THE WILL

The Federal Government appears set to implement the recommendation of the International Monetary Fund (IMF) on the removal of the subsidy on petrol after many years of indecision occasioned by absolute lack of the political will to take the bull by its horns once and for all.

Now, the government is ready to give a ‘barren’ New Year gift to Nigerians as it has already announced its decision to remove the subsidy, increase the price of petrol and electricity tariff amid the worsening insecurity, instability, poverty and rising unemployment .

THEWILL recalls that the global bilateral money lender, in its preliminary findings at the end of its official visit to the country, under the Article IV Mission issued on Friday, November 19, 2020, had restated the need for the withdrawal of the subsidy on petrol. The IMF report had said, in part, “The mission stressed the need to fully remove fuel subsidies; and move to a market-based pricing mechanism; in early 2022 as stipulated in the 2021 Petroleum Industry Act.

“In addition, the implementation of cost-reflective electricity tariffs, as of January 2022, should not be delayed.

“Nigeria’s past experiences with fuel subsidy removal, which have all been short-lived and reversed, underscore the importance of building a consensus, improving public trust, regarding the protection of the poor and efficient, and transparent use of the saved resources.”

Building a consensus on this policy and improving public trust, with regard to the protection of the poor, has been the heart of the matter since last Wednesday when the Minister of Finance, Budget and National Planning, Zainab Ahmed, unveiled the plan after the Federal Executive Council meeting on that day.

Spelling it out in detail, while briefing State House correspondents after the week’s FEC meeting, presided over by President Muhammadu Buhari at the Presidential Villa, Abuja, the minister said the sum of N5,000 would be disbursed to the poorest of the poor 40 million Nigerians to cushion the effects of the subsidy removal. According to her, the disbursement would be done digitally through platforms like the new e-Naira wallet system and not through cash transfer.

“What we would not do is to pay people cash. It is meant to be for a period between six and nine months. The maximum would be 12 months and a minimum of six months. It is something that we can get from the Federation Account so every member of the Federation Account Committee (FACC) will have to agree.

“We thought we would do this to give people time to adjust before the other support measures that the Federal Government is working on as an alternative to PSM, that is, mass transit vehicles, to come into effect.

“From the experience we have had on the conditional cash transfer, it shows that money actually helped them to provide basic needs and some women, who are care givers of these families, started petty trades to support the family. We wish we could do more, but we are also limited by what government can do at any point in time and there is nothing stopping the states to add more to the N5,000 that is coming from the federation account,” she said.

The minister said the government can no longer bear the cost of petroleum subsidy at N250 billion monthly because the Nigerian National Petroleum Company (NNPC) has been making zero remittance to the Federation Account.  NNPC, being the sole importer of petrol into the country, has been subsidising the commodity.

On the reasons being adduced for the removal of N3 trn petroleum subsidy, the Group Managing Director of the NNPC, Malam Mele Kyari, had preceded the finance minister by a day. On Tuesday of that week, at a World Bank event held in Abuja, Kyari announced that petrol, currently selling for N165 per litre, would sell for between N320 and N340 per litre from February 2022, when the subsidy is expected to end.

REACTIONS

Different persons have expressed different but basically advisory opinion and hard views in respect of the proposed removal of petroleum subsidy and the hike in electricity tariff. For its timing and context, it is the opinion of many that the proposed policy bears the worst of times for Nigeria and Nigerians.

There are questions surrounding the identification of the 40 million Nigerians being targeted by government for the N5,000 transportation funding through platforms like the e-Naira wallet system, considering the anticipated negative impact of the removal of petroleum subsidy and increase in the prices of petrol prices and electricity on the livelihood and welfare of Nigerians.

A senior lecturer in the Department of Economics at the Benue State University, Makurdi, Dr Jerome Andohol, told THEWILL that the plan on fuel subsidy withdrawal by the Federal Government was a dangerous move.

He noted that, although there would be some expected gains from the removal of fuel subsidy, the impact would be enormous, especially in a receding economy as ours.

He also faulted the timing of the plan, saying, “The reason is that if fuel subsidy is removed, the average consumer will take the full impact of payment for the imported refined fuel. In essence, the subsidy removal will translate to high cost of production, higher prices of goods and services and an increase in the cost of transportation.”

According to Andohol, the withdrawal has the capacity to cause an inflationary spiral that would become counter-productive to growth and development.

