Sylva’s diagnosis – The Nation

  • It is being clever by half to say that subsidy killed our refineries

Minister of State for Petroleum, Timipre Sylva, again stirred the hornet’s nest last week, when he said it was subsidy regime that killed Nigeria’s refineries. Speaking at the News Agency of Nigeria (NAN) Forum in Abuja, the minister said “Part of the reasons why the refineries were not working is subsidy because a refinery that is producing something at a certain cost and selling at a loss, how can it sustain itself?

“Over the years, the refineries couldn’t sustain themselves and all of them died. So, if you do not deregulate, you will find out that even the refineries, if you fix them today, they cannot be commercially operated because the refineries need maintenance and they need to run.” He added: “If you are producing something and they are selling at a certain subsidised price, it cannot work, that is why you see that the sector is not growing at all”.

There is the temptation to agree with this seemingly sensible assertion. In a sense, if the minister said our refineries ran into problems because of the establishment of something like Equalisation Fund under which the Federal Government bridges the differentials in petroleum products’ prices so as to let all Nigerians buy at the same price, irrespective of nearness to the source of the product, he probably has a point. This does not make any economic sense; it is only a political arrangement of convenience imposed by the country’s military rulers in their misguided understanding of how to unite the country.

But, while this bridging of the price differentials by government might have created some challenges in making the refineries break even, it does not explain how this alone could have killed the country’s four refineries. In other words, the minister’s attempt to blame subsidy for our non-functional refineries is only being clever by half. Blaming subsidy for the death of our refineries is analogous to blaming waiters in restaurants for obesity.

We do not have to ‘criminalise’ subsidy as if it is a bad thing, per se. Many countries use it to achieve diverse objectives and they do not have issues with it. The problem is with our peculiar nature of subsidy, especially on petroleum products. Peculiar because, as a major oil-producing country, we should have no business importing fuel. Unfortunately, we import nearly all the petroleum products, with the government now complaining over the subsidy that it has to pay, estimated at more than N5billion daily.

Without doubt, this is humongous, but it is probably the price the country is paying for successive governments’ (including the incumbent Muhammadu Buhari administration) inability to have a clear-cut policy of how to deal with the challenges in our refineries. They had undergone several cycles of Turn Around Maintenance (TAM), yet, they have not been able to produce near  30 per cent of their installed capacities for several years. They have therefore come to be seen as conduit pipes through which huge sums of money are siphoned into private pockets.

It is this same corruption that has permeated the fuel subsidy regime. Many individuals and companies had taken undue advantage of the subsidy to enrich themselves. Only about two weeks ago, a former House of Representatives member who also doubled as chairman of the House of Representatives Ad hoc Committee on Fuel Subsidy, Farouk Lawan, was convicted for bribery arising from the subsidy regime. It is by punishing highly placed Nigerians like this that the appropriate message can be passed that the government has zero tolerance for corruption.

Unfortunately, rather than fight the subsidy thieves to a standstill, government finds it convenient to label subsidy a bad idea, harping on why it must be removed, albeit with great pains to the citizenry. Government officials have been harping on the same excuses that had been recycled by their predecessors to threaten removal of fuel subsidy. One of these is that it is the rich that are enjoying the subsidy. This may be true, but it is the duty of government to let subsidy go to the right beneficiaries. For instance, when the government says it is our neighbouring countries that are benefitting from subsidy, this is an indictment of its security agencies, etc. The Federal Government has a duty to rein in the corrupt elements in these agencies rather than keep wringing its hands in frustration, and passing the burden of their incompetence or corruption, or both, to hapless Nigerians.

The truth is that, many Nigerians are not opposed to deregulation, per se. What they are resisting is the so-called deregulation that is based on importation of petroleum products. Deregulation does not mean abandoning the people to the vagaries of the international crude market. That is the point they are making; because they are not responsible for the paralysis that has made a major crude producing nation to be a major importer of petroleum products. Today, matters are exacerbated by the continued fall of the naira which has further weakened the purchasing power of many Nigerians.

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