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Robbing Peter to pay Paul – The Nation

The Citizen by The Citizen
September 14, 2020
in Public Affairs
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Subsidy removal cannot rescue the suffering masses

We are not entirely surprised at the negative reactions that have trailed the latest cycle of adjustment in the ex-depot price of fuel by the Pipelines and Products Marketing Company Limited (PPMC). Had the government been led to assume an unqualified support for its programme of deregulation after announcing its kick-off way back in March, the outrage that has greeted the latest hike in ex-depot price from N138.62 to N151.56 per litre must be seen as a measure of how wrong it was in its judgment. Pump price of fuel has increased from N121 per litre in June to over N143 in July and now N162 per litre.

A number of factors make the current anger understandable. First, the economy is only now beginning to come out of the COVID-19 lockdown, which means that any talk of fuel price increase for whatever reasons will, for all practical purposes, be punitive. Second, the economy is already plagued by rising costs across the board.  Forex volatility has been oppressing us in the last four months amidst poor consumer spending. Unemployment has risen dramatically, with most households barely able to make ends meet. A vicious cost-of-living spiral would be unleashed from the fuel price hike and it can only pass as a most unwelcome addition to their pauperised conditions.

To these is the lingering question of whether the deregulation – knowing its correlates – can even be justified at a time that the fundamentals at the heart of the subsidy question are not yet in place.

This is the context in which the Nigeria Labour Congress (NLC) not only condemned the new price as smacking of government’s insensitivity to the plight of the people, but also its timing as wrong in view of the negative impact of the COVID-19 pandemic on the people’s overall wellbeing.

As for the government, it continues to push the argument that the current subsidy burden is unsustainable, that the regime is fraught with corruption, and that the way to go is for the sector to be fully deregulated. Moreover, it says the government doesn’t have the means even if it wants to maintain the subsidy regime, said to gulp some N1 trillion annually.

Lesson for the Buhari govt

To start with, if there is any lesson for the Buhari administration, it must be in the folly of the road not taken. In May 2016 when the administration first jerked up the petrol price from N87 to N145 per litre, it was a case of Nigerians giving the relatively new administration some benefit of the doubt.  Painful as the adjustment then touted as a cost-recovery measure was, a major part of public expectation was that the refineries would at least be fixed in no distant time. We entertained the naive hope that the fraud that attended the subsidy administration would at least disappear. The Jonathan administration tried to force the same measure which had to be aborted when the organised labour kicked. So Nigerians cannot in good sense be accused of not showing enough understanding with the current administration.

It has been five years hence; enough time for the current administration to have beaten a different path, to show greater commitment and imagination to either sell the refineries or get them up and running and ultimately, to usher in a true regime of deregulation. Unfortunately, just like successive administrations before it, not only did it choose to do nothing in that direction, it opted to follow the same trail, pouring billions of naira into the sink holes called the refineries.

Now, the latest revelation is that the administration actually blew almost N148 billion on the four refineries in the last one year alone, even when no single barrel of crude was refined during the period. And now that things have become tough, the government, like those before it, takes to a mealy-mouthed deregulation agenda like we saw in March when, not without a dose of fanfare, it crashed the ex-depot price of petrol in what it opportunistically advertised as the dawn of a new era. Clearly, Nigerians cannot pretend not to have seen through the charade. This is because it tallied with their expectations, given the prevailing low oil prices; in any case, the government could not have left the price as it was without opening it up to the charge of profiteering.

Chickens have come home to roost

Now, with oil prices showing modest recovery, the chickens have come home to roost. Nigerians are finally learning that low oil prices do not alone translate to low prices at the pump. we also know that the exchange rate is as much a factor as oil price in fuel price determination as indeed any other factor outside the nation’s immediate control. We have accepted that deregulation, more than the mere cyclic movements observed in prices, is rooted in real competition which under the current circumstances does not exist.

That explains the tragedy that the nation has found itself – a situation that is not helped by the fact that the country currently devotes some 35- 40 per cent of its entire foreign exchange earnings to importing fuel.

With COVID-19 pandemic, the situation has only become a little more desperate. Clearly, if the prognosis for the macro-economy is bad as it is, the choice ahead is even as unenviable. The country’s ’s biggest revenue earner, the oil sector, is said to have reported a 6.63% (year-on-year) contraction in the second quarter, a decrease of –13.80% compared with the corresponding quarter of 2019. Latest projections are that the economy would witness the biggest contraction in four decades. Should we also talk about the 2020 Federal Government’s revised budget, with an in-built deficit of N5.365 trillion expected to be funded by domestic and foreign borrowing? With such cold statistics staring the nation in the face, it would seem utterly irresponsible to talk of further implementation of the subsidy policy on the fuel-price template.

The point needs to be borne in mind however that the Buhari administration is just as complicit in sustaining the mess as all of the administrations before it. Unfortunately, it seems to the government now a little late in the day to turn back the hands of the clock. In any case, the nation has been on this cycle for far too long without any serious attempt to address the challenge in a more comprehensive way. The government seems to have surrendered and sees itself as having no choice but to accept the current reality of the subsidy removal together with its associated dysfunctions.

We cannot fetishise deregulation in a state of worshipful surrender. If the government sees itself helpless in finding another policy but hardship for the masses, it is not a way to handle a crisis. Government is about vision and audacity. We cannot rob Peter to pay Paul. We cannot accept subsidy removal because of suffering. It is a false choice. Suffering is not an option, especially when there is no short-term or long-term solution in sight. If the incompetences of the past have failed us, we can resolve it with another slew of incompetences.

We need to rejig our revenue potential. Government expenditure has not reflected an austere era, with sometimes ostentatious vanity by government officials and families. The agencies are not generating their revenue potential. Waste is palpable. The war on terror is not bringing peace while ruining the economy.

We cannot seek the easy way out with fuel subsidy removal when it brings burden on the average citizen.

Our expectation is that the NLC and other stakeholders will in the coming days, engage the government on the broad range of palliatives on offer to mitigate the current hardships faced by Nigerians.

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