FG Is Right On Fuel Subsidy Removal - DropShot

By 01:06 Fri, 13 May 2016 Comments

Times are tough, no doubt. The situation we find ourselves as a nation is dire, no doubt. As the FG announced the new price regime for fuel pump price from 87 naira to 145 naira max, a lot of people including on this forum have criticized the action of the government and accusing it of insensitivity to the plight of the common man.

While this article is not deliberately focused on the past administration of GEJ and how it managed our resources, it’s nearly impossible to attempt to justify the current government’s action without needing to make reference to the oil boom period of 2011 to 2014. Had the immediate past administration judiciously utilized what we earned and what it inherited from OBJ/Yar’Adua, it’s very unlikely that we will find ourselves in this messy situation.

While I don’t oppose a government providing palliatives to its citizens to cushion effects of high cost of essential commodities, it makes no economic sense to do that if there are no resources to do it. Nigeria with a paltry $27 billion dollars in foreign reserves (GEJ met it at $47 billion, earned more than any president in Nigeria’s history, yet depleted it to abysmal level), $2 billion in Excess Crude Account, lacks the resources to subsidize fuel.

In the same way, it will be disastrous to support a corrupt regime to remove subsidy from essential commodities while the president watches helplessly as his foot soldiers defraud the citizens and enrich themselves corruptly. Numerous corruption cases ongoing is a reminder of how GEJ allowed the Dasukis, Bafarawas, Akpobolokemis, Mettuhs, Diezannis, Inde Dikos and many others steal us blind.

Brief History of Fuel Subsidy
Beginning from when OBJ re-introduced fuel subsidy in 2006 as a palliative for high landing cost of imported refined fuel, Nigeria has spent more than N6 trillion to subsidize fuel since then
*2006 – N151.9 billion; *2007- N188 billion; *2008 – N256.3billion (January to July); *2009 – N421.5billion; *2010 – N673 billion; *2011 – (N1.3 trillion)revised to N2.19 trillion; *2012 – N888 billion + N161.6 billion supplementary *2013 – N971 billion; and, *2014 – N971.1 billion
The amount spent on subsidy in 2015 was in excess of N1 trillion

Why Fuel Subsidy Is Not Sustainable Now
It’s not a hidden fact that our earnings from crude sale has nose-dived; more than halved from what it used to be. The average crude price per barrel now is below 30$ since beginning of this year. When compared to an average of $90 to $100 for the four years of 2011 to 2014, no one need a rocket scientist to understand the money to subsidize the product is no longer there.

Throughout the world, all countries that have their economy largely dependent on crude oil have experienced economic set-back and most of them have taken drastic actions to cut back on their expenses on subsidy. Saudi Arabia, at the beginning of crude price fall had more than $600 billion in foreign reserves, yet she increased fuel pump price by 50% http://money.cnn.com/2016/01/05/news/economy/saudi-arabia-oil-budget-gas/.

Qatar increased fuel price by about 35% and still planning to increase it further, UAE and many other Gulf countries refine their own crude locally, can afford to keep subsidy, yet have all removed some subsidy from petroleum products. The only places where fuel prices have gone down since crude price crash are the economies that were not enjoying any form of subsidy when crude price was high.

Going by this summation, it amounts to irrationality, lack of having any grasp about happenings in the world economy, or pure and deliberate emotional blackmail to expect Nigeria to be able to keep subsidizing fuel especially with her current economic recession.

Why Nigerians Were Right to Oppose GEJ’s Subsidy Removal in 2012
I, among many other Nigerians were opposed to GEJ’s plan to remove subsidy from petrol in 2012 and here are some of the reasons:
1. GEJ by then had already proved to be shamelessly corrupt and lacking the political will to stem the tide. So, we were right to believe that the subsidy to be removed will still end up being looted one way or the other. Events since after the partial removal have proved us right as not a single measure of the promised palliatives was fulfilled. No mass transit buses. No new refineries as promised. No new roads built as promised.

2. Nigeria was earning excess from crude oil as at then. As such, we should be able to enjoy some part of the excess profits through subsidy. If ministers, Special Advisers and other top government officials were stealing us blind and we saw them, why should we not have a right to some subsidy which was paid for by the excess earnings from our crude?

The Way Forward
For Nigeria to get out of the fuel crisis quagmire, there are certain things we should be doing but are failing to do:

1. Diversify the economy: In the past, lip service was paid to economic diversification. To be sincere, we have missed our best opportunity to diversify our economy with little or no pain. The second best opportunity is NOW which unfortunately comes with pains and sacrifice. We cannot expect the government of PMB to diversify the economy and not plough resources from subsidy towards the diversification; especially when we are earning far less than we require now.

2. Build more refineries: Without having the capacity to refine our local petrol demand in the next two to three years, fuel price will go up further and we will be back to square one when crude price goes up astronomically again. It’s good to hear that the FG in partnership with some businesses is planning to have new refineries on board within three years from now. I hope it comes to fruition.

So, should we find ourselves in the same position as 2012, with a president who acts like GEJ, I am certain Nigerians will resist any attempt to remove the fuel subsidy. But given the current economic situation and the type of president we now have, it will be unpatriotic not to support him. Even his worst detractors know in their deep heart that this president is not an IB and not a corruption personified.

Constructive criticism is welcome. Empty brains should stay away!



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