Removing Nigeria’s Fuel Subsidy Is A Lame Excuse

By SKC Ogbonnia

Plagued by endemic corruption, Nigeria’s fuel subsidy scheme has ignited intense debate in recent times. The past Jonathan regime attempted to end the subsidy but was rebuffed by the masses. Once Muhammadu Buhari was elected president, many pundits, including former British Prime Minister, Tony Blair; Bukola Saraki, now Senate President; and the Presidential Transition Committee urged him to terminate the subsidy entirely. Although President Buhari has rejected such calls, the tone of his press statement of July 13, 2015 lacked the decisiveness needed to quell the debate.

Since then there has been a growing opposition to the subsidy, particularly from influential voices, such as the eminent political economist, Pat Utomi; former governor of Central Bank, and Emir of Kano, Muhammadu Sanusi II; and some newspaper editorials; to name a few. But Buhari should not budge. Removing the subsidy because of the fear of corruption is a lame excuse for failure.

First of all, the fuel subsidy is not a bad policy after all. Different forms of subsidy are obtainable world over in both developed and developing economies. Subsidy is nothing but financial aid granted by the government to assist a sector or sectors of the economy so that the price of certain commodities or services can remain competitive or affordable to the citizens. Similar to most other oil-producing countries, the fuel subsidy policy was designed to alleviate the plight of the masses who have been waiting in vain to experience the welcome breeze of Nigeria’s overflowing oil wealth. Moreover, any review of the original fuel subsidy policy roundly shows that the scheme is vitally essential for Nigeria’s national development.

Unfortunately, the policy has failed to meet the desired goals. But there is hardly any such thing as a perfect or an ironclad policy. The fuel subsidy policy can always be restructured to reflect current conditions, including crude oil as well as pump prices. Besides, which of the various policies in any sector of the Nigerian economy has actually worked as intended? If Nigeria is to utilize the savings from fuel subsidy to intervene in other sectors, as some have suggested, how plausible is it that such funds will not fall prey to the same corruption, especially considering that budgets for projects in every sector are commonly looted by politicians and their cronies?

One important fact that has consistently escaped the minds of many pundits is that Nigeria’s problem has never been the lack of progressive policies capable of elevating the country to an enviable pedestal. And it is definitely not the lack of individuals ready and willing to implement the policies. The main problem has been the perpetual failure to produce a national leader with the inner will to influence the implementation of the policies to the admiration of the intended beneficiaries. This lack of efficient implementation usually creates loopholes for corrupt practices and consequently failed programs. But there is change. There is change. President Buhari is gradually looking like that leader day-by-day. True.

Effective leadership is all about positive influence—being able to persuade people to do what they are required to do—towards greater good. Within two months of Buhari being in office, there is a dramatic improvement in electric power supply; the refineries are finally back on stream; the moribund anti-corruption agency is back to life and, of course, the looters of our common wealth are now running helter-skelter.  In short, for the first time in a long time, there seems to be consequences for bad behviour in my country.

So, why is the ‘Buhari effect’ not being felt in the subsidy regime—so that the masses that yearned for the change can finally benefit from this policy? Granted that corruption has been a big obstacle, but how long must Nigeria continue to scrap good policies because of the fear of corruption?

Instead of removing the subsidy, now is the time to confront the corruption within the subsidy regime head-on. And President Buhari should be decisive. He ought to be emboldened by the positions of progressive forces, as expressed by the president of the Nigeria Labour Congress (NLC), Ayuba Wabba; the Publicity Secretary of Conference of Nigerian Political Parties (CNPP), Osita Okechukwu; human rights activist and lawyer, Femi Falana (SAN); and many others who share the view that closing the corrupt loopholes within the fuel subsidy program offers a better compromise.

A starting point is to truly enforce the extant laws on the fuel subsidy scheme. With the current personnel changes sweeping through Nigerian National Petroleum Corporation (NNPC), the Department of Petroleum Resources (DPR) should walk the talk by setting earnest examples with petrol stations, tank farms, and major marketers who flout the price laws. This view may be at odds with the evangelicals of free market economy. Yet, there is no nation, including capitalistic societies, where a state-subsidized commodity is left at the mercy of the opportunistic realm of market-determined prices without a measure of restriction on the ownership or exchange of the commodity itself.

The second is to permanently disengage the political henchmen who have posed as middlemen in the fuel importation exercise and promote the new initiative where NNPC is the sole importer of fuel, at least for the time being. NNPC as sole importer also minimizes the chances of refinery agents colluding with fuel importers to keep the local refineries comatose.

The third step is for NNPC to fully transition to a more transparent and cost-efficient crude-for-refined product swap program.

The fourth recommendation is to move towards refined-product independence by investing in more state-owned refineries without further delay. A quick approach is to deploy easy-to-install modular refineries, similar to a 2012 initiative by the Trade Ministry. Such refineries should be strategically spread across the six political zones, using a location template that mirrors the existing national crude pipeline-depots network. The end purpose here is that state refineries do work, have worked before in Nigeria, are working again now, and ought to continue to work moving forward. Thus far, the new NNPC Group Managing Director, Ibe Kachikwu, is making good moves, repositioning the refinery management.  But there is the need to further sanitize the entire operation and maintenance culture by engaging competent and experienced refining team, pruning stale workers immanent with past patterns and practices, and retraining others committed to efficient service delivery.

The last recommendation is expected to attract a broad range of critics, especially from the proponents of privatization. But Nigeria has to be extremely careful with borrowed theories. Just as leadership is contingent upon the environment, deregulation and privatization have never been a one-size-fits-all.

While it remains a viable approach in the Nigeria’s oil industry, deregulation without due considerations to the conditions on the ground is a specious ingredient for a sour outcome. The country cannot immerse its economy completely into a concept that intrinsically advocates corporate profits at the crude expense of public interest in this stage of national development, especially where an average citizen lives on less than one dollar per day.

Even in the United States of American, often seen as model capitalism, not all sectors are fully deregulated. For instance, due to the importance of electricity in human welfare and obvious complexities with open market economy, deregulation of the power sector in the US did not begin until less than 25 years ago. Moreover, despite what some analysts may view as its merits, a majority of American states are yet to see sufficient benefits to exercise full deregulation of electricity.

So much is at stake and there is little room for error. Yet, given Buhari’s huge reservoir of goodwill, the temptation to toy with the removal of the subsidy remains real. But Mr. President should not lose sight of history. His predecessor, Goodluck Jonathan, has not recovered since betting his enormous luck against the masses by tinkering with the same fuel subsidy program in the spring of 2012. The current change movement cannot be compromised on the altar of a radical gamble.

Ogbonnia, a leadership scholar, is the chairman of First Texas Energy Corporation.