So, fuel subsidy is gone. Those who had always advocated for its end are celebrating. But those who see it as an entitlement for the masses are angry.
If it’s gone, then it’s a special anniversary gift to Nigeria at 60. But is it really gone? We need to know as the government has been silent on the fate of the Petroleum Equalisation Fund, one of the structures set up to prop the subsidy regime.
The PEF was designed to ensure that fuel products – petrol, diesel and kerosene – were sold at same prices all over the country. If a tanker of petrol leaves Apapa Port in Lagos to, say, Maiduguri in Borno State, the transportation cost would be borne by the government. Is this still subsisting? If the answer is yes, then subsidy is well and alive.
The idea of uniform prices for petroleum products throughout the country was populist but insane. This is because basic economic principle makes it unworkable. And the objective was never achieved as there were price variations in different parts of the country. This was even more glaring and widespread during periods of fuel supply scarcity. In any case, is yam, for instance, sold at the same price from one place to another? Our fixation on just petroleum products fed the corruption that the subsidy policy inevitably bred.
The policy was a product of woolly thinking and executive stupidity on an epic scale. Tens of trillions of naira or hundreds of billions of dollars were wasted during the over three decades it lasted. The government has said that subsidy payments consumed eight trillion naira between 2006 and 2015. But the statement, gleefully announcing this, was silent on what was spent from 2015 to 2020.
Whatever was spent propping up a policy that bred corruption that enriched public officials and private players in the downstream sector of the oil industry, cost the economy very dearly. Needed infrastructure was starved of investments, which in turn stymied the kind of economic growth that could have lifted millions out of poverty. Today Nigeria is the world’s poverty capital with over 100 million people living in extreme poverty.
Our road networks are mostly dilapidated and the railway service primitive and severely limited. Electricity remains a luxury that most Nigerians can only dream of. While clean, potable water is unheard of. We all depend on boreholes in urban and rural areas.
The public educational system, from the primary to tertiary level, is a complete shambles. And the health care system is no different. Thirty-six years after then Brigadier Sani Abacha described our hospitals as “mere consulting clinics” in the coup broadcast that ended President Shehu Shagari administration, they have remained so.
Top government officials, including the president and his family, and financially buoyant individuals go abroad for medical treatment. The rest of us are left at the mercy of a public health care system that isn’t fit for purpose.
Given the parlous state of the nation today, the wanton waste of humongous resources on fuel subsidy for so long is not only criminal but insane. And Labour’s threat to protest the end of subsidy is a wrong fight for the wrong reason at the wrong time. They should be told to go find some other cause to make noise about.
Labour is always quick to jump on the populist bandwagon of fighting for retention of a policy that has damaged the country economically. But they have never threatened to shut the country down over NNPC’s refineries that are not working. Yet the staff are paid and Labour is happy so long as its coffers are fattened by the workers’ monthly dues.
We spend tens of billions of dollars importing fuel products and then spend trillions of naira subsidizing the prices. And the waste encompassed the special dollar rate that the Central Bank of Nigeria provides for the importation of the products.
In his Independence Day broadcast, President Muhammadu Buhari said the government was left with no other choice than to end the subsidy madness. Because it just couldn’t afford it anymore. The government is broke, and surviving on piling on loans home and abroad.
It’s sweetly ironic that Buhari is the one who drew the curtain on fuel subsidy. He and his hapless government had finally collided with the reality of the unsustainability of the policy. And they have made the right decision even if it’s not popular.
While running for president for the fourth time in 2015, he had said that fuel subsidy was a hoax. Implying that it was a grand scam that drained trillions of naira yearly from the national treasury.
Of course, he knew he wasn’t telling the public the truth. He was just saying what he thought they needed to hear to get their vote. Hence he doesn’t deserve any credit for making the tough call to end subsidy. He ought to have done it five years ago. He only did it now because his hands were forced by the prevailing circumstances of worsening government revenue.
He was one of those who opposed President Goodluck Jonathan’s decision to end the policy in January, 2012. He gave moral support to Labour and the Occupy Nigeria group that organized public protests against the government all across the country.
And they succeeded in forcing the Jonathan administration to change its decision. What we got was another eight years of spending huge sums of money the government couldn’t afford on a policy that benefited very few Nigerians. And made the country poorer, as critical social and economic investments continued to be made hostage to the subsidy regime.
