A Review of the Nigerian Energy Industry

Fuel subsidy removal: The issues, the reality

Iyabo Idowu

23 December 2011, Sweetcrude, LAGOS – After the deafening chorus of opposition that greeted the recent proposal by the Nigeria’s Federal Government to deregulate the down stream sector of the petroleum industry, the truth is gradually emerging about the staggering and mind-boggling cost of sustaining fuel subsidy regime in Nigeria.

Nigerians are now confronted with the shocking revelation that the country spent N600 billion to subsidise the prices of petroleum products in 2010 and N1.3 trillion this year for the same purpose representing one third of the annual federal budget.

A further breakdown of this shows that for every N65 paid for the pump price of petrol, N77 is used to subsidise it. This is buttressed by the fact that the landing cost of litre of the product at any given filling station is N140.00. The accumulative cost from a tabulation of these figures for a three to five year period is what is giving government officials sleepless nights.

The fact which cannot or must not be ignore is that the prevailing huge cost of subsidies will continue to grow even bigger if nothing is urgently done to arrest the disturbing trend for sure, the Dr. Goodluck Ebele Jonathan’s administration has the choice of allowing the present situation to subsist by ignoring the evidence of a development that is gradually leading the country to financial ruin and undermining her economic and industrial growth.

But to do then is to deny that the sunrises from the east and sets in the west; or that the promise he had made about kick-starting a process of economic development that will see the country take its pride of place among the 20 most developed countries in the year 2020 is nothing but a ruse, intended to hoodwink gullible Nigerians while he and his merry fellows in government have their fill from the national till.

However, whatever anyone says of President Jonathan, he certainly cannot be accused of being guilty of greed and insincere considerations. At the same time, no objective or discerning observer can accuse him of being insensitive to the feelings of Nigerians.

If the truth must be told based on the little that Nigerians have seen of the President, his actions and comments have been clearly guided by what he considers to be in the best interest of Nigerians and the country.

So, when the president speaks passionately about subsidy removal, we should not misunderstand him; especially on the prodding of political and economic mischief makers who are presently up in arms against the Federal Government through an orchestrated campaign of disinformation against the essence of the deregulation of the petroleum sector.

For some groups and anti-government opinion cheer leaders, fuel subsidy is a birth right which government is threatening to undermine. So, they are mobilising the populace to resist it. And since to them all is fair in war, employing some bit of propaganda to mislead the public is well in order.

To them, it is not important to listen to the sound argument in support of deregulation and subsidy withdrawal. As a matter of fact, an argument it is not because government is presently engaged in letting Nigerians to know and understand the considerations that informed its decision to take this course of action.

And after due consideration of what government officials are saying in this regard, it is clear that we have reached that point at which an ailing individual must swallow a bitter pill in order to survive or succumb to the ailment. We cannot pretend that all is well with our economy for that is far from the truth.

The truth is that Nigeria’s economy presently needs some therapies to revive it whether bitter pills or painful injections. And in the thoughtful consideration of the Jonathan administration the deregulation of the petroleum sector will go a long way in achieving this.

In responding to criticisms, government has maintained that the move in line with its trans formative agenda that will open up the various sectors of the Nigerian economy. According to the president, deregulation will ensure that Nigeria becomes the bub of petro-chemical industry, exporting finished products to other African counties.

Government’s position is that no nation can survive without deregulation. And if the experience of
the deregulation of the telecommunication sector is anything to go by, the Nigerian economy will certainly receive a massive boost once the petroleum sector as well as the power sector is deregulated.

Without mincing words, the expected benefits will be quite massive, and it is a development that can easily launch Nigerian to an enviable height of development. We are all living witness of the explosion of businesses exponential growth of the national economy following the deregulation of the telecommunications sector. If deregulation should record maximum success at this sector why not so in the petroleum sector?

The problem is that some misguided and selfish Nigerians prefer not to see the clear gains of deregulation; all they envisage are perceived follows like fuel price increases and spiraling inflation. They forget that you cannot make an omelet without breaking eggs. They ignore the fact that the farmer usually do not bother with the pain of planting but looks forward to the joy of harvest time.

What organised labour and others opposed to deregulation fail to understand is that the present administration is not interested in unleashing hardship on the populace. In fact, government’s intention in that regard is motivated by a desire to promote and enhance the common good by setting the economy on a sound and solid foundation for sustained growth.

Government hopes through subsidy withdrawal to reduce pressure on the naira and realise revenue to fund its social welfare programmes and infrastructural development. And to demonstrate its commitment to ensure that the populace do not suffer hardship on account of deregulation, government has already put in place a process to used proceeds from subsidy removal to stimulate the economy and alleviate poverty through critical infrastructure and safety net projects.

These poverty mitigation safety programmes will cover areas such as public works and employment schemes, materials and vocational training and skill acquisition schemes. Government has demonstrated by this gesture that it is not unmindful of the likely impact of deregulation, especially in the short term, on the populace.

It is also aware that there exists bigger advantage in subsidy withdrawal at this time as it is envisaged to accelerate investment in critical infrastructure that will boost economic growth and create jobs.

This is a development that no one who loves Nigeria and Nigerians should quarrel with. So, a vote for subsidy discontinuity can only be a vote for progress and improved well-being of Nigerians.

*Ms. Iyabo Idowu, a public affairs analyst, wrote from Lagos

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  • fada kreece

    This is a good analytic and, seemingly, objective insight. I want to know more about the pains and gains of subsidy removal. Keep it up