“That is, growth stagnation will lead to an increase in the unemployment rate. Again, now that inflation and unemployment are taking an upward trajectory, a scenario of stagflation will evolve”.

He pointed out that the stagnation will have counter-productive effects on the supposedly social investment programmes of the government. More so, the real effect of money in the face of rising inflation will be decimated, thereby, causing reduced consumption, poor investment activities and an increasing deficit balance of trade.

“In this connection, the speed of the continuity of the vicious cycle of poverty will accelerate in a country that is supposedly tagged as the headquarters of poverty in the world,” he added.

A chieftain of the Peoples Democratic Party (PDP) and spokesperson of the Atiku Campaign Organisation, Segun Sowunmi, however thinks that the removal of subsidy will stabilise the petroleum sector.

“President Buhari cannot and the APC-led government cannot pretend that they do not know what subsidy is when they were campaigning and when the Goodluck Jonathan administration under the PDP was trying so hard to say is not sustainable for you to be burning hydro-carbon.

“You need to liberalise that sector. It needs to be driven by the private sector and market forces. It is high time Nigerians understood that there can be no way of sustaining the routine of fuel subsidy. But enough is enough; it has to go,” Sowunmi said.

He nonetheless added, “The issue I have with the Muhammadu Buhari administration is that a country that is using about 90 per cent of its money to finance debt services cannot afford the N5,000 monthly stipend for 40 million Nigerians to push for subsidy. That is playing to the gallery at the expense of the sustainable economic model for the development of the country.

“The removal of subsidy will stabilize and the cost of transportation will stabilise eventually. One of the major problems we are having with fuel subsidy is that we assume that we can run equalisation for a product that we are importing.

“We should just let market forces play its role. It may seem a bit high, but I don’t think it can be sustained if the people cannot pay the price. I am sure the price will have to come down to meet the people at an equilibrium level where they can easily afford it.”

Commenting on the planned N5,000 transport grant, a professor of Accounting and Finance and former Vice-Chancellor of Nassarawa State University, Keffi, Mohammed Mainoma, expressed concern that it could be another dimension to corruption. He said that the Federal Government had not learnt lessons from its previous interventions that yielded little or no results.

“The government is not learning lessons from its previous intervention.  It should tell itself the truth about other social interventions, whether it has not introduced new dimensions to corruption.  They should not share money. They should invest in infrastructure to make the citizens empowered to do their business.

“Why should the government want to spend N2.4 trillion (on transport grant)  instead of N1.8 trillion (on total subsidy)? The kind of lessons expected from this regime is the kind of thing Abacha did and made Buhari Chairman of the Petroleum Trust Fund. They should utilise the saved subsidy and do such interventions in power supply, entrepreneurial education, hospital management, and creation of local businesses,” Mainoma told THEWILL.

An economist and Visiting Fellow at the London School of Economics, Dr Olu Fasan, on his part, commended the idea of fuel subsidy removal as appropriate, though overdue. He said it would help in fighting wastefulness and corruption, which have eaten into the governance fabric of Nigeria.

“The issue of the removal of fuel subsidy has been extant and long-running for decades. It is high time Nigeria held the bull by its horns and dealt with the issue decisively, once and for all.

‘’The fuel subsidy costs the government $300million a month. It is a heavy fiscal burden and the economy, comatose as it is, cannot sustain that cost. That’s why the IMF and other international economic institutions and experts have consistently called for the removal of the subsidy.

‘’What’s more, the fuel subsidy mainly benefits the wealthy and it has long been a major source of corruption, with the history of oil scammers. So, from both fiscal policy and anti-corruption points of view, the oil subsidy should go,” he said.

In a note sent to THEWILL, Fasan added, “Another important reason why the subsidy should go is climate change. Nigeria made a commitment at the just-concluded UN climate change conference, COP26, to reach net zero carbon emissions and President Buhari has just signed the Climate Change Bill into law. The truth is that subsidising fossil fuels is not compatible with any of these climate change policies. Nigeria cannot fight climate change by continuing to subsidise oil. It is better to divert the subsidy into renewable sources of energy.

