The President Who Took Down A Five Decade Old Subsidy By Tijjani Ibrahim

The President Who Took Down A Five Decade Old Subsidy by Tijjani Ibrahim

A subsidy is a benefit given to an individual, business, or institution, usually by the government. It can be direct such as cash payments or indirect such as tax breaks. Subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, or to promote a social good or an economic policy.

Petro subsidies were introduced in Nigeria in the early 70s as a response to the 1973 oil price shock which caused a spike in the global oil prices and to prevent Nigerians from paying more at the international rates government had to limit local pricing burden on fuel and other energy products.

Then, the positive impact of the policy was felt because the economy was evolving, production base developing, policy makers and implementers much more truthful, transparent, accountable, patriotic and valued public interest over the pursuit of individual and selfish interest.

Unfortunately, the general downturn that affected the entire polity occasioned by maladministration introduced essentially by military takeover of the Nigeria state didn’t spare public policy implementation, including the fuel subsidy regime. The subsidy implementation in this regard was not only battered but completely derailed as so much dishonesty was introduced and soon became a conduit for importers and marketers in the petroleum industry and their collaborators who later earned the appellation ‘oil subsidy cabal’.

The cabal became so powerful largely due to the huge illicit profit it was making through the fuel subsidy regime that influenced the direction, policies and programmes of government not only in the petroleum industry but other sectors of the Nigerian economy. To further consolidate this grip on the system and keep the petrol needs of the country under its firm control the cabal orchestrated a subtle means to gradually diminish the productive capacity of the country’s refineries until it brought it to zero productivity at some point.

The Port-Harcourt Refining and Petrochemical Company Limited for instance has a 210,000 per day production capacity, while Kaduna Refining and Petrochemical Company Limited has 110,000 and Warri Refining and Petrochemical Company Limited has 125,000 per day production capacity but as of June 2020 the three Refineries combined processed no crude and posted a combined yield efficiency of 0.00 percent.

That also meant that there was no associated crude plus freight cost for all three refineries yet operational expenses at that material time amounted to over N10 billion. A 2020 Premium Times Report also showed a cumulative loss of N1.64 trillion between 2014 and 2018.

After completely wrecking the three refineries whose combined optimum capacity would have supplied about 80 million litres of petrol daily the cabal continued to raise the country’s daily consumption arbitrarily even during Covid-19 pandemic when movement was restricted countrywide, figures didn’t go down.

In September 2022 the Nigerian Petroleum Corporation NNPC claimed the country’s average daily petrol supply was 68 million liters. That claim generated a serious controversy not only amongst ordinary citizens, some top government officials and industry watchers equally questioned the figure.

Surprisingly immediately President Bola Ahmed Tinubu announced subsidy removal on May 29 2023 the figure dropped to 40 million. This invariably meant that the cabal was shortchanging Nigeria of subsidy payments of over 20 million liters of petrol either not supplied or stolen daily by the cabal.

As at February 2023 NNPC subsidies payments releases were put at over N400 billion monthly while figures from the Petroleum Products Pricing Regulatory Agency (PPPRA) showed that Presidents Obasanjo, Yar’adua and Jonathan governments paid over $23 billion in fuel subsidies which many noted that a huge chunk of the payments went into private pockets.

Another most troubling aspect of the subsidy regime was the incessant artificial scarcity created through hoarding and smuggling, a situation that enabled the criminals to claim subsidy payments in billions of dollar yet they refused to make the product available to Nigerians who most times out of frustration ended up buying way above the ex-depot or subsidized price while substantial part of the products were taken to neighbouring countries to sell at huge prices after claiming subsidies from the Nigerian government. And to even imagine that most of monies used to subsidize these products were borrowed funds and loans made it even more regrettable. Nigeria was borrowing to subsidize foreign Countries because some Nigerians were compromised.

The haemorrhage suffered by the economy because of the scam in the regime placed a heavy financial burden on the economy, caused huge budget deficits, left the economy porous to corruption and other costly leakages that were threatening to close up the economy.

To halt the drift and stop an already weakened Economy from total collapse, President Bola Ahmed Tinubu had to act from day one, hence the May 29 announcement of subsidy removal.

His decisiveness and courage where past Presidents could not act didn’t go down well with the cabal and it immediately started all manner of attacks directly and subtly especially through a section of the mainstream and social media against the removal.

They capitalized on the frustration of Nigerians arising from the hike in price and the general hardship being faced which is not peculiar to Nigeria, to ensure many citizens become blinded to the positive side but focus only on the temporary difficulty it brings.

It is important to note that since the subsidy was removed government has begun strategizing on ways to ameliorate the hardship on the people. Palliative measures to be the implemented within the short, medium and long time period are being put in place.

There is a steering committee already considering demands presented by the organized Labour. A fall out of this is a new minimum wage review committee whose report will be submitted in a few days from now for immediate implementation.

President Bola Tinubu has also approved the establishment of Infrastructure Support Fund (ISF) for the 36 States of the Federation to enable the States intervene and invest in the critical areas of Transportation, farm to market road improvements; Agriculture, integrated livestock and ranching solutions.

The support fund will equally focus on basic healthcare; Education, especially basic education; Power and Water Resources, that will improve economic competitiveness, create jobs and deliver economic prosperity for Nigerians.

Similarly the government disclosed that out of the June 2023 distributable revenue of 1.9 trillion Naira, only N907 billion will be shared among the three tiers of government, while 790 billion will be saved for statutory deductions and complement the efforts of the Infrastructure Support Fund (ISF) and other existing and planned fiscal measures aimed at ensuring that the subsidy removal translates into tangible improvements in the lives and living standards of Nigerians.

Furthermore, the National Executive Council (NEC) meeting of July 20th, 2023 resolved that State Governors should negotiate a new minimum wage for workers just as agreed that each plans towards implementing a cash transfer programme based on the social register of the state and put a Cash Award Policy in place for public servants for 6 months. And State Governments should pay public servants outstanding liabilities.

The NEC also agreed that government should begin to fund MSME with single digit interest rates and immediately begin implementation of the energy transition plan to transit from fossil fuels vehicles to Compressed Natural Gas which is far cheaper and runs higher fuel efficiency than petrol cars. Government also said it will vigorously deploy CNG-powered vehicles and establish auto-gas conversion plants and kits in all States in the short term.

In the areas of tax the President also upon announcing subsidy removal signed four executive orders which included the suspension of 5% excise tax on telecommunication services including the excise duty escalation on locally manufactured product and suspended the finance act 2023 deferring the date of its commencement from 28th May, 2023 to 1st September 2023.

As laudable as government efforts at reducing the hardship arising from subsidy removal from the people may be it must understand that many Nigerians are listening and hearing other narratives trying to paint a picture of insensitivity and lack of empathy about it. The government therefore must constantly keep the people abreast of its short term palliatives measure and start implementation as soon as practicable while also letting them into the positives that will acrue in the medium and short terms. This means that channels of communication on implementation progress must continue to remain opened, so that while craving their patience and understanding they can see a believable process and hear the real narrative which is that Nigeria is better without subsidy than with it as opposed to what the opposition is leading many to believe.

The government is just two months old let’s give it a chance!

Tijjani Ibrahim can be reached on drtijjaniibrahim@gmail.com