WHY PRESIDENT MUHAMMADU BUHARI MUST REMOVE FUEL SUBSIDY

According to wikipedia.org, a subsidy is a form of financial aid or support extended to an economic sector (or institution, business, or individual) generally with the aim of promoting economic and social policy.

Subsidies come in various forms and can be broad or narrow, legal or illegal, ethical or unethical. The most common forms of subsidies are those to the producer or the consumer. Producer/Production subsidies ensure producers are better off by either supplying market price support, direct support, or payments to factors of production.

In simple terms, fuel subsidy is when government keeps the price of fuel low by bearing part of cost. Subsidies commonly reduce the price of goods (in this case, fuel) and services to the consumer.

Whether subsidies are positive or negative is typically a prescriptive judgment. As a form of economic intervention, subsidies are inherently contrary to the market's demands. Some have argued that subsidies can also be used as tools of political and corporate cronyism.

In Nigeria, fuel subsidy has become an issue of public debate. Some are strictly against the removal of fuel subsidy. They argue that fuel subsidy is the only thing citizens enjoy from government, and as such mustn't be tampered with.

Some others like former Petroleum Minister, Prof Tam-West say there is nothing like fuel subsidy. He instead calls it, 'a mega scam'. According to him, one cannot remove what doesn't exist.

Whatever side of the divide one belongs to, the truth is that something needs to be done about fuel subsidy by the Buhari administration, and quickly too. This is because even though some like Prof Tam-West argue that there is nothing like fuel subsidy, the fact remains that the cost of fuel subsidy has continued to grow.

An analysis of figures on fuel subsidies from 2006 to 2012, according to BusinessDay showed that between 2006 and 2012, Nigerian spent more than N4.987trn on fuel subsidies. In fact, an analysis of the 2013 budget showed that allocation for fuel subsidy constituted about 20 percent of the entire budget.

In the 2015 budget, the Federal Government made a provision of N145.2bn for fuel subsidy. This was slightly lower than the N237bn for the very key health sector. This reduction could be attributed to the fall in global price of crude oil which is Nigeria's major source of revenue.

The truth, however, is that something is seriously wrong when the amount allocated for fuel subsidy in 'Africa's largest economy' is more than amount allocated for key sectors of the economy of the nation like education, health, agriculture and rural development.

Perhaps, the problem isn't so much about the fuel subsidy itself as it is about those who actually benefit from this subsidy. 

Even though fuel subsidy was intended to benefit the poor, the irony is that the poor do not benefit from fuel subsidy. The rich do. With the government subsidizing the cost of petroleum, those who consume more of the product actually benefit the most. The rich who live in Maitama and Lekki with their garage filled with fast cars benefit from the subsidy.

My poor grandma (and those in her economic bracket) who relies on 'kekenapep' and her feet for moving to and from the market doesn't benefit from fuel subsidization. This is because her  fuel consumption is significantly less than that of the creme de la creme of the society.

There is also the issue of illegal bunkering of oil by racketeers. Nigeria's neighbors, through smuggling of petroleum products, benefit more from fuel subsidy than those it was meant for.

Having outlined the above, it is clear that Buhari needs to muster the political will to remove fuel subsidy.

I say 'political will' because former President Jonathan's attempt to end fuel subsidy in January 2012 sparked a week of strikes, prominent among them being the Occupy Nigeria movement, which lead to complete shutdown of the economy. Government was thus forced to partially restore the subsidy to avoid a total collapse of the economy.

If President Buhari will have even the slightest chance of fulfilling his many campaign promises, then he needs to take a bold step and remove the fuel subsidy.

Why? You may ask. The first reason is because fuel subsidy is no longer sustainable. Government cannot continue to pay billions of Naira in fuel subsidies when it has to borrow money to pay salaries.

Another reason is one that has already been mentioned above. There is really no fuel subsidy since it doesn't benefit those it is meant for.

The next question is, ‘how will total removal of fuel subsidy benefit all Nigerians’? The next few lines will explain that.

With funds saved from the removal of fuel subsidy, Nigeria can invest in key sectors of the economy that will not only accrue revenue to the federation, but also provide jobs for citizens.

Also, the Federal Government can look to some of its agencies like Nigeria National Petroleum Corporation, Nigeria Ports Authority, Nigeria Maritime Administration and Safety Agency, Nigeria Communications Commission and others that are sitting on trillions of Naira to shore up its finances, so that the savings from removal of fuel subsidy can be applied to establishing the infrastructure and projects to make Nigerians benefit from its abundant gas.

Perhaps another huge benefit of total fuel subsidy removal will be the fact that Nigeria will no longer be at the mercy of oil marketers who hold the nation to ransom at will.

Also, Nigeria will no longer be tormented, terrorized, brutalized, traumatized, and harassed by PENGASSAN and NUPENG, the two main labour unions in the downstream petroleum sector, who embark on strike actions at the slightest threat to what is in their narrow minded interest.

Having stated the need for total removal of fuel subsidy by the Buhari administration and how its removal will benefit citizens, the issue then becomes how to go about the removal.

                                                 

President Buhari must not act in the manner his predecessor, President Goodluck Jonathan did.

Nigerians woke up on January 1st, 2012 to learn that fuel subsidy had been removed without palliative measures put in place and due consideration of the plight of Nigerians.

Before removing fuel subsidy, President Buhari must ensure that palliative measures and safety nets have been put in place to reduce some of the effect its removal will have on citizens. Our refineries have to be functioning at optimum capacity to cater for the oil and gas needs of Nigerians. The president also has to consult with key stakeholders to ensure that proceeds from fuel subsidy removal are ploughed back into key sectors of the economy.

This process must not only be transparent, but must also be perceived by all as being transparent. If the fuel subsidy removal is successfully implemented, it could lead to greater developmental gains for all Nigerians.

Above all, the President has to communicate to Nigerians why fuel subsidy needs to go and how the citizens will gain in the long run.

He won the elections on public trust and belief that he will bring the 'desired change' the country needs.

He mustn't act in a manner that suggests that like his predecessor, he too 'doesn't give a damn'.

 XoXo

NAWTIprof

Sources: 

                wikipedia.org,

                bizwatchnigeria.ng, 

                Businessday, 
                   TheNigerianVoice.com