“But it is true that, although the fuel subsidy mainly benefits the wealthy, its removal would still hurt the poor in terms of the rising costs of goods. Given that the cost of living is very high in Nigeria, which particularly places the poor at a disadvantage, the government should do something to help those most in need. So, a monthly transport grant is a good idea, but N5,000 is minuscule. Government should consult with labour unions and other relevant stakeholders and agree on a more appropriate figure.

“The biggest problem, though, is the management of the grant. Will it get to the right people? Or will it be hijacked by corrupt people? The poor management of COVID-19 palliatives and the social security programmes does not give one any confidence that the monthly transport grant will be well managed. Besides, if the government says the grant will be for the “poorest” Nigerians, does it have the statistics or data on who and how many they are? Does it have the money to cover all the poorest and vulnerable population?

“Ultimately, the best way to tackle poverty is to grow the economy, create jobs and increase productivity. Otherwise, the transport grant would become another subsidy that the government can’t sustain and can’t remove.”

A former speaker of the Plateau State House of Assembly, Hon Istyfanus Mwansat, told our correspondent in Jos, the state capital, “I don’t think it is good. it is not the best for Nigeria now. I don’t think it is properly considered.”

Mwansat said the history of removal of petroleum subsidy in Nigeria, partial or whatever, is that it has always worsened the lot of Nigerians because the people always suffer more because the removal always comes with hardship and lack of improvement in government welfare programmes.

The baseline effect, he said, is that the gap between the have and the have-not will further widen, noting that the latest one proposed for next year will completely wipe out the middle class and majority of Nigerians will be the worse for it.

But Mr Bismark Rewane, CEO of Financial Derivatives Company, is alarmed.  “N5,000 x 40 million is about N200 billion a month. It is N2.4tn in one year. This means that the government wants to save N3tn to spend N2.4tn. Now, who are the 40 million people? For instance, I buy petrol, but I am not among those who will get N5,000 a month. So, who are those 40 million to get this money? And how will it be disbursed?”  Rewane asks.

But he thinks that the removal of subsidy will provide free money to government to sustain economic growth.

For the Director-General of the Manufacturers Association of Nigeria, Mr Segun Ajayi-Kadir, the government’s policy makes economic sense but a disaster from a welfare angle.

He said in a statement last week; “Regardless of the arguments back and forth on the issue, PMS remains a commercial product. It is therefore not insulated from the laws of demand and supply.

“From an economic point of view and that is the area I am comfortable to talk about, it should not come as a surprise. The rise in the price of crude oil should signal the inevitable increase in the landing cost of petrol in the country. You have oil marketers importing fuel with the need to recover their costs and make a profit. Taken together, it is inevitable that the pump price of petrol will increase.”

THE WAY FORWARD

Sowunmi thinks it is about time the Chairman of the Dangote Group, Alhaji Aliko Dangote, hurried up with the construction of the Dangote refinery.

“Something we can do is to refine our product and put it in the market and adopt the concept of a modular refinery.  Whatever is the case, you cannot treat petrol as a special product at the expense of other areas of development that are sustainable.” he added.

Dr Nnaemeka Obiaraeri,  Managing Director/CEO, Taurus Capital and Advisory Services; and Taurus Oil and Gas Limited, advised against replacing corruption with another corruption.

He said, “Please someone close to Buhari should beg him not to replace the corruption laden consumption petroleum subsidies scheme with another corruption laden consumption scheme of paying N5,000 monthly to 40 million Nigerians. It does not make any economic sense to save N1.8 trillion and then create a pathway for some fat cats to steal N2.4 trillion annually.

“We cannot continue to subsidise criminality, bad behaviour, inefficiency and destruction of Nigeria. We cannot remove one layered criminal subsidies scheme and replace is with another public sector money sharing scheme that will only create many new hushpapas and hushmummies.”

Patience Samuel, a businesswoman based in Jalingo, capital of Taraba State urged the Federal Government to put a proper social structure in plsce before and during the start of the policy, which she thinks is beneficial in the long run.

She said, “The removal of oil subsidy is quite disturbing, especially at this point where inflation is high. The poor masses will suffer this more than anyone.

“Government should find a suitable way of cushioning the effect of subsidy removal on the common people. It is not as if it is not for the  greater good, but people will suffer before they begin to reap the gains if it is not properly approached.”

It is a few weeks to D-day in January 2022, almost a year to the 2023 general election. Developments in the coming days will decide, who, between IMF and Nigerians, will carry the day.

