A major topic of discourse in the last few weeks is the issue of whether or not the federal government of Nigeria should remove the current subsidy on fuel which is estimated to be around N1.5 trillion. HRH the Emir of Kano Muhammadu Sanusi II, a former Governor of the Central Bank of Nigeria and respected voice on financial matters made a call for the removal of fuel subsidy and a further devaluation of the Naira. The Governors forum under the aegis of the National economic council have also lend their voice to the debate on the removal or sustenance of fuel subsidy. However, the body language of the governors seems to favour the removal. In an interview on Channels television, the Chairman of the Nigerian Governors forum and Governor of Zamfara state Abdulaziz Yari Abubakar opined that the removal of fuel subsidy will release funds to build infrastructure and development the country. A sing song that the poor masses of Nigeria are used to over several decades.
The IMF and world bank are also said to be pressing Nigeria to devalue its currency so as to attract foreign direct investment (FDI). Recall that the Naira has been devalued many times over and is currently ‘deadvalued’ at over N200/ 1 US Dollar without any commensurate economic gains by the poor masses of this country. It seems that any economic gains stop at mere economic analysis and debates but not in the stomach of the poor masses of Nigeria. Recall also that the structural adjustment programme (SAP) under the Babangida regime at the instance of the IMF and world bank sent Nigeria into an unprecedented economic turmoil that the country is yet to recover from after almost 30 years. In the light if this, one has to look for extraordinary words and economic terms out of this world to convince the good people of Nigeria that a further devaluation of the already battered and bruised Naira is in the best interest of Nigerians. I think it is not.
Although I am nowhere near the sagacity of the respected Emir Sanusi IIon economic matters as to join issues with him on this topic, I still find it expedient that I express my own opinion on this very critical issue. While the link between the government and the people continues to shrink towards extinction, it could be argued that the only remaining connection between the government and the masses is the subsidy on fuel. Fuel subsidy subsidizes not only the price of PMS, AGO and DPK, it also subsidizes the price of tomatoes and onions in the market. This means that the poor and often maligned masses in this country have everything to do with the price of PMS. Even the person who uses a bicycle which doesn’t need PMS to function has everything to do with the price of fuel because he has to buy foodstuff to feed his family and the price of these foodstuff are majorly determined by the price of fuel. As a result of the glaring failure of leadership in Nigeria, the last remaining identifiable derivable benefit for the poor masses of this country from government is fuel subsidy. Currently, Nigeria subsidizes fuel by about N52 per litre which brings the official price of a litre of PMS to N87. Although at the parallel a.k.a black market, PMS sales for as high as N150 per litre when fuel is available. During fuel scarcity, the price of PMS could hit anywhere between N250 to N500 per litre. If the subsidy is removed, the official price of a litre of PMS will be around N130 which will jerk the parallel market rate to anywhere between N500 to N1000 per litre meaning that prices of goods and services could skyrocket beyond the reach of the common man. Relative poverty in Nigeria is currently at over 80% in some states and an average of 8 out of every 10 homes in Nigeria are squeezed with the struggle to feed the children and pay for their school fees. Unemployment is about 40% in Nigeria which means the level of empowerment of the citizenry is very weak as to afford such astronomical increase in the prices of goods and services occasioned by the removal of fuel subsidy. The high level of unemployment also shows that the real sector of the economy is pretty much down and cannot shoulder the huge financial burden that the removal of fuel subsidy will result to. Small and medium Scale enterprises SMEs that use power in their businesses are already squeezed because they cannot operate at reasonable capacity. Most of them have closed shop because of the high cost of diesel which they have to use to run their machines as NEPA/PHCN is missing in action. Removal of the subsidy on fuel will lead to the closure of most of the few SMEs that are still in business. The economy is stagnated on a single commodity and the Buhari administration is introducing measures aimed at diversifying the economy towards agriculture. However, removal of the subsidy on fuel could endanger these economic diversification efforts.
At every political campaign event and after in the last 55 years , Nigerians have been told by their leaders that they will be provided with electric power, good roads, pipe born water, schools etc etc. However some of these promises still remain largely unfulfilled. On what basis will the good people of this country believe that this time will be different when most of the gladiators over the last 50 years still remain in charge? Yes, our current President and nemesis of corruption is different and virtually all Nigerians are confident that he will do things differently but what about the other principal officers and drivers of the system? It is clear today that the governors are experiencing difficulties in paying salaries which shows how bad things have turned to. Some states owe salaries of up to 12 months and strikingly, these states have abundant natural resources which could be harnessed to generate revenue and provide jobs. But everyone is simply talking about federal allocation from oil revenues. One can understand the apprehension of the good people of Nigeria that if the subsidy on fuel is removed and sent to the states, the governors could decide to use it to pay salaries and attend to their states’ financial commitments instead of building any roads of schools as they did promise many times over.
There is no doubt that the subsidy on fuel is a huge burden on the economy. Removal of fuel subsidy cannot stand under the current levels of unemployment and poverty but can be a long term plan. What is required is a PHASED removal of the subsidy which should commence only when the 3 state owned refineries are back on stream to at least 50% refining capacity. At 50%, the Federal government can begin a phased removal of fuel subsidy commensurate to the level of petroleum refining of our refineries. For example if the refineries operate at 60% capacity, then 60% of the subsidy on fuel can be removed and so on. Secondly, the FG should support the real sector of the economy with a reformed regulatory framework in form of lower taxes and levies, import duties etc. This will stimulate industrialisation to create jobs and promote people’s empowerment to cushion the effect of any removal of fuel subsidy. The FG should support SMEs with soft loans and grants to enable them survive the huge financial burden that any removal of the subsidy on fuel is expected to bring so that they can stay afloat and promote job creation to empower the people to survive any economic squeezes.
Finally, removal of fuel subsidy could scandalise the PMB government and lead to a misunderstanding of the good intentions of our President by the good people of Nigeria especially the ordinary citizens who constitute the majority.
By Abubakar Alkali Sokoto
Runjin Sambo
Sokoto
Email: alkalizai@yahoo.com