The unending subsidy saga – Soji Akinrinade

The unending subsidy saga – Soji Akinrinade

We have been here before. In fact, every government since the Babangida years has had to face the perennial subsidy crisis. The liberalisation of the Nigerian economy in the 1980s brought a lot of headache for Nigerians and the economy itself. Prices doubled and quadrupled at the time.

 

When the Structural Adjustment Programme (SAP) was introduced in 1986; Nigerians suddenly woke up the day after to realise that what they used to pay 20 naira for was now costing them as much as 80 naira. The value of the naira had plummeted. The Babangida government called it a home-grown programme. But we all saw the hands of the Bretton Woods institutions in it.

 

 

It was an IMF programme, an institution which encourages currency devaluation but is dead set against subsidy. Muhammadu Buhari, the man that Ibrahim Babangida and his men had thrown out of power; was against the IMF/World Bank model for reforming economies. Rather, he introduced what his government called countertrade; a reciprocal form of international trade which allows goods and services to be exchanged for other goods and services; rather than hard currency. Many Nigerians called it trade by barter at the time.

 

 

 

 

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But the Nigerian establishment, not used to the ensuing hard times, would not stand for, and did not allow the measure to work. Hard times ruled those months. “Listening” to the clamour of Nigerians for things to improve; Babangida and his men, who installed Buhari and his deputyl Brigadier General Tunde Idiagbon in the first place, sent both men packing. Babangida then introduced SAP and things have never been the same.

 

 

Every government since then has had to tinker with petrol prices, some even establishing subsidy palliatives; which as things go in Nigeria, was just another pool of our money for the fast fingers to steal. Refineries that were built to refine petroleum products for Nigerians to use never worked. They were comatose despite hundreds of millions of dollars spent on their turnaround maintenance. It paid those who reaped from the misery inflicted on Nigerians to import refined petroleum products. We allocated petrol to be refined but we paid so much more to bring it back to Nigeria.

 

Subsidies themselves have become mired in the cesspit of corruption. Indeed, subsidy has become a conduit for brief case investors to make a fast buck. So, when President Buhari assumed his first term in office; it had been thought that the austere man would decisively deal with the situation; particularly in the oil sector, and rescue his country’s men and women from corruption hell.

 

 

In an interview in 2011, Buhari, then a presidential candidate said; “I don’t understand what Nigerian economists and the people in government mean when they talk about subsidising Nigerian oil…Who is subsidising who? Nigerian petroleum industry was developed with Nigerian capital. Most of the expertise are Nigerians if you go to the oil fields. It is Nigerian capital; it is Nigerian oil.

 

 

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“What I understand Nigeria should charge Nigerians is the cost of a barrel at the well head; then the cost of transportation to the refinery, the cost of refining it and the cost at the pump. If anybody says he is subsidising anything, he is a fraud. So, all these people talking about subsidy, who is subsidising who?

 

 

 

The unending subsidy saga - Soji Akinrinade

 

 

 

“We have four refineries with a capacity of 445,000 barrels a day. But because of corruption, we have virtually allowed those refineries to become inefficient. So, all talk about subsidy is sheer fraud and corruption.”

 

 

Such words have not been matched by a clean-up of the system since Buhari assumed power in 2015. With his own government paying hundreds of billions of naira every year to petrol subsidy for the end user; it is clear the Buhari government has been impotent dealing with subsidy issues in the oil sector. Clearly, this particular subsidy has continued to drain Nigeria’s treasury as corruption grows without let or hindrance in the petroleum industry.

 

Now, President Buhari has come full circle. From his days as a countertrade peddling leader; he knows there is no escaping IMF/World Bank diktat on subsidy and economic reforms; despite the dislocations they cause to weak economies.

 

It now seems as if the economic repercussions of the Coronavirus pandemic are now making the economically blind leaders see the efficacy of cutting their countries’ clothes according to the level of their resources. The full effect of the pandemic is getting clearer by the day in our economy. The 2020 budget has already been revised by the government. Still, it is a hard slug running this economy. It makes sense not to waste money on petrol prices subsidy anymore. In truth, petrol is cheaper here in Nigeria than in most poorer countries around us.

 

 

It is even cheaper here than in Saudi Arabia, the biggest oil producer in the world. The problem with Nigeria is that we frittered away the billions of dollars the country made from oil; providing no cushion for hard times. While I understand the efficacy of getting rid of our corruption-laden subsidy system; it is hard not to worry about how it may affect ordinary Nigerians.

 

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In this kind of situation, the poor in the society are the ones who; unfortunately, bear the heaviest burden of subsidy removal. The trite argument that it is the middle and upper classes that would suffer most if petrol subsidy is removed does not wash anymore. Nigerians know the mercenary attitude of their own folks when they board a vehicle either for intercity or intracity movements. It is usually profiteering at its cruellest and basest. So, it is with prices of commodities at our markets. At the whiff of removal of subsidy; prices make such incredulous jumps you will wonder what kind of rules govern price movements at our markets.

 

 

 

 

 

What has made matters worse and even makes it seem as if Nigerians are being kicked; while prostrate on the floor, is the astronomical increase in electricity prices. They have jumped more than 100 percent for the various bands the distribution companies, Discos, use. The Buhari government is pleading it can no longer subsidise the power sector too. It needs the money elsewhere, particularly to pursue its infrastructure development agenda.

 

Eliminating all these sources of corruption and resource wastages and using the gains to benefit the economy and Nigerians, sound like a lofty ideal. Except we are used to such initiatives which eventually do little or nothing for the economy or for us. Nigerians are sceptical. And coming at this very difficult Covid 19 times, it is a double blow for most of them.

 

Tweeting on the new electricity tariffs, former vice president, Atiku Abubakar said; “I reject the increased electricity tariffs. Coming out of the lockdown, Nigerians need a stimulus, not impetuous disregard for the challenges they face.

 

“Many Nigerians have not earned an income for months, due to no fault of theirs. This increase is ill-timed and ill advised.”

 

 

That exactly is the crux of the matter. How do Nigerians weather being battered by these destructive economic winds? There is neither a buffer nor any hiding place for them. The winds are coming at full pelt. The Buhari government has to do something to cushion the effects of these necessary but unpalatable economic measures. It cannot just leave them to their own devices.

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