Experts take a critical look at government’s claim that it is subsidising fuel price, arguing that the figures being bandied about by the federal government and proponents of subsidy removal are questionable
The administration of President Goodluck Jonathan may have run into a brick wall as far as its bid to do away with the subsidy on the price of petroleum products is concerned. The prevailing mood within the country, occasioned by the growing unemployment and insecurity seem to have rendered the proposition a hard sell. Jonathan, who tabled the matter before the National Assembly last Wednesday, failed after a two-hour audience to persuade members of both houses to back his plans for the deregulation of the downstream sector of the petroleum industry. The President had argued passionately that the country would collapse if the subsidy were not withdrawn.
But the parliamentarians were not favourably disposed to Jonathan’s arguments. Some of them even openly told the President to deal with the much talked about cartel milking the country dry through the subsidy. “You are the most powerful black President; you have the power to deal with the cartel. We should confront the cartel,” Abdul Ningi, deputy Senate leader was quoted as saying. Aminu Tambuwal, Speaker of the House of Representatives, pointedly told the President that the parliamentarians could not be stampeded but would act in the overall interest of the people. It was gathered that when Senate president David Mark gauged the mood of members on the removal of fuel subsidy, he intervened by changing the focus to Boko Haram menace and insecurity.
The refrain since 1986 is that petroleum products in Nigeria are too cheap in Nigeria. Ibrahim Babangida, former military president, and his advisers made this a singsong each time the administration jerked up the prices of fuel with a promise that the extra revenue would be used to improve infrastructure. Twenty-five years after, the country relies primarily on imported petroleum products, and President Jonathan, the incumbent leader, is still advancing practically the same argument.
But even more contentious and unclear to many Nigerians is the argument about whether the subsidy is real or is a mere Phantom designed to hoodwink the people. Curiously, government has not been forthcoming in shedding more light about the nature of the subsidy in place with regards to refined petroleum products. The position of Tam David-West, minister of petroleum resources under the Muhammadu Buhari and Babangida governments respectively, on this issue is well known: To him, there is nothing like subsidy, and all the talk about landing cost and demurrage is fraud bordering on corruption. “They deliberately sabotaged the refineries to create an atmosphere of artificial scarcity of petroleum products, so they can import fuel from outside the country,” he told the magazine in an interview.
The former minister and professor of virology said the problem could be traced to the Babangida era, when the efforts to deliberately sabotage the refineries began. “Through my personal efforts, which I called Tam Security Organisation, TSO, I foiled many attempts to shortchange the Nigerian people. Dele Giwa, slain former editor-in-chief of Newswatch magazine, knew about it; Ray Ekpu, another renowned journalist in the same magazine, also knew about it because I used to meet with them regularly,” he recalled. He added: “I challenge Babangida, Olusegun Obasanjo, Jonathan, Diezani Allison-Madueke and Ngozi Okonjo-Iweala to face me in a national debate on the fuel subsidy issue. I will disgrace all of them.” (Read interview Fuel Subsidy: I'll name the cartel if...-Tam David West )
Indeed, the opinion of an array of experts is that government’s argument is dubious, as the same government deliberately created the situation that led to the current regime of fuel importation. From his own perspective, Oliver Mordi, chief executive officer of an oil and gas consultancy outfit, is of the view that the inability to make the refineries function is a failure on the part of government. He added that the situation in the downstream sector is a state of emergency that has been allowed to linger for too long. “The government should not be harping too much on the waivers it is granting to importers of petroleum products since it has failed to put the refineries in order, as if it is doing Nigerians a favour by relying on importation of petroleum products. The refineries should work for goodness’ sake,” he emphasised.
For Adedoyin Soyibo, a professor of economics, the nature of fuel subsidy in place in Nigeria is suspicious. His argument: “The definition and measurement of fuel subsidy is suspect because it is not based on an explicit concept and measurement. It is based on a kind of ‘what if’ premise, like ‘what if we sold our crude oil in London, New York or Paris, we would make this much amount’. On that basis, some hypothetical sales and revenues are computed and this would be the amount imputed as subsidy.” Soyibo insists that these are assumptions that should not be regarded as subsidy.
Government, Soyibo insists, does not actually disburse any amount of physical cash as subsidy. “You would think that an actual amount of money has been spent. It is not an explicit expenditure; it is implicit and imputed. Economists do a lot of imputing when there are decisions to be made. But it must be made clear on what and what conditions we are operating. We must make clear our assumptions and not pretend that our assumptions are the same as actual occurrences.”
