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FUEL SUBSIDY: THE LAST STRAW THAT WILL BREAK YAR’ADUA’S BACK

By Kali Gwegwe
Published September 15th, 2009

There is one very fundamental goal every government- whether democratic or dictatorial seeks to achieve. That goal is the socio-economic well-being of its citizens. The well-being of citizens of any country is mostly built on four key foundations. They include dependable leadership, vibrant economy, rule of law, and the culture of fair play. As important as it is, many persons still do not appreciate the fact that without the culture of fair play, rule of law would not be able to support the necessary framework that would promote the socio-economic well-being of citizens. Let us consider the Niger Delta question. Both natives and non-natives of the Niger Delta have come out to argue that 13% derivation is unjust- not commensurate with the region’s contributions to national development and incidence of environmental degradation. It is only the spirit of fair play that can make non-natives of the Niger Delta region to support calls for an upward review of derivation principle. It is however instructive to note that the spirit of fair play is mostly a product of the desire to apply common sense in dealing with critical issues. Without the benefit of the wisdom of common sense, leadership in whatever sphere or level is bound to fail.

Incidentally, poor leadership culture is the major problem plaguing Nigeria since becoming a nation nearly fifty years ago. A very careful analysis of the problems of poor political leadership in Nigeria has led to a very shocking conclusion. Owing largely to the economic interests of the British colonial administration, a very faulty foundation was laid when His Royal Majesty, King George V approved the Nigerian Protectorate Order-in-Council in November, 1913. It was this royal order that gave official backing to Lord Fredrick Lugard to proclaim the amalgamation of the Northern and Southern Protectorates to form Nigeria on the 1st of January, 1914. The numerous tribes were not offered opportunities to discuss their future. Such discussions would have enabled the various tribes to agree on safeguards and standards by which they would co-exist. This dialogue would have also helped to protect the rights and privileges of minority tribes. This faulty foundation laid by the British colonists went on to fuel the culture of tribalism in Nigeria. As part of efforts to protect tribal interests, it soon became un-Nigerian to accuse or indict a fellow tribesman for corruption. Top government officials in the executive, legislature, judiciary, armed forces, and police have since then been protecting their kinsmen or associates involved in corruption. Today, the roots of corruption have spread so wide and deep that uprooting it has become very difficult. This best explains why despite all the efforts of CCB, EFCC, and ICPC; corruption has not still abated.

We shouldn’t have waited for Hillary Clinton to come and remind us that a nation suffering from poor political leadership can neither fight corruption nor achieve the fundamental goals of government. It should therefore not surprise anyone that Nigeria has not been able to achieve much almost fifty years after gaining political independence from Britain. Instead of addressing the causes of poor leadership, our leaders have resorted to relying on western economic theories to lead the nation out of the woods. As a matter of fact, Nigerian leaders need more than sound economic theories to succeed. For decades now, Nigerian masses have been suffering because of the refusal of the country’s leaders, economic advisers, and fiscal policy formulators to recognise the important place of common sense in nation building. As a result of this, they have been seeing the woods for the trees. The non-application of the wisdom of common sense in leadership can create big gullies- deep enough to swallow the whole essence of government.

In Nigeria; the essence of government would be defeated if fiscal policies are developed and deployed without minding the short term effects on the larger society, which is made up of mostly very poor people. While there is absolutely nothing wrong with implementing sound economic theories, there are however visible traces of deep ignorance on the part of our leaders concerning the nature and limitations of man-made ideas. The realisation of this would have made them to appreciate the fact that no one single economic idea is perfect. The present global economic meltdown is an example of the failure of trusted economic theories. President Yar’Adua must therefore not rely on the wisdom of his advisers. He should always put the opinions of his advisers through the heat of common sense.

