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Removal Of Subsidy And Job Creation - Politics - Nairaland

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Removal Of Subsidy And Job Creation by Okoroawusa: 9:10pm On Jan 25, 2018
By Prof. Nyerhovwo Tonukari…
Price controls are regarded by economists as
one of the worst forms of intervention in
markets. Over the years, the history of
governments implementing price controls has
shown that it is a failed venture. If truth be
told, no measure implemented to control
prices can overcome the basic economic
forces of supply and demand on a long-term
basis. Government involvements in price
control of any product always inevitably lead
to scarcity, price gauging, rationing or black
markets. Subsidy can be systematically
exploited by those involved. Therefore, the
price of a commodity or service should not be
dictated by the government but by simple
economic laws of supply and demand as well
as competition. It is unfair to fix the price of
Premium Motor Spirit (PMS) (commonly
referred to as petrol or fuel) or any product or
service across board. The cost of petroleum
products should rise or fall depending on the
crude oil price worldwide.
Lately, Nigerians have been buying petrol
between ₦200 and ₦300 without serious
negative consequences for the country. This
clearly shows that if subsidy is removed and
there is competition among importers, the
pump price will inevitably crash to about ₦190
or less. There is no gainsaying that in a
hundred years the Nigerian
Telecommunications Limited (NITEL) would
never have achieved the level of coverage
now provided by MTN Nigeria, Globacom,
Vmobile and 9mobile. Yes, NITEL may have
been cheaper but then, purchasing a mobile
Subscriber Identification Module (SIM) was an
uphill task. Look at Nigerian Airways of old
and compare with many local and National
carriers that we now have; also consider Aero
and Arik Airlines airport terminals in Lagos.
This in my opinion shows that, private sector
intervention is the key for real development in
Nigeria. These privately-owned companies
have a reputation for better salaries, improved
staff welfare packages, and they invest so
that they can make good profits on a long
term. The developed economies of the world
are evidences of the roles entrepreneurship
activities have played in economic
development.
To achieve this economic development in
Nigeria, oil marketers or business men or
women should be able to import petroleum
products and sell at whatever price. The
Government should not force them to sell at a
loss to themselves. The simple economic
theory of demand and supply will bring down
the cost of petrol. In my view, it will be best
for the government to stop interfering in
commerce and focus on collecting taxes from
the importers and distributors. In addition, if
the Federal Government must give licenses;
licenses should not be given to 20 or 100
importers but to 10,000 importers or more.
Anyone who wants an import license should
get it without much bureaucracy.
The present government must act swiftly to
address the issue of subsidy honestly in the
best interest of Nigerians. The government
has no option than to do the needful in
eliminating subsidy payment and servicing.
The continuous payment of subsidy is a scare
to the survival of the economy. Whilst subsidy
removal will fully open up the sector for the
needed investments and development it
seriously requires, it should not be removed
immediately or abruptly. All major marketers
should be allowed to sell above ₦145. The
Nigerian National Petroleum Corporation
(NNPC) can continue to import petrol for one
year while allowing any company to import
petrol and sell at whatever price they want. I
would suggest that NNPC maintains its price
at ₦145 for the first three months and then
remove ₦5 from the subsidy every three
months until there is no subsidy. Nigerians will
have been used to varying petrol price by
then. Market economics will definitely bring
the price to a stable average over time. While
NNPC is divesting itself from fuel importation,
it must have at least three months’ supply to
cushion any shortage or price hike from
crooked cabals. Such cartels will always seek
to associate and set higher process, but NNPC
can release hundreds of millions of litres from
its supplies to counteract the monopolists.
Assuming Nigeria consumes 30 million litres of
petrol and diesel per day. With the standard
value added tax (VAT) rate at 5%, the Federal
Government will reap a huge 100 billion naira
in tax revenue from petrol sales. This is in
addition to import duties that will also be
collected. If we add this to more than 250
billion naira we are currently losing to
subsidize petrol per year, we can construct
roads in every village in Nigeria within three
years from the more than one trillion naira
saved. I believe this will be an enormous step
to employment generation and boost
infrastructural development instead of the
payment of subsidy into the hands of a few
hands.
The removal of subsidy will no doubt be an
incentive for private refineries, job creation
and national development. The State of Texas
alone in the United States have 47 operating
refineries. Crude oil is currently being piped to
Kaduna Refinery, and with subsidy removal
Kaduna State alone may have nothing less
than four private refineries serving not only
northern Nigeria and Cameroon, but also the
landlocked countries of Chad, Niger and
Burkina Faso. There will also be private
refineries in neighboring states to Kaduna
since access to crude is assured. Tens of
thousands of construction jobs will be created
within few years subsequently leading to
hundreds of thousands of jobs for refinery
workers and truckers. Many allied companies
and services will set up shops also leading to
more jobs. The Dangote refinery currently
being built in Lagos is expected to provide
more than 80,000 direct and indirect jobs
according to widely circulated reports. The job
opportunities and rapid infrastructural
development that will occur in Kaduna and
neighboring States within ten years of subsidy
removal will shock naysayers.
On the other hand, the South-South region will
also be a major beneficiary of subsidy
removal. I can envisage Delta and Rivers
States having two to three private refineries
each. Hundreds of thousands of jobs will also
be created as well as rapid infrastructural
development. Refined products from the
South-South can also be exported. It is my
conviction and hopes that local shipping
companies will thrive as well. This will also
lead to private refineries springing up in
several states.
It is time Nigerians begin to see and believe
that Nigeria will ultimately become a petrol
and diesel exporting country. Believe me it is
going to happen and it will happen fast if we
remove the subsidy. This pain of long queues
and expensive petrol once in a while is not
going away as long as subsidy remains.
Subsidy failure has contributed to the
nonexistence of local refineries and the
curtailed developmental growth. Malaysia and
several countries have since abandoned the
subsidy policy, thereby boosting resources for
employment generation and infrastructural
development. The Federal Government should
take the inevitable decision to do what other
governments failed to do by partially
deregulating the downstream sector of
Nigeria’s oil and gas industry. Please join me
in encouraging the President Muhammadu
Buhari led Government to be courageous
enough to stop payment of subsidy on
petroleum products so that millions of jobs
can be created as well as economic growth.
Re: Removal Of Subsidy And Job Creation by CodeTemplar: 9:32pm On Jan 25, 2018
Good points but sentiments overrides logical reasoning in Nigeria anyday anytime.
Our attempt at carrying poorer and backward thinking people along has made subsidy inevitable.

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