- That’s the story of N9 trillion on subsidies in 10 years
The oil industry worldwide is notorious for its cloudiness. But nowhere is it shadier than in Nigeria, where the next scandal is just one audit away, if they bother at all to conduct an audit and publish the outcome.
An outraged public fumes, demands sweeping reforms and swift punishment. Some cosmetic changes in operations and senior personnel are carried out, and the industry limps on as before. A fresh scandal breaks, a resolution of sorts follows the same old pattern, but nothing changes.
The recent disclosure that Nigeria, a major oil producer and exporter with four petroleum refineries spent N9 trillion in 10 years to “subsidise” importation of petroleum products is a poignant indication of the deep rot in Nigeria’s oil industry.
For more than three decades, the refineries have been producing far less than is required for public consumption. The shortfall has had to be imported and then marketed in local currency, the value of which is continually shrinking relative to the U.S. dollar and major international currencies. The differential pricing is what the authorities call a “subsidy.”
But why a shortfall in the first instance?
The refineries are deliberately crippled so as to make importation seem inevitable. Instead of building new refineries, the authorities keep patching the old ones at costs that cannot be justified. Much of what the local refineries produce is smuggled to neighbouring countries by political officials and their proxies to earn windfall profits, or shipped to the high seas and returned to port as imported products qualifying for subsidy payments.
Even where importation can perhaps be justified, the scale far exceeds the absorptive capacity of the economy.
In whatever case, bridging the gap between supply and demand is not the main concern of the regulators in the oil industry and those licensed to import petroleum products. The central, if not the sole concern, is to harvest windfall profits consisting in the ever-widening gap between the Naira and international currencies. So corrupt and corruptible is the system that many a licensee has been known to obtain huge payments for products that were never supplied.
A list of who is who in this racket is almost identical with that of persons exercising or well-placed to influence public policy in Nigeria. Revealing their identity has not weakened their pernicious hold on the trade. The will to bring them to justice has been less than robust.
And so the traffick continues.
Funds that should have been invested in projects that would enhance the quality of life for the people of the oil-producing areas and benefit the generality of Nigerians continue to accrue to a rapacious cabal.
The failure to bring this cabal to justice lies at the heart of public resistance to any effort to cut or abolish the so-called subsidy. What is being subsidised, they argue, correctly in our view, is the craven inefficiency of the refineries, the brazen corruption within the industry, and the rapacity of licensees and their collaborators.
Make the refineries more efficient, build new ones, strengthen the machinery for accountability in the industry, patrol the land borders to curb smuggling, and the need for a so-called subsidy will all but disappear.
In the meantime, the racketeers and their confederates should be brought to justice without further delay.