In theory, fuel subsidy is socialist in nature and would therefore not support a capitalist economic culture. Even with the collapse of socialism, it is believed that over 3 billion people on the face of the earth are enjoying fuel subsidy. Why? Many nations do not have influence over the price of crude oil in the international market. It is therefore assumed that allowing the price of crude oil in the international market to determine local price of fuel may end up breaking the already weak platform on which poor people survive. Despite this popular acknowledgement, the percentage of subsidy defers from country to country. In most cases, the amount of subsidy is influenced by factors such as economy, politics, culture, and even religion. All of these explain why the price of fuel is not uniform all over the world. Every country fixes the price of fuel in line with the fiscal policies of government. It would definitely shock President Yar’Adua, his team of economic advisers, and fiscal policy formulators in the CBN to learn that while Nigeria is warming up to remove fuel subsidy in November, the Indonesian legislature has increased fuel subsidy from RP58.98 trillion to RP68.73 trillion in the 2010 budget. It has however asked the executive arm to design fiscal policies that would make the poor benefit more from the subsidy. To underscore the importance many governments attach to the interests of the poor, India has special fuel subsidy plan for tri-cycle operators. Just like motorcycles have turned out in Nigeria, tri-cycle is a popular means of transportation among India’s low income earners.

No doubt, a number of countries have at one time or the other removed subsidy on fuel. While some had done it in phases, others had carried it out at once. One very important point to note here is that, no country has ever removed fuel subsidy while her socio-economic framework is as weak as that of the present day Nigeria. The fundamental argument emerging from this opinion is that Nigeria’s socio-economic infrastructure is not strong enough to bear the consequences that would follow the removal of fuel subsidy.

Our leaders and fiscal policy formulators must not forget the fact that over 90% of the Nigerian adult population is living below poverty line. They should realise that whoever that is unable to create wealth either by reasons of unemployment or inadequate wages is poor. That is to say every adult Nigerian that earns less than N6,500 daily is poor. The reason behind this opinion is the fact that an average Nigerian family of five persons (husband, wife, and three children/relations) will need about N3,000 daily (N200 x 3 meals x 5 persons) to be able to afford decent meals. They would also need about N1,000 (N200 x 5 persons) for transport expenses, and another N1,000 (N200 x 5 persons) for miscellaneous expenses. Wealth comprises of physical properties and surplus cash after taking care of one’s basic needs. In healthy societies, even the least paid worker is able to have savings (wealth) at the end of every month. Therefore, Nigerian workers should
be able to save- create a minimum wealth of N1,500 daily. With this arrangement, the issues of house rents, medical, academic, and socio-cultural expenses would not turn out to be burdens on Nigerians workers again. But the present day reality is shocking. The bulk of Nigerians- civil servants, technicians, labourers, subsistent farmers, traders, artisans, and vendors earn less than N600 daily. With this brief, we can now appreciate why the standard of living of the average Nigerian worker is low.

World Bank documents states that low standard of living sustains poverty. There is no denying the fact that poverty is a major contributing factor to the rising cases of illnesses among Nigerians. The poor health of most Nigerians can be rightly traced to hunger, severe malnutrition, and poor sanitation. For obvious reasons, most Nigerians are too concerned about how to survive the biting effects of poverty. As a result, very little or no attention at all is given to nutrition and sanitation. This already bad situation is made worst by two fundamental problems. Most houses in Nigeria’s rural and urban areas do not have decent toilet facilities. The few that have them do not have water. We cannot talk of sanitation without water. Unfortunately, more than 80% of Nigerians do not have access to safe water.

