The removal of subsidy on Premium Motor Spirit (PMS), otherwise called petrol, is one of the best policy decisions any responsible government would execute. I was not surprised that the present government did just that. My challenge, rather, was with the speed it was executed.
Even at that, I wasn’t too much surprised, given the background of the President who is revenue driven.
Subsidy on petrol is a colossal waste on our resources. The waste is better imagined.
1. Like any subsidy administration, it was opaque.
2. Nigeria subsidised all her neighbouring countries with her petrol, which is ridiculous. You cannot police our borders, it is inherently porous. Any policing is merely an extension of chains of beneficiaries of smuggling. Did you note that there were protests in some neighbouring countries when Nigeria adjusted price of petrol recently?
3. If all countries this man mentioned subsidise energy, including US and Britain etc, he should tell us how much is a litre of petrol in those countries?
4. In UK, as at June this year a litre of petrol was £1.434 which, at an exchange rate of N950/£1 amounts to: N1,362.3. In the US, during the same period, a litre of PMS was: $1.823, which at an exchange rate of N750/$1, amounts to: N1,367.25 per litre. In other European countries, the price of petrol per litre was: €1.672 as at June this year, when you convert this to Naira, its value would be similar to those in the UK and the US. All doubles our current prices of petrol per litre across Nigerian cities. If these countries subsidise energy, how come their prices are this high? Truth is, many of these countries even tax petrol, and that accounts for the high cost of the petroleum products there. I am not saying our petrol prices should be the same as those in Europe and America because of differential in income levels. Even in Nigeria, Petrol tax once existed and was one of the easiest to collect. We used to have N3 petrol tax prior to 2002. Dr. Rilwanu Luckman, of blessed memory, as Presidential Adviser on Energy, reluctantly agreed to sacrifice it to beat the cost of petrol down and affordable to Nigerians when an adjustment in the price of petrol was effected that year. I know this because, I was an assistant in his office then and indeed, I was a member of a technical committee on deregulation of Nigerian downstream sector that guided the transition from 2000 to 2003. I am happy the tax elements, I understand, is back.
5. Nigeria imports petrol from Europe mainly, how come our price is grossly lower than prices of petrol in Europe, if all is right.
6. If all is right, how come our products prices are lower than any of our neighbouring countries’.
7. The truth is that subsidy removal is a political economic decision. President Buhari couldn’t do it because his regime had been extremely vilified and had little or no emotional capital to foist petroleum products price adjustment on Nigeria. That regime bled under the weight of petroleum subsidy, however, for self preservation, which I agreed with, it schooled itself from effecting any increase in subsidy. It is not that that government deterred on subsidy removal because the removal of subsidy was bad, but that it did not have enough emotional capital to carry it through just after the ENDSAR riots that shook parts of the country. Being a political decision, only a foolish government, on a course of self-immolation, would effect subsidy removal close to election time, not because it is bad economically, but it is politically. It would weep up resentments again such a government or party. Humans are beings of emotion, not reason. Many don’t even know what is in their long term economic interest to start with. The Tinubu Administration is on honeymoon, that is why it could foist price adjustment on Nigerians with little or no storm. Let it be as reckless with electricity tariff adjustments any time soon without clear programmes to ameliorate the suffering of Nigeria as a result of the removal of petrol subsidy and it would see peoples’ reaction.
8 Petrol subsidy remains a waste and the elite clique would rather it continues forever if you care to know.
9. Let it be known, I have mentioned it here before, there is nothing awry in the petrol subsidy removal recently effected by President Bola Ahmed Tinubu. That had been done before on a number of occasions when, with favourable crude oil price regimes and fair forex rates, we exited subsidy on petrol. To prevent a relapse, this administration must see superintending downstream sector as something far above effecting price adjustments. It needs forward thinking, having good monetary policy, getting midstream facilities, to wit, refineries, reception and other shared facilities like pipelines working, getting some people to help manage the tradition, otherwise, you will wake up to see that we have launched back to subsidy regime, because you cannot continue to jerk up prices of petrol ad infinitum.
Addendum:
The subsidy removal is a means of getting our economy in shape.
There are other unexplored areas that could add value to that.
Finally, subsidy on agriculture, health, housing and other social services is good and desirable. It isn’t on petrol. Revenues from petroleum resources which is the main stay of Nigerian economy should be optimised and used as a springboard for industrialisation and general development of the country. It should not be squandered.
So, so, so, long!
Gboyega writes from United Kingdom.