“President Buhari has the mind and capacity to do what he wants  for Nigeria. If that is the decision he has made for Nigerians, the President has the capacity to do that,” Governor Abdullahi Sule of Nasarawa State told Channels TV last Wednesday, while answering questions on the desirability of removal of subsidy after much postponement by the present administration.

A former Commissioner of Local Government and Chieftaincy Affairs in Akwa Ibom State, Architect Okon NseAbasi, said the issue surrounding the whole subsidy thing is the lack of study of the problem facing the country in that direction.

“Nobody is ready to engage wisdom. Everyone is looking for cosmetic solutions to problems. They fail to realise the insufficiency of their preparation for the pressure of their needs in the economy.

“They are still trying, but for how long will you try? Our leaders need to listen to an economist of National Planning from America, Europe or some of the Western countries.

“As we speak, there are faculties of petroleum and petrochemical engineering in the South-South, but they have not done any publication on the economic and political circumstances of our oil and the rest. By now, we should be adequately informed about what oil subsidy means.

“Let us look at how much Akwa Ibom people spend on fuel monthly. You would be surprised that they spend more fuel to get on with their lives than the annual budget of the state. The money spent on fuel is bigger than the budget for road construction.

“The money I spend on fuel for my power generator in one month can be used to pay power bill for six years. There is no day I don’t consume 30 litres of fuel, which is about N90,000 monthly. You cannot compare that to an American whose fuel is paid for and is the cheapest in terms of consumption.

“There is absolute lack of sufficient study and there is not enough information as to the need for fuel subsidy in Nigeria,” he said.

Mr. Bolaji Adeniji, an APC Chieftain and Communication Consultant in Abeokuta, the Ogun State capital, said, “The issue is that Nigerians have to pay the true value of PMS. How is government prepared for the whole outcome and all the other elements attached to the price of fuel in a sense that the price of goods and services will go up, unemployment will go up and inflation will continue to rise. We are still borrowing more to finance the budget and capital expenditures. So how will government cope with the effect of the removal of subsidy?

“If the local capacity is equipped in a sense that we have our refineries around, they will have to depend on government control price, which will now force importers to come down on their own cost.  At the end of the day, we will be having competitive prices under a deregulated industry.

“The removal of fuel subsidy will be good for Nigerians, but it will also add to their hardship. Regarding the issue of N5,000 to 40million Nigerians, I think the people government have continued to act as if they lack the capacity to think. I cannot buy the idea of doling out money to people without proper data. How can you give out N5,000 to over 40 million people for transportation because of the removal of fuel subsidy?”

Okenaberhie Harold, a social commentator in Bayelsa State, said he welcomed the torrent of rejections by well meaning Nigerians and groups, such as the Nigerian Labour Congress, Civil society organisations and Afenifere. He implored other critical stakeholders to lend their voices to what he described as an obnoxious and ill-timed government policy.

Also speaking, an environmental activist, Alagoa Morris, said, “When some of us protested against subsidy removal in 2012, we saw Nigerians who supported the removal, even in Bayelsa State. They massively protested in support and this time around , l think they will support any protest against it.”

Morris maintained that as an oil producing nation, Nigeria has no business exporting crude oil and importing refined products.

He urged government to fix the refineries and stop the importation of petroleum products.

“That will make the price affordable. Besides, this is the time government at state and federal levels should be taking steps to move along with the rest of the world in terms of renewable energy by investing in that direction and less and less on fossil fuels.

“I thought President Muhamadu Buhari protested against the removal of subsidy and promised to build new refineries and refurbish old ones. What about the masses of this country that have suffered too much while those in the corridors of power are living in affluence?” he said.

But the President of the National Association of Nigerian Students (NANS), Sunday Asefon, is unimpressed by the development.

At a press conference held in Abuja on Friday, Asefon threatened that the country would be shut down if the government went ahead with its policy.

According to him sufficient buffers must be put in place before the take-off of the new subsidy regime.

At the briefing, he stated, “None of those conditions is in place at the moment. It is therefore very strange that the Federal Government could contemplate the removal of fuel subsidy now.

“The four refineries are not functioning and if they are functioning at all, it is at a near-zero level. There is zero consultation with stakeholders to even consider issues around deregulation and why it should or should not be. The survival of Nigerian workers and their wards is yet to be discussed, yet a date that may take lives out of them has been fixed.”