Tuesday, June 6, 2023 2:38 pm
•The four facts, the demagogues and reality
By Dele Sobowale
“Once to every man and nation comes the moment to decide, in a strife of truth and falsehood, for the good or evil side” – James Russell Lowell, 1819-1891.
Former President Muhammadu Buhari, as the candidate of the All Progressives Congress, APC, called fuel subsidy “a scam”. Yet, the hypocrite paid more fuel subsidies to the beneficiaries of the fraud than any President in Nigerian history during his eight years in office. The most pathetic aspect of Buhari’s turn-around was the fact that he paid for the subsidy by taking on huge loans to pay for what he knew was grand larceny.
Buhari was not alone in sabotaging Nigeria’s economy. He had accomplices – Ministers of Finance, senators and members of the House of Representatives, and Central Bank of Nigeria – who readily approved each loan package needed to pay for the robbery. Nigerians should be prepared for the shocking revelation that a substantial percentage of the unconstitutionally sourced N23.7 trillion Ways and Means debt was incurred to pay fuel subsidy. If ever there was a conspiracy by elected and appointed officials, deliberately or inadvertently, organised by those we entrusted with the fate of our country, to ruin Nigeria, fuel subsidy payment was it for more than 40 years.
Every military or civilian government since the 1980s had contributed its own share of the economic destruction which fuel subsidy represents. It started after the Organisation of Petroleum Producing Countries, OPEC, started imposing export quotas on member countries in 1973. By limiting global crude oil supply, the cabal created an artificial scarcity and raised prices of crude. But, in the beginning, the retail price of petrol was not regulated.
Many of us old enough can still remember when fuel price was competitive; when Mobil, Texaco, BP etc engaged in vigorous sales promotion campaigns to attract customers. The Muhammed Murtala/Obasanjo regime brought an end to the competition when Nigeria’s refineries came fully on stream. Then, imported fuel was prohibited and all fuel marketing companies were forced to collect fuel for distribution from the Nigerian National Petroleum Company, NNPC, and sell at the same price. To some extent, that made sense, after all, there was no product differentiation. What made absolutely no sense was the stipulation that the fuel price must be uniform nationwide. Very few countries impose a national price on fuel for the simple reason that the distribution costs, as well as efficiency of companies, are different. Competition forces marketing companies to become more efficient; and to drive pump prices to the lowest level. Nigeria lost that advantage once governments started determining fuel price.
Full cost recovery
There would have been no question of fuel subsidy – if every government had insisted on full cost recovery even when Nigeria’s four refineries supplied almost all the fuel needs – which were below 18 million liters per day. But, as the number of vehicles increased, and our refineries could no longer cope with daily demand for fuel, importation became inevitable. And, as the price of crude oil started rising, the landing cost of all finished products went up. Fuel price went up globally; but not in Nigeria.
At first the multinational oil companies started importing fuel until the fixed selling price made it impossible for them to make profit. But, as global crude prices rose steadily, on account of global economic expansion and tight OPEC control on crude supply, the price of fuel went up in response in countries where prices were not regulated. The International Oil Companies, IOCs, in Nigeria found the fixed prices unprofitable and withdrew. Fuel scarcity became a regular feature of Nigerian life. The Federal Government stepped in and started importing fuel through the NNPC until it became the sole importer. For political reasons, the government absorbed the increased landing and distribution costs and maintained fuel prices at the same level for years at a time – in the hope that the implied subsidy would be temporary.
The first attempt to remove subsidy totally occurred when it finally dawned on the military regimes that subsidy was going to be permanent. After years of subsidized fuel, the attempt was stoutly resisted, and the push back was mostly successful as Organized Labour and other groups threatened strikes – until the short-lived administration of the late Chief Ernest Shonekan did something unprecedented. It went for total subsidy removal and the price of petrol escalated from 70 kobo per liter to N5 per liter. Riots broke out nationwide. Then-General Sani Abacha took advantage of the breakdown of law and order to seize power. To placate the masses, Abacha reduced the pump price to N3.25 per liter. Peace was restored; subsidy was also partially restored.