Added to this, there has been on a steady rise in poverty among Nigerians in the last twenty years. Among the factors responsible for this are failed political leadership, corruption, obsolete educational curriculum, poor electricity infrastructure, bad roads, non-availability of credit facilities, unfriendly tax regimes, neglect of the agricultural sector, and the promotion of a mono-economy. Nigeria is no longer a preferred destination for investors. Within the last fifteen years, most industries have closed shop and relocated to neighbouring countries due to the high cost of doing business. In the process, millions of jobs were lost. The nation’s huge population is therefore forced to rely on the few job opportunities in government, oil companies, and financial sector. Perhaps, this will help explain why Nigerians now see politics as investment portfolios. This development has placed massive pressure on the machinery of governance. The desire by politicians to make enormous profit from public office is greatly responsible for the failure of political leadership in the country. Wherever you go to in Nigeria today, the effects of failed political leadership can be seen standing naked in the market place. Corruption, unemployment, poverty, hunger, disease, frustration, anger, and crime are almost becoming abnormal in Nigeria. Sensing that the masses have refused to be fooled, government has appropriated huge percentage of national budget to buy guns and bombs for the police and armed forces. Instead of improving the conditions of existing ones, government is busy building new prison facilities across the country to hold those that will dare it. Sooner or later, more hangmen would be employed to execute condemned prisoners- most of whom are unemployed, poor, hungry, and open to the forces of evils. From all indications, the Nigerian federal government is close to declaring a senseless war against its poor and down trodden citizens.

When Queensland State in Australia removed fuel subsidy, the citizens protested vehemently. They argued that the removal of fuel subsidy will make their state become the most expensive in the country. No doubt, the planned removal of fuel subsidy in November will pitch the federal government against the already disenchanted Nigerian masses. It is very hard to explain where President Musa Yar’Adua is finding the courage to display blithe disregard for the suffering Nigerian masses.

As indicated by the minister of finance, Dr. Mansur Mukhtar; the removal of fuel subsidy is mainly for the economic benefits of the nation. Like it is in every country that is subsidising fuel, government loses huge resources that could have been channelled towards physical and human development projects. Good as government’s intentions are, many Nigerians are bothered about why government always chooses to over stretch the patience of the down trodden masses to strengthen national economy. Between 2000 and 2007, the price of petrol jumped about six times. But despite all the talks about palliative measures and heightened investment in critical sectors aimed improving public infrastructure, the masses were short of being called fools. That is the reason why the federal government may not succeed this time around. Nigerian masses have brought out the last straw!

President Yar’Adua, his team of economic advisers, and fiscal policy formulators in the CBN are reminded of the naked fact that all the countries that have removed fuel subsidy first made attempts and achieved certain fundamental goals. Nigeria should not be different. For the federal government to earn the justification to remove fuel subsidy, it must first strengthen the socio-economic framework of the nation. To do this, it must reduce corruption to the barest minimum. It is mostly because of corruption and pressure from importers of petroleum products that the nation’s four refineries are dead. Since Nigeria’s socio-economic framework cannot support the removal of fuel subsidy, the issue of privatising our refineries should not arise at least for now. Before considering the removal of fuel subsidy, the federal government should ensure that the nation’s refineries are performing at optimum capacity. It is a huge shame that with a whole of four
refineries, the world’s sixth largest producer of crude oil still imports 85% of petroleum products to service domestic needs when we are supposed to be exporting same.

Before removing fuel subsidy, the federal government would need to achieve a minimum annual budget performance of 90% for a period of three years. This will help strengthen the socio-economic framework of the nation. With just 50% annual budget performance for ten years, Nigeria would have been among the first thirty most industrialised nations in the world by now. With a 90% annual budget performance for three consecutive years, it is believed that all federal roads would be in good conditions and the power sector fixed to support the 7 Points Agenda of the Yar’Adua led administration. Furthermore, government should assist to revive collapsed industries and support new ones to commence business. This will help take care of the problems of rising unemployment and its attendant nuisances. Government must also give strong support to the agricultural sector. Genuine farmers should be granted access to low interest and long term credit facilities. Apart from being a sure source of national revenue, the agricultural sector has the capacity to generate millions of jobs.

As important as it is, government should work towards ensuring uninterrupted academic calendar. More than that, a new educational curriculum should be developed to reflect the needs of the 21st century. Emphasis should be placed on self employment after the completion of each academic segment e.g. primary, JSS, SSS, OND, HND, or BA/BSc. The socio-economic framework of the nation would be strong enough to accommodate the removal of fuel subsidy after all the issues enumerated above have been addressed.

