At last, the subsidy regime ends

By Dan Agbese

The Federal Government could not have expected public applause over its decision this week to end fuel and electricity subsidies. None came. Instead, criticisms have come fast and furious. Labour is oiling its gun to do battle with the Buhari administration. It is the normal reaction. As they say, no shaking.

All the critics of the new policy home in on the fact that the timing is wrong. Sure, with the coronavirus pandemic and its devastating effect on government and individual earnings, paying more for fuel and electricity at this time feels like an uncaring government is piling it on. But there is no such thing as the right timing for a harsh or an unpopular policy resented by the people. A policy such as this is not a measured response to the management of the economy. It is a desperate act forced on the government because it is unable to bear the burden for much longer by protecting the people against the vagaries of market forces in a capitalist system. This should end, I should hope, the pretences to a welfarist system that has left the people confused and holding the very short end of the economic stick.

I have always argued in favour of ending the subsidy regime because it never benefited the poor in our country. It is corrupt; it is fraudulent. It exists for the privileged few at the expense of the many under-privileged. But now that Buhari has ended the subsidies on fuel and electricity, I am not applauding the government either because, thanks to politics, it dithered when it should have acted promptly. Even before the president assumed office in 2015, he was aware that the fuel subsidy regime could no longer be sustained. When he grandly announced on assumption of office that the fuel subsidy had come to an end, I applauded him. It turned out that my applause was rather foolish. A few months later, we found that fuel subsidy was alive and well and the fuel importers still had bank managers ministering to their every need. It turned out that the Federal Government misled the people. The devil is always in the detail.

There is no denying that the administration of the fuel subsidy had been consistently opaque. Truth was bent any which way to make successive governments look good in the estimation of the people. But every federal administration knew, as I pointed out elsewhere, that “the subsidy regime was riddled with corruption. Ending it (would) mean closing one avenue through which unscrupulous Nigerians, through no fault of theirs, bleed the country.” Their unwillingness to end it had less to do with lack of courage and more to do with the hold of the oil cartel on the jugular vein of every federal administration. No one should be uncharitable enough to suggest that dismantling the well-serviced network operated by the private sector in cahoots with the public sector, would be easy for a president anxious to do well by the people by not upsetting the apple cart.

The Buhari administration had problems with, to quote a Daily Trust editorial, coming “clean on fuel subsidy.” It buried fuel subsidy under a new bureaucratic sophistry called “under recovery.” This was supposed to assure the people that the subsidy regime had ended. But under the new policy, according to the Daily Trust editorial under reference, “it diverts some proceeds from the sale of crude abroad to finance the import of refined fuel for domestic need, which in turns sells at a fixed price to marketers.” We knew that the fuel was subsidised at N26 per litre. This was the difference between the landing cost of N171 per litre and the pump price of N145 per litre.

Politics has a strong pull on every administration. For years, the IMF and the World Bank had repeatedly advised successive federal administrations to end the subsidy regime and allow the people to contend with market forces. And for years, every federal administration had refused to act. In 2019, the former managing director of the World Bank, Mrs Christine Lagarde, again told Buhari to end the fuel subsidy regime and spend what it saves from it on health, education and infrastructure. She put it rather indelicately when she said that “As far as Nigeria is concerned, with the low revenue mobilisation that exists in the country, in terms of tax to GDP, Nigeria is among the lowest. A real effort has to be made in order to maintain a good public finance situation in the country.”

At a workshop organised by the office of the Accountant-General of the Federation in Kano sometime in June last year, Emir Muhammadu Sanusi II, advised the Federal Government, for the nth time, to end the subsidy regime. He said that in 2011 when he was governor of the Central Bank of Nigeria, Nigeria earned $16 billion from crude oil. According to him, “We spent $8 billion importing petroleum and spent another $8.2 billion subsidising the product. And I asked, “is this sustainable?”

Apparently, not. The Buhari administration, in ending the subsidy regime, appears to have admitted that it is not sustainable and the time has come for it to come clean with the people and end years of running around on the same spot. Sanusi had said that “the country is bankrupt” and that the country is forced “to sacrifice education, health and infrastructure for us to have cheap petroleum.” The fact that Nigeria is the poverty capital of the world is proof enough.

The minister of information and culture, Alhaji Lai Mohammed, gave details of what had been spent on fuel subsidy regime in the last 14 years to reporters in Abuja this week to explain why the government did what it did. The total amount came to a tidy N10.413 trillion. Electricity subsidy regime trailed far behind with N1.7 trillion. How did this benefit the people? Electricity is still an embarrassing problem for the people. Since it is not available, what was the government subsiding but the opacity and the corruption in the system? There is not much sense in paying less for what is not available.

The manipulation of fuel supply in which the importers induced artificial scarcity and forced us to pay much more than the official price at the black market rate, made nonsense of the so-called official price set each time by the government. I thought we ought to have decided long before now the rationale for running the hybrid system of capitalism and a poorly thought out welfare system which leaves everyone confused. Certainly, if the government had ploughed the N10.413 trillion that served the fuel importers and the corrupt system well but the people not at all, into education, health and infrastructure, it could have made some difference in those very vital sectors. It seems to me that if we pay more attention to the near-criminal wastage of our common resources, we could have a better rating on the global poverty scale than we do now. Our poverty is not a product of the red ink in the accounts of the governments. It is a product of a network of systems that have served smart individuals more than the country and its people.

In his new 2018 new year message, Buhari said, “Our government’s watch word and policy thrust is change. We must change our way of doing things or we will stagnate and be left behind in the race to lift our people out of poverty…”

Does ending the subsidy regime signal the beginning of that change in “our way of doing things”? Maybe. The truth is that a policy is a mere pronouncement that does not in and of itself succeed unless it is properly articulated and policed. My advice is that we keep our fingers crossed and see how far the government is willing to let market forces determine what we pay for fuel and the very erratic electricity supply system. Ending the subsidy regime means dismantling an entrenched system that has enriched the few and impoverished the many. It would be naïve to think that the cartel would not fight back to sabotage the system and force the government to make concessions to them, in the interest of the masses of course, that would ensure we remain stagnant

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