Friday 14 October 2011

Editorial: Nigerian Government Dishonesty About Fuel Subsidy

The Fuel Subsidy Debate

The Nigerian Social Media space has been considering the possibility of Nigerians waking up from their docility and acceptance of everything thrown at them by their indifferent government to the inspiration of their own Arab Spring early next year.

This has been predicated by the decision of the government to remove subsidies from Premium Motor Spirit what we generally call fuel subsidy early next year.

The chatter has really been confounded by the situation where over decades there have been threats and salami-sliced implementations of the removal but no one is particularly sure of how much that subsidy really is, that it has become some imaginary slush fund of ready cash that the government suggests it will plough back into the economy taking cognisance of the effects such a removal might have on the working classes.

The Truth About Our Government

Sadly, the government has never really had a track record of ploughing oil profits back into the pockets of Nigerians except in the mid-70s after which plunder and squander has been the tack of those in leadership with little consideration of the bottom-line and particular welfare of the generality of the people – there are points for argument in the previous statement but little to dispute in terms of results.

Fundamentally, the fuel subsidy is literally the substrate of the totality of the Nigerian economy, it will touch on every aspect of life in relation to prices for food, goods, transport and every other service apart from the inflationary pressures it will present, but those issues are best left to central bankers and economists whilst one deals with a few other brass tacks.

Plans or Fables?

As a producer of petroleum products, it is bordering on the atrocious that Nigeria imports about 85% of its refined fuel needs because its existing four refineries are poorly managed and are lacking in serious productive capacity which means that the federal government subsidies imported fuel to the tune of $4 billion annually. [TransparencyNG]

Commonsense will suggest that the long-term goal of the government will be to facilitate, encourage or sponsor raising our refined fuel capacity to levels that will ensure that the subsidy expended in imports is radically reduced, at least that is what informed the signing of the memorandum of understanding with the China State Construction Engineering Corporation in May last year to build refineries in Lagos, Kebbi and Bayelsa States at the cost of $23 billion. [TransparencyNG][China in Africa][BBC News]

Whilst it is interesting to note the activity of the Chinese in building refineries in Ghana, Niger and Nigeria, what made interesting news a few months ago was the idea that Niger might get way ahead of Nigeria in commissioning its own refineries and end up exporting refined fuel to Nigeria. [All Africa]

How Much Is The Subsidy?

Besides, it appears no one is sure of what the cost of subsidising fuel is, the Central Bank in its MPC Meeting minutes suggested that the cost was about $6 billion, the on-going debate in the Nigerian Senate suggests the Federal Government budgeted NGN 240 billion ($1.54 billion) for subsidies in 2011 but have found that cost inflated to NGN 1.5 trillion ($9 6 billion) in what is a looking like a typical Nigerian scam. [CBN (PDF) Page 3][All Africa]

This amazing discrepancy should have heads rolling faster than when the Bastille movement chopped off heads in the French revolution, but none such will happen because the matter of responsibility leading on to accountability is just absent in Nigerian governance.

As an aside, the real big cost of governance sits within the profligate nature of our Federal Government, the abuse of security votes at state government level and the exorbitance of our legislature that consumes over 25% of our Federal Government overheads without essentially being a productive sector of our economy.

Indonesia Caught in Denials

Much as the idea of building more refining capacity in Nigeria does not seem to appeal to those resolute in finding another largesse to nudge their greedy snouts into, what adds insult to injury in spite of the now seemingly white elephant plans to build refineries in Nigeria is the news that Nigeria plans to invest Rp 24 trillion (US$2.68 billion) in Indonesia to build three refineries. [Jakarta Post]

The Nigerian Government has gone to great lengths to deny this report, but one has to ask why Indonesia will dream up such a scheme if there were no iota of truth in the same. The Nigerian Government unfortunately for all its protestations has a Matilda Complex about it, its propensity for denying fact and defending lies is legendary especially with the instrument of Social Media personnel it has employed for propaganda, obfuscation, distraction and alienation. [All Africa][AkinBlog]

Our Insurrection In Planning

It has become known that any opposition to the government is quickly construed as unpatriotic whilst the government has perfected a complacency of siege mentality proffering more excuse than reason for any action or inaction they have found themselves in.

At the end of the day, the reasonable thing about fuel subsidy is for Nigeria to build and sustain its refining capacity by whatever means encourages that trajectory and it is only after that is put in place that the desire to remove the fuel subsidy can be justified.

Nigerians have two and a half long months to put everything in place to start off their justifiable insurrection against a moribund, ineffective government in d├ętente and inertia, for once, let us – Arise, O Compatriots and heed a call for a democracy that is fair, just, honest and true.


Akin Akintayo said...

Without going into dissecting ur piece, I'll just say we are too afraid of change, am glad this govt is finally doing what shld hv been done years ago, time for us all to buckle our belts. This sort of hysteria was postulated when commercial bikes were to be banned from Abuja city center, when diesel supply was thrown open to market forces etc, yet we survived, we'll survive this just fine too, i still dont know why we love a good panic in this country.

Akin Akintayo said...

Dear Guest,

I suspect you failed to read and understand the points I raised in my blog. I was not essentially against removing the fuel subsidy but there are issued that needed addressing.

These range from the indeterminate cost of the subsidy from $1.5bn (FG Budget), $4bn (Transparency Nigeria), $6bn (CBN estimate) & $9.6bn (New FG Projection).

Then the matter of local refining capacity that is not being addressed which is the reason why the subsidy is quite an issue on to the lack of clarity as to the use of foreign countries to supply essential local requirements.

Simply put, if you after reading my blog think is it about hysteria and resistance to change, we can agree that you are completely oblivious of the issue you have chosen to comment on.


Akin Akintayo said...

I was never convinced by the plan to construct 3 brand new refineries without a proper analysis as to why other existing refineries are not functioning properly.  That being the case we should not be surprised that the 3 new refineries also don't work as planned. Those who are responsible for sabotage will no doubt have their hands in the failure of this new venture. Lessons from the past have not been learned. Given that this is the only item of any significance that keeps the economy afloat, it should be addressed with the utmost urgency. No attempt should be spared to sort out the oil sector and put it on a sound path, and thereby secure the economy in the short-term.

An outside observer, in fact the secretary of state for the United States noted that oil sector is being mishandled.

Hillary Clinton's observation about the Nigerian government

Nigerians seem to be apathetic about it's importance.

During the last Obasanjo administration, the money saved from not having to service the foreign debt, was meant to be used to be build infrastructure, but that was not the case. So the intended the removal of oil subsidy, what guarantees that the money will go to where it is intended? If it is the same old public announcements, made by the government. Judging by past efforts that is no assurance.

The whole thing smells of a rouse, to for those who have access to that sector to make large amounts of money illegally. It is schemes like this that are responsible for a net oil exporter and OPEC member, to be one of the few OPEC members who accept foreign aid.

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