It is very clear that the conditions set out for the federal government to meet before removing fuel subsidy is very ambitious and capital intensive. This is basically how many developed nations have had their socio-economic framework strengthened to help accelerate government’s holistic developmental agenda. The first and most important thing for government to do in order to mobilise enough funds to meet the fuel subsidy removal baseline is to reduce corruption to the barest minimum. Through this effort, government is expected to save so much money. But more than that, the federal government should negotiate with the federating units and mobilise funds from the Excess Crude Account. Nigeria must however need to meet up her OPEC production quota in order to adequately fund the Excess Crude Account. This would only be possible if there is genuine peace in the Niger Delta region. It is necessary to note that the federal government’s two pronged approach of armed suppression of agitation and offer of amnesty to Niger Delta militants without first addressing the fundamental issues of environmental degradation and injustice in the sharing of oil and gas revenue will only secure graveyard peace in the region. Nigeria cannot continue to survive on the edge of the precipice for long. This observation is important because apart from the Niger Delta question; rising poverty, discontent with bad government policies, and arrogant display of ill-gotten wealth by government officials have all become threats to national peace and security.

It is therefore ridiculous for members of the president’s economic advisory team and fiscal policy formulators in the CBN to sit in the comfort of the air-conditioned offices to assume that the present socio-economic framework of Nigeria can survive the removal of fuel subsidy. What they have done is nothing but overrating the abilities of Nigerian masses to endure government’s insensitivity. Fuel is a commodity that both the rich and poor rely on. This is the reason why President Yar’Adua must not be deceived into allowing his well-heeled economic advisers and fiscal policy formulators in the CBN to think for the millions of the nation’s unemployed citizens, students, impoverished civil servants, petty traders, subsistent farmers, artisans, labourers, street hawkers, and water vendors. Doing so will amount to betrayal of trust. I challenge the federal government to publish the names of the president’s economic advisers, fiscal policy formulators in the CBN, and members of the Presidential Committee on Deregulation of the Petroleum Downstream Sector. Most of these persons can afford to buy fuel even at N200 a litre. The few that may not be able to do so but in support of the removal of fuel subsidy might have been either cornered or brainwashed into submission. It most disheartening that these persons would not bother to capture the plight of millions of Nigerian workers that earns less than N600 daily. The removal fuel subsidy will definitely plunge the masses deeper into the bottomless pit of poverty.

It is extremely dangerous for a governor or president to have advisers who are not independent minded. Such advisers are most likely to make prescriptions that merely seek to please their principals. Non-independent minded people do not believe in the efficacy of common sense. They would readily die for theories developed by one renowned professor or international institution. Any governor or president that has such persons as advisers would surely fail. Before ever implementing the recommendations of the World Bank, IMF, or other global financial institutions; our political leaders must properly analyse all subsisting socio-economic elements. This is where the application of the wisdom of common sense becomes very essential. Without the application of common sense, an adviser would wake up one morning and suggest to the president that the grumblings of poor Nigerians are a threat to national security and should therefore direct the Attorney-General to ensure that all those caught complaining about poverty be sent to jail. This is the kind of advice President Yar’Adua is fed daily with. Unfortunately, he is not allowed by his aides to see the straw in the hands of every suffering Nigerian.