He argues that subsidies are given by government the world over, including the developed countries either, as incentives for some sectors or for social protection of the vulnerable groups. “America continues to protect its agriculture with subsidies. The same happens in the European Union. Nigeria was asked to withdraw subsidies in health and education during Babangida’s Structural Adjustment Programme, SAP. We know where it led us,” he argued.
Sylvester Odion-Akhaine, executive director, Centre for Constitutionalism and Demilitarisation, CENCOD, Nigeria, equally believes that the argument of the federal government is fallacious. He reasons that it makes no sense to make Nigerians pay exorbitantly for the gift that God blessed them with. “Oil subsidy does not belong to the category of fiscal deficit or liability as the monetarists would have us believe, but rather a legitimate social expenditure,” he told the magazine, adding that it could have been deployed to other area if the governing elite were to be responsible and responsive to the demands of the people.
Princewill Akpakpan, lawyer and head of legal unit, Civil Liberties Organisation, CLO, also believes the so-called fuel subsidy is an artificial creation of those at the helm of affairs. “Looking at the scenario and what the federal government has been telling us, one can infer that it is an artificial creation. On the other hand, the generals and all the rest (in government) are exporting the crude oil and raking in huge returns,” he observed.
He said the federal government should fix the refineries and stop talking about subsidy, because (removal of) subsidy would cause a lot of ripples in Nigeria. “It will make the poor poorer and the rich richer. At the end of the day, the cost of living will be very high,” he explained.
Contrary to the view of the federal government and proponents of fuel subsidy withdrawal, David-West argues that the pump price of fuel in Nigeria is one of the highest among oil-producing nations. “They have been telling us that our fuel costs less than that of other oil-producing nations. But it is all lies. The current price in Iran is N58.40 per litre; Kuwait N30.16; Qatar N32.12; Saudi Arabia N17.50; UAE N54.02; Venezuela N5.84; Libya N15.95; Egypt N46.17; Malaysia N73; Bahrain N39.42; USA N108.04; and Indonesia N81.14.” He added that with the exception of Malaysia, the other countries where fuel is more expensive than Nigeria’s in the above list are not oil-producing countries.
Mordi said he recently sat with an auditor who has worked with the Nigerian National Petroleum Corporation, NNPC, from 1996, and he explained in detail what the whole issue is all about. His words: “Essentially, what the government does is to grant tax holidays or waivers with regards to the importation of the required petroleum products. It is not really tangible in the sense that government does not really hand out cash to the importers. Rather, government is calculating what it ought to have earned as taxes had it not granted the waivers for the purpose of importing petroleum products for Nigerians.” Another component of subsidy, he added, is the cost of bridging or transporting the products across the country, and that the government regularly reneges on this payment.
The consultant insists that government is trying to make a political capital out of it, stressing that government has responsibility towards Nigerians to make petroleum products available at reasonable cost. “After all, we have crude oil in abundance in our country. We are currently producing 2.4 million barrels of crude oil per day. It would not be out of place to refine a fraction of this crude oil for local consumption,” he added.
Put simply, Mordi’s argument is that it does not make sense for government to say that it wants to start making money from the importation of petroleum products, which was necessitated by the inefficiency and negligence of the same government. “If government is saying that, it is unfair because it amounts to totally abdicating its social responsibility to Nigerians,” he added.
By withdrawing the so-called petroleum subsidy, Soyibo contends that the federal government would be failing in its stewardship role towards the citizenry. “In a number of studies, we have found that government has abdicated its stewardship role and the households readily come in to fill the void,” he told the magazine.
Owing to failure of government, he added, the elderly have to continue working because there is no viable social protection programme for them. “Yet other less-endowed nations of Africa like Senegal, Kenya and Mozambique are doing better in this regard,” he added. He said Nigerian leaders “are in the habit of jumping into the bandwagon of ideas (often foreign) that promote personal or group interests to the detriment of the larger group interest. This is called the Askiya Syndrome (because, such was first observed in Africa’s political history with Askiya Muhammad Ture of Songhai Empire).”
The professor’s parting word for President Jonathan is to hearken to the voice of the people. “The best option of raking in more money for government is by blocking all leakages, and not alienating the masses of Nigerians who are completely spent already in the service of the fatherland. The Arab Spring should be an eye-opener. Who would have thought that such a thing was possible some years ago?”
Additional reports by ARUKAINO UMUKORO
and AYODEJI ADEYEMI