The removal of fuel subsidy is the moment at the front burner in national discourse, with many berating the government for contemplating such an idea. But could it possibly be a means to an end? JULIET ALOHAN writes.
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Despite criticisms against the federal government for its planned withdrawal of fuel subsidy, it has continued its campaign aimed at convincing Nigerians on why subsidy should be withdrawn.
Although government has been unable to convince Nigerians on why subsidy, which is perceived as a benefit of the common man should be removed, the big question however, are, who benefits most from this subsidy? Could it be a means to an end? And can the government be trusted with the gains from subsidy when eventually withdrawn?
Government functionaries at various fora have reiterated the need for subsidy withdrawal, arguing that it benefits only a few Nigerians who are getting richer by the day at the expense of others.
According to the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, while addressing an international press conference recently in Doha, Qatar, fuel subsidy has only been benefiting the rich and making them richer. She stressed that its removal would be in favour of the poor as the money saved would be channeled to the development of major infrastructure.
“As a matter of fact, if you look at it critically PMS (fuel) is subsidising the middle class and the rich. It is the rich in Nigeria that have up to six cars and above, not the ordinary man and woman, they (the rich) are the ones who are enjoying the sudsidy on PMS,” the minister said.
Explaining further she added, “at this time it is the thinking of government that Nigerians have not benefited from the subsidy put in place to benefit the ordinary man and woman on the street for a number of reasons and government would rather see some very aggressive policies put in place that would cut across all strata and impact on every Nigerian no matter their level in an immediate and obvious manner.”
She said gains from subsidy would be used to address infrastructural projects like critical irrigation and water project desperately needed by the farming sector and individuals, critical areas of health as well as education and urban mass transportation, which she noted, is delivered on the back of diesel and not PMS, amongst others.
Also, the Minister of Information, Mr. Labaran Maku, has informed that subsidy removal will result in value addition to various sectors of the economy, which would be opened up.? He said government would utilise its share of the resources from the subsidy to implement a combination of programmes that would stimulate the economy and alleviate poverty.
Maku maintained that the potential impact of the discontinuation of the subsidy regime on the poor could be mitigated through properly targeted safety net programmes.
According to him, “the federal government is desirous of discontinuing subsidies on prices of petroleum product because this poses a huge financial burden on the government. It disproportionally benefits the wealthy, whereas the poor masses who are supposed to benefit from the subsidy hardly get to enjoy it.
He also informed that high price disparity has encouraged smuggling of petroleum products across the borders to neighbouring countries, where prices are much higher. “Nigeria therefore, ends up subsidising consumption of petroleum products in neighbouring countries,” he said.
Meanwhile, analysts have posited that unless subsidy is removed to encourage private investors to build more refineries and crash down fuel price in the country, Nigeria’s pump price of fuel will remain one of the highest among the Organistaion of Petroleum Exporting Countries (OPEC) member nations, even at N65 per litre,
Unfortunately, governments intensions is being doubted by Nigerians who have become skeptical about the issue since it has become a ritual for governments to make promises without fulfilling them. Past administrations have made numerous promises which never left the drawing board.
The apprehension of Nigerians is against the background of belief that rather than making more resources available for developmental projects, removal of subsidy would make more money available for some corrupt government officials to steal and earn alarming allowances.
Regrettably, this was further heightened by the manner in which the governors’ forum hinged their demand for the removal of subsidy on their desire to have a larger portion of the revenue shared monthly by the federal, state and local governments, even as they capitalised on the need to implement the minimum wage act to demand for the removal of fuel subsidy.
No doubt, fuel price would skyrocket following subsidy removal, but if urgent steps are taken to boost local refining capacity, and make the country less-dependent on importation of fuel, the price would go down in no distant time.
With over 36 billion barrels of crude oil reserves and average daily production of 2.6million barrels per day, Nigeria is the seventh exporter of crude oil, with 10th largest reserves in the world, but remains the only country among OPEC that imports refined petroleum products.
Since the country imports fuel, the price of products in Nigeria is a reflection of international oil prices, instead of a reflection of the cost of local refining.
However, if the assurance by the petroleum minister recently in Doha is anything to go by, government was already putting in place structures that would see to the increase of local refining capacity, which is crucial to the crash of pump price in the country.
According to her, final negotiations with the original builders of the nation’s three refineries are being finalised for the purpose of transparency and elimination of past abuses associated with past efforts at turn-around maintenance.
“Port Harcourt refinery will kick off in a couple of months once we finish the negotiations; they (original builders) have assured us that the refinery will be up to 90 per cent utilisation. Warri and Kaduna refineries will be phased in over the next 12 months, and by the time we finish in two years time we should have 90 per cent utilisation in all three refineries.
Also, she informed that final negotiations would begin in January 2012, with the green field refinery consortium having just finished the feasibility study. “We are moving into final negotiations, hopefully within the next quarter we will kick off with the green field refineries and we have a time period of 36 months to be up and running fully and that will give Nigeria another 445,000 bpd in refining production.
In addition to this, it is envisaged that full deregulation will encourage private-sector participation in the building of more refineries and bring down prices in the long run, while also creating thousands of jobs for the teeming unemployed Nigerian population.