The Fuel Subsidy Palaver

Government case for subsidy removal is unwisely based more on the need to increase government revenue, rather than deregulation to ensure investment, massive job creation and sustainable product supply in the downstream petroleum sector. Why should Nigerians want corrupt, inefficient and often dysfunctional governments to have enhanced revenue (and this is not about Jonathan, but ALL Nigerian governments to date!)? Of what significant benefit has government revenue been to our people? Nigerians don’t trust government, for good reasons, and Jonathan hasn’t yet given Nigerians overwhelming reasons to believe his is different. Nigerians are right to demand that the executive and legislature demonstrate willingness to make sacrifices, as requested of Nigerians. Personally I think Jonathan means well, and I trust Ngozi Okonjo-Iweala (irrespective of the irrational social media ranting), but the essential character of the Nigerian state remains the same! However I have always supported downstream petroleum sector deregulation! Deregulation and liberalisation have transformed several sectors in Nigeria-financial services; airlines and aviation; broadcasting and media-radio, television and newspapers; upstream petroleum; universities and polytechnics; and telecommunications. Every sector which relatively “works” is conducted by the private sector; those that don’t-power, refineries, railways, water, public education, public health, security, judiciary, roads etc are managed by government! But not every sector can be deregulated and liberalised e.g. security, public health and education. Even there private players can play critical roles such as in the Lagos State Security Trust Fund by its private sector partners, which has transformed the security sector in Lagos. Clearly downstream petroleum sector should be deregulated so that private capital and investment can build refineries, petrochemical plants and invest down the sector’s value chain. The best insight is drawn from telecommunications experience. Imagine this was 2000 and we were pondering how to provide 100 million telephone lines for Nigerians. Would we hand over $20 billion to then corrupt and inefficient telecommunications monopoly, NITEL and given it “marching orders” to ensure it provides 100 million lines within ten years? That would have been sheer foolhardiness!!! We would simply have made individuals rich-Minister for Communication, senior civil servants, NITEL officials, contractors, and their friends and cronies, as we had done since independence! Ten years later, NITEL may have moved from 470,000 lines (actually less were working) to may be 750,000!!! Instead we acted sensibly-deregulated the industry, sold licenses to private investors (earning billions of dollars from digital mobile license auctions, 3rd generation licenses, second national carrier licenses; additional operator licences) and earned additional revenue from taxes, import duties, spectrum sales. We created thousands of jobs, with employees paying P.A.Y.E taxes to government and the sector impacted other industries-media and entertainment; advertising and public relations; professional practices; small and medium enterprises (even micro enterprises); and telecommunications enhanced overall economic productivity. Private capital in excess of $20 billion flowed into the economy, and government corruption in the telecommunications sector has disappeared! Today the Nigerian telecommunications sector has 125million connected lines, capacity for 167.8million lines and tele-density of 67.09 percent!!! Why would we so resolutely insist on not using a similar strategy for downstream petroleum??? If we hate corruption, one of our most important actions would be ending the petroleum subsidy scam which is now the largest single source of corruption in the Nigerian economy. The evident irony is that if subsidy stays, the happiest people will be the oil importers!!! I also think many of the opposing arguments are escapist-a gradual removal (that is what we have been doing since 1986! Global oil prices and exchange rates will go up, while petrol prices remain fixed, so a bigger subsidy will re-emerge and we will have merely postponed the evil day); the timing is wrong (evidence suggests that there could never be a right time to ask Nigerians to pay more for petrol. A sense of entitlement to cheap petrol has developed and prior governments have got negative reactions irrespective of timing); there was insufficient consultation (we hear stories of labour leaders who privately agree with government, but refuse to admit so publicly to preserve their populist base-they may later “change their minds” when they get into government!); it is IMF/World Bank policy (no intelligent observer needs an international conspiracy to know that spending one-third of your budget on a corrupt subsidy scam which stunts a potentially huge industry, while you lack jobs, infrastructure and social spending on education, health and transportation, is nothing short of insanity!) The big challenge is how government will calm the populace and alleviate the short-term impact on the poor and struggling masses. Government must urgently implement credible and well-thought out measures to ameliorate the impact on the vulnerable. I support downstream deregulation and I hope the policy is successful, but government must offer deep and meaningful sacrifices of its own. Government must also unequivocally begin the process of transforming itself before it can transform Nigeria! Jonathan must fight corruption, inefficiency and lack of commitment of government officials to the people. The people must henceforth see that government exists for public good and not private benefit!