 million) on wasteful spending. It’s completely a zero sum game in the economic wellbeing of the people (especially the masses) because there has never been a direct economic gain from this “thorn in the flesh” called fuel subsidy regime all these decades. Whereas the government has failed to make Power systems work, no good Road networks and transport systems created, it now wants to be generous with borrowed funds (you can’t give what you don’t have). It is wrong at Law (nemo dat quod non habet). This action as being planned is viewed as a big hole that corruption stems from, since it’s difficult to measure the unexplainable misappropriation of funds this palliative move may appear to be explaining (no transparency whatsoever with this rogue subsidy regime).
What are we debating on? Is it where the simple interpretation or definition of “Nigeria’s Fuel Subsidy” regime (in its right context as purposed for this economy from its oil industry), which has not been specifically and smartly grasped all these two decades of its colossal economic waste, by tailoring the meaning down to Nigeria’s economy? We continue to beat about the bush intentionally, to suit our personal purses whereas, the real meaning of it, economically, was specifically, designed ab initio, to “cut down costs of refined petroleum products locally for our daily domestic consumption, with our own crude oil” – our richly endowed “Capital Stock”, the hydrocarbon deposits. The primary purpose of this policy, initially, was to alleviate the sufferings of poor Nigerians from high energy cost by reducing the unit cost of daily energy consumption for everyone (rich and poor). This purpose never saw the light of day, as it, regrettably, quickly got hijacked by the privileged politically advantaged persons (PAPs) in positions of high governance and authority, who redirected the above simple interpretation, to technically suit official corrupt practices of rent-seeking and round tripping, through this misplaced and manipulated window of “Petroleum Subsidy Policy regime” on refined products imports and its value shortfall (under recovery) charges, by an arm of the NNPC Limited.
In 2008, I called for Fuel Subsidy Removal, when I christened the policy regime a “thorn in the flesh”, and that it should be scrapped. How is it that today, we are still digging the same economic Tsunami-grave, deeper and deeper, by continuing to borrow to finance a scheme clearly identified as an additional colossal waste to the economy (if we borrow to fund fuel subsidy palliative; where is then the savings that accrued from its removal)? It is senseless to talk about a post-subsidy palliative plan as scheduled for distribution to 50 million Nigerians, representing just 10 million households. All these while (from December 2022 to March 2023) has it not been a period of “subtle unofficial fuel subsidy removal” where Nigerians were buying petrol for as much as N550/litre at the pump price, before the recent downward rate of about N250/litre? I praise Nigerians who have raised doubts about its obscurity by wondering why, and observing that this effort could be “another white-goose-chase”. Imagine this from a nation with a total debt stock of N44.06 trillion (and still counting), with revenue generation standing at just N10 trillion. This same policy window has been used to gulp an average of N17.6 trillion from 2005 to mid-2023. It includes the announced N3.36 trillion subsidies by the federal government for January to June, in the 2023 budget, which the NEITI Report in September 2022 showed an already spent N13.7 trillion.
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The only way out of this financial mess is to revisit our infrastructural development plan for the downstream sector that we have shied away from all these decades, while still being compliant to the UN’s global warming action against carbon emissions generated from fossil fuel sources. This can be done by reviving all the comatose local refining facilities to make this economy self-sufficient in its daily domestic energy consumption. We must go back to our unfinished business of establishing basic infrastructural facilities that will propel economic growth through value addition to the hydrocarbon capital stock for energy provisions, after decades of abandoning the downstream oil sub-sector!
This is a bitter truth that we must tell ourselves. The government should implement this if we must come out of this current rising debt profile. Tweaking these strategies ought to involve a great deal of fiscal and monetary policies that should contribute to ease off stress and tensions on the general public. This is feasible, and might be achieved on the premise that we all would forsake corrupt practices to a great extent, especially in the nation’s hydrocarbon industry, to enable private investors (mostly local operators) to be aggressively wooed to participate, non-oil exports diversification strategy, notwithstanding.
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