The oil subsidy debate

On a recurrent basis, the vexed issue of oil subsidy has continued to dominate national discourse. This critical issue dates back to the early 1970s when the government in its wisdom decided that imported petroleum products should be subsidised. This was done in order to equalise prices of the products across our relatively vast country. The aim was to keep the price artificially low, with a view to ensuring that the masses continue to benefit from a product which Mother Nature bestowed on this country.

In the course of time, however, two schools of thought have emerged over the issue. The first one contends that subsidy should be done away with. The principal argument of this particular perspective is that deregulation should be the main plank of our oil policy. Meanwhile, the other school deposes that the government has a duty to ensure that petroleum products are made available to the populace at a fairly low and artificial price.

Almost every government from the Gowon regime till date has had to contend with this important issue of subsidy. On some occasions, feelings have boiled over to the extent that the masses had to spill over to the streets in the bid to express their passions. Even indices of the international system have taken a hand in the issue. More often than not, these social forces, in a way that is consistent with the ideology of market forces, have always argued for the removal of subsidies from petroleum products. This argument has usually been complemented with the perspective that the expended subsidy can always be used on welfare programmes in the areas of health, education and sundry infrastructure.

Over time, the proponents of subsidy retention have always had the upper hand. More often than not, the government had had to backtrack by forging compromises with elements in this category, including workers, students and human rights activists.

In more recent times, however, it is arguable that a certain kind of herd mentality has taken over the subsidy debate. Right across the ideological spectrum, there seems to be an insistent and clear call for the removal of subsidy on petroleum products. What has probably ensured this unanimity is the realisation that the subsidy as operated is nothing but a monumental fraud. There are estimates suggesting that Nigeria loses around $8 billion annually on the subsidy which supposedly goes into petroleum products. Such is the decadence in the subsidy regime that it is alleged there are  even ghost importers of refined product who, in consonance with that shadowy appellation, import nothing and walk away with stuffed bank accounts in the name of subsidy. Moreover, there is the other revelation that, courtesy of subsidy, the price of petroleum is so low that it has spawned another lucrative industry – the smuggling of petroleum products into our neighbouring countries.

Even then, another dimension of the racket is the round-tripping phenomenon. Specifically, this involves the taking out of domestically refined petroleum products and the re-importation of same, with a view to having fraudulent access to the funds earmarked for subsidy.

In view of this, this newspaper has always taken the position that the earlier we do away with the subsidy regime, the better. In essence, and as has been stated by almost everybody, the issue of subsidy has been so thoroughly bastardised and compromised that a few  Nigerians are laughing all the way to the banks while the vast majority are handed the short end of the stick.

However, our case for subsidy removal is not absolute. We wish to draw attention to the fact that there is something inherently contradictory in the fact that an oil producing country like ours has to rely on subsidised imported refined petroleum products. This in itself is something of a perverse record because Nigeria is the only country in the Organisation of Petroleum Exporting Countries (OPEC) that operates this patently bankrupt policy.

Therefore, although we support the current clamour for the removal of subsidy, we also wish to state that our refineries must function for the benefit of the populace. As things stand, the installed capacity of our various refineries has the potential of ensuring that fuel importation becomes history. Moreover, they can be complemented with modular refineries, such that the nation will have self-sufficiency in this critical area of our national life. And private investors can also be encouraged to establish refineries which will be fed with crude oil at prices that are not determined internationally.

We therefore urge the new Buhari government to immediately abolish the current subsidy regime. However, this policy option should be complemented with the resuscitation of old reefieries and establishment of new ones.