Subsidies are really an indirect way of putting money in the pockets of beneficiaries. It is not waste of money as many economists would want us to believe. Rather, the removal of fuel subsidy was merely an option developed to raise addition funds for government. Most developed countries still give subsidies to sectors critical to their national development. For instance, agricultural subsidies accounts for more than 40% of the total budget of EU. This has not only helped the agro-allied sector to grow; it has equally promoted food security in the EU. Back home in Nigeria, the deregulation of the telecoms sector helped to put phones in the hands of millions of Nigerians that wouldn’t have had access with the monopoly that NITEL enjoyed. Nevertheless, the same cannot be said of the downstream sector of the petroleum industry owing to its critical nature. Unlike the telecoms sector, businesses in the petroleum industry are strongly tied to the international market, which is transacted in US Dollar. Minus the fact that Nigeria does not have influence over the pricing of crude oil in the international market, our local currency is too weak against the US Dollar. Furthermore, Nigerian workers are not paid the US Dollar equivalent of what their contemporaries earn in developed countries. This fact alone has rubbished the bases for government to believe that the income of average Nigerian workers can withstand the removal of fuel subsidy. The very wide disparity in the wages of Nigerian workers and their contemporaries in developed countries were fuel subsidy was removed should act as bumps along the road President Yar’Adua is driving. The president is reminded that there are inherent dangers associated with leaving the fate of the down trodden masses to be massaged by international market forces, which Nigeria does not have any influence over. Only a reckless leader would afford to do that.

This is the major reason why fuel is still being subsidised all over the world. The Economist reports that over half of the world’s population enjoys fuel subsidies. The level of subsidy varies from country to country. For instance, the official pump price of a litre of petrol in Nigeria sells for N65- about US45₵. However, petrol marketers sell a litre of petrol for as much N90 in the riverine areas of the Niger Delta region due to the dearth of major marketers. Venezuela is reputed to be the nation with the cheapest fuel. There, a litre of petrol goes for just 4₵. In Britain, a litre of petrol goes for about $2.77. It is 79₵ in China, 15₵ in Saudi Arabia, 30₵ in Kuwait, 29₵ in Egypt, 16₵ in Libya, 24₵ in Qatar, and 13₵ in Iran. Compare this to the $1.15 in the United States, $2.62 in Germany, and $2.69 in France. The percentage of subsidy is mostly influenced by government’s evaluation of the country’s socio-economic framework.

Perhaps, I should also remind President Yar’Adua that as the nation approaches election year, a lot of political forces will come to play. Some opponents would no doubt infiltrate weak links within his colony of advisers and aides to achieve political gains. This is one strong reason why he must not swallow all suggestions line, hook, and sinker. Every advice should be put through the test of common sense before being deployed. One of such prescription is the removal of fuel subsidy. It was sickening to hear the Minister of Finance, Dr. Mansur Mukhtar argue that the low price of fuel in the country has encouraged the smuggling of the commodity across the nation’s border. While I agree that cross-border smuggling of petroleum products contributes to cases of, I am at loss as to why the Nigerian masses should be punished- held responsible for the ineffectiveness of the Customs and security agencies at the nation’s borders. It has never been heard that the president has punished or reprimanded the Comptroller General of Customs, Inspector General of Police, Chief of Army Staff, Chief of Naval Staff, or Chief of Air Staff following the revelation by the Minister of Finance. Is this the rule of law President Yar’Adua and Minister of Justice and Attorney General of the federation, Mike Aaondoakaa have been flaunting all over? How can a serving minister make such a grave indictment and yet nothing happens. The rule of law should be dismissed as a farce. Were it to be in developed societies, this high level indictment of the Customs and security agencies in the nation’s border posts by the Minister of Finance is enough for government officials to resign.

The patience of Nigerian masses has run out. It was mainly for the fear of military intervention and possible disintegration that Nigerians ignored the charade that was the 2007 presidential elections. The planned removal of fuel subsidy will be a different ball game all together. Nigerians are already disappointed with government. Apart from the fact that corruption is still thriving, Nigerian roads are the worst in the whole of Africa. The power sector has become a source of shame and embarrassment to Nigerians. Current power situation cannot support any meaningful economic development. Businesses are closing daily and unemployment figures reaching to high heavens. The educational sector has completely collapsed, while basic health care services are accessed only by the rich. Crime rate has reached an alarming state despite all the guns and armoured personnel carriers provided for the police.