So, ending the policy is good riddance to bad rubbish. With subsidy hopefully gone forever, that may just spur more private investments in the downstream sector of the oil industry. The Dangote Industries Group’s multi-billion dollar refinery and petrochemical complex is poised to rescue the country from its financially crippling dependence on imports. And the BUA Group is already planning to invest in the sector too.
Barring any U-turn by the government on the subsidy palaver, Nigeria could, in just a few years, become a major exporter of finished petroleum products. Henceforth the government should focus more on how to make that transition possible quickly. And work out what to do with the NNPC’s refineries that have become obsolete due to negligence and mismanagement. They may have to be mothballed as there will be no ready takers if they’re put up for sale.
[President Buhari] doesn’t deserve any credit for making the tough call to end subsidy. He ought to have done it five years ago. He only did it now because his hands were forced by the prevailing circumstances of worsening government revenue.
AND THE $2 BILLION GIFT TO NIGER
Now the government wants to build a railway from Kano via Katsina to Maradi, Niger Republic. The cost of the proposed railway? $1.92 billion!! Where will the money come from? China which is becoming Nigeria’s biggest benefactor.
The Buhari administration plans to borrow the money to finance the project. This will be on top of the billions it has already borrowed from the Chinese for other railway projects that are ongoing albeit very slowly.
When the plan was first announced few weeks ago, it was met with instant public outrage and wide condemnation. Garba Shehu, the president’s senior special media assistant, attempted to be clever by half by saying that the railway will end at the border between Nigeria and Niger Republic. But he didn’t explain the economic rationale, if any, for building a railway to the border that accounts for a very minuscule percentage of Nigeria’s transnational trade.
Shehu was eventually put out of his misery of sanitizing the truth about the project by Rotimi Amaechi, transportation minister responsible for the government’s railway modernization plan. In a TV interview, Amaechi, who is known for talking bluntly, confirmed the earlier announcement that the plan for the railway to Maradi, about 60 kilometers from the border, is on.
But his justification for borrowing to finance the project strains credulity. According to him, Nigeria needs to capture the bulk of the import business of Niger, Chad and Burkina Faso that are landlocked. He added that the country couldn’t fold its hands while Ghana, Côte d’Ivoire and Benin were making good money from handling the imports/exports of those landlocked countries.
Which sounds very reasonable. But the problem – and it’s a big one – is that the railway gift to Niger is putting the cart before the horse. Where are the ports to service the needs of those countries?
Nigeria’s only modern port is Onne, Rivers State, which services mostly the oil and gas industry. The two major ports, Apapa and Tin Can Island, in Lagos are a glaring monument of chaos and planlessness. And their combined capacity is barely adequate for handling the country’s imports. It could have been worse if Nigeria were a major exporting economy.
There is no railway to the two ports and the access roads are virtually impassable and clogged with endless lines of heavy trucks waiting forever to evacuate goods from there.
After the announcement of the embarrassing and indefensible gift to Niger, came what was an after-thought sweetener. The president, we were told, had directed that railway must be connected to the two ports soonest.
Any serious government would have started the railway network modernization from the two major ports. There’s now a functioning rail line between Abuja and Kaduna. But there’s none connecting to the ports which handle over 95 percent of the country’s imports.
But the problem – and it’s a big one – is that the railway gift to Niger is putting the cart before the horse. Where are the ports to service the needs of those countries?
The Niger railway gift is yet another demonstration of how our government always gets the country’s priorities wrong. Buhari’s fascination with that country has become an excuse for making a totally irrational policy that will not give Nigeria any tangible economic benefits. And we’re going to borrow the money just to satisfy the president’s whim.
If, indeed, the government is keen to attract the import/export businesses of our landlocked neighbours, the first thing to do is a serious upgrade of the existing ports and build new ones with the capacity and facilities to handle our needs and those of other countries.
As the government is planning the new railway project, the Lagos-Ibadan-Kano line, Port Harcourt-Enugu-Maiduguri line and the coastal line from Lagos to Calabar and Uyo remain on the drawing board. Only the Lagos-Ibadan line is being constructed now. The money for the Ibadan-Kano segment hasn’t been secured.
Yet the government is prioritizing a railway, with dubious economic benefits, to another country just because that’s what the president wants. The Chinese can save Nigeria from this grand folly by refusing to loan us the money.
And where are Labour and its cohorts while the government is foisting the Niger
railway gift on us as a fait accompli?
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