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Nairaland Forum / Nairaland / General / Politics / Effect Of Subsidy Removal (1165 Views)
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Effect Of Subsidy Removal by kastroud(m): 6:45pm On May 11, 2016 |
Nigeria reminds me of a farmer who sells his
harvested cassava for another party to process,
and buys garri back. The buyer gains the peels and
other by-products of the cassava — what a foolish
farmer!
Today, the fuel subsidy removal is still a thorny
issue in our national politics because we refused to
make the necessary sacrifice vital for national
development. The ghost of the January 2012 mass
protest stayed President Goodluck Jonathan’s hand
from removing the scam called subsidy, so it was
allowed to remain even as the economy is bleeding.
Over the years, the refineries were neglected
deliberately to help supply crude to refineries
outside Nigeria. Turnaround maintenance (TAM)
was carried out on these refineries without a single
thought of building new ones. The common
accounting knowledge of depreciation and
replacement was totally lost to Nigeria
policymakers. In partnership with oil marketers,
refineries were abandoned, oil importing became a
lucrative business with no one caring about what
would become of the economy.
Jonathan, immediately after being sworn in,
discovered the economy rape called subsidy.
Without much public enlightenment and education
to sensitize the masses, he proceeded to remove it.
The removal was ill-timed, too, as most Nigerians
were yet to return from the Christmas season; thus,
the government was termed insensitive.
The cabals in the downstream sector directly or
indirectly instigated the people against the
government by emphasizing the harsh economic
effects of the removal; the long-term benefit was
eschewed. The people being ill-informed helped the
cabals to keep their bank accounts afloat.
According to a Vanguard’s January 6th 2015 article,
the sum of N10trillion was spent on subsidy
between 2006 and December 2013. Much of the
shortfall in excess crude account was used to pay
oil marketers. This amount is more than Nigeria’s
two-year budget figure, three times the budget
allocation for health, and two times budget
allocation for education in the 2014 fiscal year.
I quite agree with Chief Economist for Africa with
Standard Chartered Bank’s, Razia Khan’s words: “If
you look at the reasons for fuel subsidy and its
economic effects, the subsidy is very regressive
because it is a cost on the whole economy. It takes
resources away especially from the poor and
rewards those who consume more fuel”.
A visit to remote Nigerian villages will make it
evident that this subsidy scam is not benefiting the
poor. This set of Nigerians hardly travel, and they
don’t have generators. What they need most is
good road networks and agric subsidy. Their only
business is kerosene which is still subsidized but
sold at unsubsidized rate to them. No one is calling
for mass protest or asking the government
questions because the rich hardly use kerosene.
It still dumbfounds me why Nigerians would still
want subsidy. Is it because they are oblivious of
this scam, or is it mere fear of the future without
subsidized fuel?
At the climax of the unrest, a committee with
Aigboje Aig-Imoukhed as its head was set up to
look at the alleged fraud; a parallel panel was set
up by the federal house of representatives. All this
led to the Farouk-Otedola saga. Nigerians’
expectations were rekindled that something would
soon come out of this probe, but it didn’t
excite people like me because this is Nigeria.
Farouk and Otedola are walking free today like the
birds of the air.
The four refineries in Nigeria have a combined
production capacity of 445,000 barrels per day
while the country’s daily output of crude is put at
2.44m barrels per day as of February 2015,
according to the US energy information
administration.
This entails that we refine approximately 18% of
our output, 82% of raw petroleum is being
transported to Western and African countries that
do not have petroleum. I always wonder why
countries without crude oil resources build
refineries: does it mean they anticipate the supply
of crude oil from ‘unserious’ countries like Nigeria?
Countries like Kenya have a working refinery with
no oil deposit.
In the last five years, oil price had been good, and
so subsidy programme was marginally sustainable.
But with the crude price hovering around $65, with
debt service cost of 21% and deficit of 23.8% in the
2015 fiscal year, there is no way subsidy can be
accommodated, except we want to increase the
budget deficit balance. Let it not be lost to us that
financing a deficit is not usually palatable as the
options are very unfriendly. We either devalue the
already weak naira, borrow from the IMF (our last
outing with them left a sour taste), or sell
government investments. Unfortunately, the PDP-
led government has sold our national inheritage in
the name of privatization. So, we are left with
devaluation and borrowing options.
Before we join NLC in protest against subsidy
removal, let us reflect on who the partial removal
benefited most. Let us X-ray and correlate the
economic end of selling crude below $65 a barrel
and paying marketers to import the same crude.
Subsidy was an issue when global oil price was
above $100, it shouldn’t be an issue now with the
current trend. NLC should be more concerned
about the obnoxious treatment of Nigerian workers
by Indian and Lebanese firms, the anti-workplace
practices against pregnant women in private
companies and, most painfully, the casualisation of
workers in banks and other multi-national
companies.
Okonjo-Iweala’s keen interest in verifying subsidy
claims before payment leads to delay in payment,
oil marketers use this medium to horde supply with
the primary motive of reminding us how much we
will suffer if this subsidy is removed.
However, because of civil servants’ incompetence,
the federal government has decided to stay away
from business ventures, so building a new refinery
is not attainable. Moreover, private investors
cannot build refineries when it is more profitable to
import fuel with subsidy than to refine and sell
locally. Deregulation of the downstream segment is
one of the country’s getaway routes from the
looming economic crisis and endemic corruption in
the oil sector.
Saying no to subsidy sustenance could reduce fund
leakage from the treasury, increase the balance in
the federation account, enable states like Osun pay
salaries at last. A negative answer will give Buhari
zero excuses to fail. Let’s say no to subsidy before
Nigeria bleeds to death. |
Re: Effect Of Subsidy Removal by hisgrace090: 7:28pm On May 11, 2016 |
It's now or never. Subsidy going.....? Gone. |
Re: Effect Of Subsidy Removal by Jirate(m): 8:28pm On May 11, 2016 |
Waiting for Lie Lie Mohamed to come out and speak on this, in fact I am Ashamed of all APC supporters. APC - Shame.
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