Nigerians are yet again going through the misery of fuel scarcity for the
umpteenth time. This time around, the
effect of the scarcity has been
particularly brutal in the capital city,
Abuja, with reports of motorists
spending days on queues at petrol
stations. For those who cannot endure
the painful agony of waiting on queues,
petrol hawkers provide a welcome
relief, that is, if you are prepared to
pay as much as N250 for a litre of
petrol. Not surprising, the queues are
said to be less outside Lagos and Abuja
where operators are reportedly selling
petrol at prices in excess of N120 a
litre, well above the approved pump
price of N87 per litre. So, although the
government would have paid these oil
marketers subsidy to sell petrol at N87,
apart from the NNPC, they have
collectively decided not to pass on the
subsidy to consumers in the form of
lower petrol prices; no doubt, believing
that there will be no consequences for
defrauding government. So, the fuel
subsidy scam continues with impunity.
The cost to the country in lost revenues
as a result of this policy is huge. We
continue to allocate over a quarter of
the federal budget to just one line of
expenditure. We continue to pay
trillions of naira to Nigeria’s 130 or so
oil marketers for fuel subsidies that are
only passed on to residents of Abuja and
other major cities, while the rest of the
country buys their fuel at market
price. It is common knowledge that the
closer you are to the Nigeria border,
the less likely you will ever buy petrol at
the approved price of N87, as marketers
would rather drive their tankers across
the border where they would obtain a
higher price for their product. With the
depreciation of the naira, the country
may yet find itself spending up to
N1.5trillion on fuel subsidy; more than
the combined budgets for education,
health, agriculture, rural development,
works, transport, and lands and
housing put together. Insanity of the
highest order.
You do not have to be Einstein to see
that the current subsidy regime is
corrupt and unsustainable. As a nation,
we can no longer afford to fund this
scam, especially in the present climate
of falling oil revenues, where states
and the federal government are
struggling to pay civil servants.
Although fuel subsidy is supposed to help
the poor, the biggest beneficiaries are
actually the rich. We cannot be
spending a paltry N600bn on job
creating capital expenditure and over a
trillion naira to subsidize the life style
of the rich, so they can maintain at
least two fuel guzzling jeeps and their
generators. This does not make social
or economic sense. It is indeed immoral.
The truth is that, the subsidisation of
petrol distorts the market and has
resulted in inefficiencies and
substantial loss of revenue for the
government through corruption. It has
contributed to the collapse of our local
refineries by making them unprofitable
for private investors to invest. The
subsidy regime has also been responsible
for sporadic fuel shortages at fuel
stations as corrupt marketers, after
receiving subsidies, have then
proceeded to sell the subsidised fuel to
neighbouring countries at higher
prices.
It would be irresponsible for the in-
coming government to do anything else
but abolish subsidies. We should be
subsiding the cost of travel (mass
transit), not petrol at the pump. The
poor will benefit more through targeted
measures as I argued in my article
during the fuel subsidy protests of
2012. In the UK for example, bus tickets
are subsidized by government to make
travel for the masses more affordable
but petrol is taxed to fund public
services. The trillions of naira we
expend making dollar millionaires of
marketers would be better spent
equipping our schools and hospitals,
building our transport infrastructure
and investing in power.
The debate on the removal of subsidies
has been plagued by sentiments, scare
mongering and misinformation, even by
our so-called economists who should
know better. One of these individuals
even stated in a TV interview that the
US subsidizes petrol at the pump –
shocking untruth. Far from subsidizing
petrol, the US actually levies taxes on
petrol and diesel (13 per cent tax on
petrol and 12 per cent tax on diesel);
as do most developed economies. In
Britain for example, 60 per cent of
every pound spent on petrol goes to the
government in taxes to fund public
services.
For decades, expensive and
unsustainable subsidies on fuel have
curtailed growth in developing
countries. Apart from, perhaps, the
rich Arab states that have huge
reserves and where vital infrastructure
is already in place, many developing
countries are grappling with strategies
to unburden themselves of fuel subsidy
payments in order to release resources
for economic development.

http://leadership.ng/opinions/435511/the-scam-of-fuel-subsidy