Mr. President, Remove The Subsidies
IN its lead article, the influential London
weekly, The Economist, quoting the late
prime minister, Tafawa Balewa, wrote,
“this is a wonderful day, and it is all the
more wonderful because we have
awaited it with increasing impatience,
compelled to watch one country after
another overtaking us on the road when
we had so nearly reached our goal”. That
was on October 1, 1960. The wonderful
day came almost five and half decades
later, on May 29, 2015, at Eagle Square,
Abuja. I was, happily, there.
Since 1960, Nigeria, the “most African
country”, slid into near failed state as
one military regime after another, a civil
war and successive kleptomaniac civilian
and civilian governments interlaced. The
single common thread among all past
governments, civilian and military alike
was corruption. Our country, year after
year, is ranked among the ten most
corrupt in the world.
Subsidies on petrol cost the government
a whopping $6 billion (1,200 billion
Naira) annually, some NGN9,000 yearly
for every Nigerian. It provides the
biggest opportunity for corruption to
thrive. The subsidies are stolen as the
subsidised fuel finds its way into the
black market or smuggled to
neighbouring countries where it fetches
higher price. I bought only yesterday, at
a station on Murtala Mohammed, Ilorin,
with ease, petrol at NGN110/liter. Drive
round the town at major marketers
stations, idle attendants tell you
nonchalantly “no fuel”.
But perhaps, the most compelling reason
to remove the subsidy is its hindrance to
investment in the downstream sector.
Solidarity with anti-apartheid and anti-
minority struggles in South Africa and
the then Southern Rhodesia (now
Zimbabwe) led to foolish nationalization
of the downstream sector in the late
1970s. British Petroleum (BP) became
African Petroleum (AP) and Shell became
National Oil. Today, these entities are
back in private hands under bizarre and
dubious privatisations that saw them
sold to inexperienced and incompetent
Traders unwilling and unable to build
any refinery, but happy to import and
claim subsidy.
Remove the subsidy and dismantle
attendant price control of petroleum
products private refineries would
balloon and the country would rightly no
longer, perhaps, export one barrel of
crude. Competition for market share
would inevitably bring down prices.
If anyone is in doubt, take a look at what
happened to the telephone business.
NITEL, a state monopoly prior to
deregulation, operated a mere 400,000
lines (for perhaps 100 million citizens)
and for so long kept us not talking to
each other. You have to pay its officials
to have your application processed. You
woke up at 3am to risk your way to its
call kiosk to make an international call.
Senator David Mark, then a
communication minister, made the
infamous remark that “telephones were
not for the poor.” Alas, today, and thank
God he is alive, even destitute have
telephones.
Today, we import more than 80 per cent
of our premium motor spirit (PMS),
thanks to public owned refineries in
comatose most of the time. But reduce
the role of the state in the economy as
the system distorts and thwart
production. The market is the best
arbiter. The Soviet Union had the world’s
most educated and disciplined and
skilled workforce, yet the system
collapsed and gave way to the market.
All that lampooning and rally against so-
called IMF prescriptions distort the facts.
They are worn out cries of the left
increasing becoming political lepers.
Russia, birthplace of central planning
and state hegemony gave way to the
market forces. Ditto China and even that
island of hard-core communists, Cuba.
Take the shiny example at home here of
a tiny Exploration and Production (E &P)
start up that for and barely 10 years into
oil and gas production. Its mini-refinery
at Ogbele, Ahoada East Local Council, in
Rivers State, it is probably the only
functioning refinery today in the
country. The company (thanks to
regulated pms) refines only Automotive
Gas Oil (AGO). It (thanks to deregulated
AGO) sells its product at market price.
When its price is high no buyer shows
up. When its price is low, buyers happily
queue. The market is supreme. The
company increases or reduces price at
the whim of the market. That’s what
works. It eliminates official permits-
synonym for corruption. Where ever and
whenever any one is sitting in an office
to exercise discretionary decision on
economic matters you provide the
perfect recipe for corruption. Remove it.
Let the market sort it out.
All that talk about inflationary
consequences of petrol price hike is pure
scaremongering. It is built on timid
ignorance, irrational emotion and crude
politics. Commuter buses, supposedly
used by the poor, consume less than 15
per cent of the stuff. Most inter-state
goods haulage are executed by diesel
engine trucks whose fuel, diesel (AGO), is
deregulated. Despite the noble intentions
cheap petrol does little to help the poor.
Eighty per cent of petrol is consumed by
car-owning city dwellers commuting to
work and the affluent rich families, some
of whom between them have halve a
dozen cars. They fret needlessly over
petrol price hike. The subsidy, alas, is for
the affluent few. Mr. President remove it
today.
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