Meanwhile, global crude prices started moving up sharply; the cost of importing fuel was rising. Suddenly, the Abacha regime increased the pump price to N11 per litre. But, by then the government had become brutal; there was no mass protest. By the time Obasanjo was sworn-in, on May 29, 1999, fuel price had gone up to N22 per litre. Still, it was alleged that it was being subsidized. Obasanjo’s attempt to increase the price to N43 per litre and remove subsidy resulted in the biggest protest to date and launched Adams Oshiomole as a national hero. Eventually, N30 per litre was agreed upon as a new pump price. Still, the FG claimed the commodity was subsidized.
Crude prices kept going up – until it reached a peak of $145 per barrel under President Yar’Adua. By then Nigeria’s refineries had virtually stopped functioning and fuel was totally imported and national demand had risen to about 40 million litres per day. An attempt by Yar’Adua to remove the subsidy and charge the appropriate price resulted in another nationwide strike. The price was eventually negotiated at N73 per litre. Subsidy remained.
Crude prices started coming down when President Jonathan started his full term in 2011. Still, the FG claimed there was a huge subsidy being paid. On January 1, 2012, Nigerians woke up and were shocked to the marrows. The fuel pump price had changed to N142 per litre. Riots and protests broke out again; some people, including General Buhari, debunked the idea of subsidy – calling it a “scam”. Jonathan retreated. Subsidy remained.
In 2015, Buhari campaigned with the promise to end subsidy payment; he was elected; he has spent his entire eight years in office paying more subsidies than any other leader and borrowing trillions of naira to pay for it.
Obviously, the first thing Nigerians must accept is the fact that there is a fuel subsidy. That is the easiest part. The really difficult facts for us to accept are the following. One, we have not been paying the right price for fuel for years and subsequently, we have been consuming more than we should. Two, the present generation of adult Nigerians are consuming fuel and passing the bill to our children and grandchildren to pay. Three, we have been distorting our economy for decades and growth has been slow and uneven. Four, insanity has been defined as “doing the same thing over again while expecting a different result”. We might as well accept that what we have been doing is a mild form of national lunacy. Four, we have now reached a brick wall; a new approach is inevitable.
Evading truth won’t help
“It is unthinkable for wisdom to ever be popular” – Johann Goethe, 1749-1832
Galileo, 1564-1642, the first man to ever proclaim that the world is round, like a ball, and not flat, was almost lynched for it. He hastily recanted to stay alive. The two greatest beings to ever walk the Earth – Jesus and Mohammed (PBTH) – came with their everlasting truths, and despite tribulations, never relented. Mankind has always chosen the easy way out of difficult problems – invariably self-created. When President Tinubu, after his inaugural address, summarized his government’s policy on fuel subsidy by stating that “fuel subsidy is gone”, he was only stating a truth which his gutless predecessors lacked the courage to state when each of them had a chance. Had just one of them been patriotic enough to do the right thing, even at the risk of losing an election, the FG would not now be spending 96 per cent of its revenue on debt servicing and there would have been more funds for other social services. We spend more on fuel subsidy than what is required to keep our universities open 24/7. Even lunacy has an expiry date.
I fully expected the knee-jerk reactions to the announcement from the usual demagogues who expect fuel price to remain unchanged while crude price goes up and global inflation is at its highest in over 40 years. They have started again. The only way forward for Nigeria is for the vast majority of us to trust that government is on the right track; that, after a brief period of hardship, the price will stabilize; then, it might start to drop – just like GSM when the private sector was allowed to handle it. Funds saved from the policy will be invested in other areas, deficits will decline and loan-seeking will be reduced.
Finally, my advice to Fellow Nigerians is this: For once, don’t respond if somebody calls you out on strike. You will only create another cynical hero; who, after riding on your back to be Governor, will turn his back on you. There is no alternative to subsidy removal NOW.