The issue of fuel subsidy has come to be perceived as one huge scam the government is not coming clean on. It moved the country to near fiscal collapse between 2011 and 2012. Between 2008 and 2010, the federal government paid a total of N1.2trillion, an equivalent of $8billion, on subsidy at the 2011 exchange rate. The fact of the matter is that subsidy creates soft money for ‘smart persons’ and the privileged in the society. The result is the creation of billionaires who have negligible impact on the economy, because they do not have the capacity to create jobs or employment, or add value to production. While they make humongous wealth from subsidy, the rest of society suffers from decay of infrastructure and in all other sectors of the economy, especially education and health.
Subsidy withdrawal is a far-reaching economic restructuring strategy that requires tough political will and an even greater measure of toughness to ensure that the savings from its removal are judiciously utilised to meet the needs of the people. It is not enough to announce its removal, government must also engage in a communication strategy to inform the common man of the cost and benefits of the policy. The issue of subsidy removal is not going to go away and one of its greatest challenges lies in the lack of trust the people have for the government. As long as government decides to run a ‘closed shop’, there will be perpetual suspicion of its policies, no matter how well meaning.
The subsidy on fuel is a total waste of resources and drain on our common wealth, but if the government decides to withdraw it, there must be adequate preparation to address the immediate effects. This is because it is easy to deduce that in an economy where more than half of the population lives in poverty, 38% of its women population have no education and less than 10% attended school beyond secondary level, an inadequately planned economic policy will only have adverse effects. The meagre purchasing power of the poor would be further eroded, thereby deepening poverty the more.
We like to tout the fact that Nigeria is now the largest economy in Africa. It is also the world’s 10th largest oil producer, even though much of it is lost to oil theft and bunkering, but this giant has not done well for itself. We have lived with economic recklessness before, but not on this scale. Our infrastructure has been decaying from the 1980s, but never at this rate of acceleration when the country is earning so much. Excuses could be made that the military juntas were incapable of appreciating our political and economic needs, but ‘civilians’ have been in the driver’s seat since 1999, and now with a world class economist managing our finances and even coordinating the economy.
The subsidy should go, but there must be put in place measures to cushion the effect on the common man.
