Hard decision on petrol subsidy

Petrol subsidy is a thorn in the flesh of the rulers of Nigeria. The World Bank and the International Monetary Fund (IMF) have pummeled the federal government persistently over the issue.  IMF complains that petrol subsidy makes it easy for motorists to burn fossil fuel without restrain.

The Breton Woods institution predicated its demand for petrol subsidy withdrawal on two strong arguments. The first is environmental protection issue.

IMF believes that if fuel is sold at open market pump price, consumption would reduce drastically, thus curtailing the depletion of the ozone layers. 

IMF argument on the relationship between price and consumption is indisputable. The federal government withdrew subsidy on petrol in 2016 and the price of the commodity surged from N87 to N145 per litre.

Consequently, fuel consumption dropped by 30 per cent within one month. 

IMF’s second reason for demanding petrol subsidy withdrawal is very compelling.  It borders on Nigeria’s debt burden and dwindling revenue. Federal government revenue for 2019 hovers around N6.8 trillion. Debt servicing would consume almost 40 per cent of that. Judging from the 2018 account of the Nigerian National Petroleum Corporation (NNPC) petrol subsidy might consume almost N700 billion or six per cent of government revenue. What is left is pittance.  

IMF is worried that Nigeria is wasting in petrol subsidy what is needed to fund education and healthcare delivery.  The two industries are in shambles due to poor funding.  In the 2018 budget only N898 billion was allocated for health and education.

Poor funding has devastated Nigeria’s education and healthcare delivery. Nigeria is one of the most dangerous places in the world to give birth.  One in every three children in Nigeria is chronically malnourished.

Nigeria has the world’s “fourth worst” maternal and infant mortality rates after war-torn Central African Republic, Chad and Sierra Leone.

Nigeria on daily basis loses 2, 300 infants to avoidable ailments and 145 women through pregnancy and delivery related deaths.

The education system is a colossal failure. More than 13 million children of school-age are out of school because the few public schools cannot accommodate them.

Last year 1.8 million candidates sat for the Unified Tertiary Matriculation Examination (UTME).  Ironically only 500, 000 were offered admission.  Even as the cut off point for admission into universities was fixed at 180, some candidates who scored 270 were not admitted. The vacancies are just not there.

Petrol subsidy is a colossal waste. It is a senseless decision to subsidise consumption when producers of goods and services in the agric sector are taken to battle in a hostile global market with their hands tied to the back. There is nothing left to subsidise production which would boost the nation’s revenue.

However, despite the huge financial burden that petrol subsidy constitutes, President Muhammadu Buhari would find it difficult to yank off the subsidy.  Petrol price in Nigeria is as inflammable as petrol itself. An increase by N1 in the official pump price of petrol could push up inflation rate by several notches.

 Besides, it could set off unprecedented street riots that no one could control.

Former President Goodluck Jonathan tried it in January 2012 and ended up setting the country sailing perilously close to anarchy. 

Buhari rode into power on the back of a popular resentment against Jonathan’s corrupt and inept administration.  Nigerians were willing to make sacrifices to support the needed changes they elected him to effect. They calmy swallowed the 2016 fuel price hike.

However, things have changed. No one can predict how an impoverished populace would react to fresh petrol price hike.  Even as he has been re-elected, Buhari’s popularity rating has dropped drastically due to worsening security crisis and rampaging poverty emanating from dwindling government revenue and a weird income distribution system.

The hard decision on petrol subsidy is worsened by the fact that the eternal darkness imposed on Nigeria by a crippled power sector has transformed petrol into a household commodity.

In the urban areas, it could be argued that six in every 10 households own and operate a petrol engine micro-electric generator.  About 80 per cent of the country’s electricity is generated by millions of petrol engine generators.

The impoverished women eking out a living by grinding pepper and tomatoes have all abandoned electric-powered grinders for those with petrol engines because of epileptic power supply.  That situation makes the cost of petrol the concern of everyone at the lowest rung of the social strata.

A decision to yank off petrol subsidy would amount to taking a pound of flesh from the 157 million Nigerians living below poverty line. 

IMF believes that petrol subsidy benefits only rich car owners.  The situation is different in Nigeria.  Epileptic power supply has made petrol something of a social security in Nigeria.

The truth however is that petrol subsidy is a colossal waste imposed on Nigeria by unbridled corruption in government in the last 30 years.  It is also the product of the present administration’s rigid statist posture.

Government should sell the four refineries, de-regulate the downstream sector of the oil industry and restrict itself to the role of a regulator.  Petrol subsidy is the product of imported inflation engendered by Nigeria’s shameful dependence on petroleum product imports with a weak naira.  Sufficient increase in the country’s refining capacity would drive down the pump price of all petroleum products and naturally end the menace of subsidy.

Be the first to comment

Leave a Reply