Just as the federal government cannot end the problems of agitations in the Niger Delta region by merely granting amnesty to militants; it will also not be able to reduce crime by just arming the police with very sophisticated weapons. It was shameful to hear the Minister of Police Affairs proudly announce last week that the federal executive council has approved the purchase of a hi-tech helicopter to help the police fight criminals. Instead of wasting scarce resources on the purchase of helicopters and other similar utilities, government should start thinking of setting up programmes that would expand the capacity of the nation’s economy to support the resuscitation of collapsed industries and encourage others to establish new ones. When unemployment is reduced, crime rate too will naturally fall.

More than anything; the federal government should not allow forces in the international oil market to destroy the very essence of government. Perhaps, I should build a monument here to highlight the fact that many Nigerian workers spend over 50% of their salaries on transportation alone. This has not only affected the quality of their meals; the health and educational needs of their children and dependants are relegated to the background. This is the platform for the growing of illiteracy, poverty, and crime in our society.

The purchasing power of citizens is determined by their take home pay. When the price of crude oil goes up in the international market in a deregulated economy; crude oil earnings jump. In the same vein, the pump price of petrol and other related products too increases while the take home pay of workers remains stagnant. This development no doubt reduces the purchasing power of citizens. Subsidies are therefore given whenever the fiscal instruments of deregulation exceed pre set bench mark. Ordinarily, bench marks are set with the nation’s socio-economic framework in mind. That is to say, deregulation has a human face. It should not be different in Nigeria. Most importantly; in all developed countries where fuel subsidy has been removed, the salary of an average worker is able to provide for his or her family’s feeding, transportation, health care, and social needs. They are even able to make savings. The BIG question is: How many Nigerians earn
monthly salaries that can sustain them and their families for up to one week, not to talk of making savings? I’m not sure if it’s up to three million.

Government’s position on the removal of fuel subsidy can be conveniently related to the on going conflict between ASUU and the federal government. Most persons supporting the federal government’s position are those who either have their children in foreign universities or are fortunate to have their wards go through university. On the other hand, the bulk of those pushing for the removal of petrol subsidy can afford to buy petrol for even N500 a litre. They do not bother even if 100m poor Nigerians can’t afford it.

Nigeria belongs to both the poor and rich. For a very long time now, the poor have lost their stake in the Nigerian Project. The nation’s political culture is such that the masses do not have any means of holding their leaders accountable. The electoral law does not make elected officials respect the feelings of voters. As it stands now, fuel subsidy is the only benefit Nigerian masses enjoy. Unfortunately, the government has commenced plans to withdraw this single benefit. This is the main reason why both the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) have vowed to resist any move by the federal government to remove fuel subsidy. The organized labour believes strongly that the withdrawal of fuel subsidy will further condemn Nigerian workers to the abyss of poverty. With all amount of responsibility, I wish to note that with fuel subsidy, government is indirectly putting money in the hands of poor Nigerians. As ways of raising revenue, government should leave the poor and look the way of wealthy citizens. Government should impose very heavy taxes on luxury cars and private mansions. More than that, the sources of wealth of citizens must be verified. There should be legislations to make citizens explain the sources of money used in buying cars, building houses, and setting up businesses. Apart from narrowing the opportunities for corrupt practices, government will through these fiscal policies raise enough money to meet the needs of society.

Frankly, fuel subsidy is the least of Nigeria’s problems. Our major problems are corruption, tribalism, the failure of rule of law, and poor political leadership. I can bet the president that even if government succeeds in going against the wishes of the Nigerian masses to remove fuel subsidy; the forces of corruption, tribalism, injustice, and poor political leadership would in no distant time swallow whatever gains that would be made. This does not make any sense. Government is therefore encouraged to allow poor Nigerian masses hold onto the single benefit of fuel subsidy pending when the nation’s socio-economic framework would be strong enough to support deregulation. This is the truth and nothing but the whole truth. So help me God!

KALI GWEGWE
2 Greenvilla-Custom Link Road,
Biogbolo-Epie, Yenagoa,
Bayelsa State.
0806 407 4810


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