According to the Federal Government the removal of fuel subsidy scheduled to commence next year will save the government N1.2trillion annually ( I wonder how they even estimate this figures). This was contained in a Fiscal Strategy Paper (FSP) presented to the National Assembly yesterday. In their words phasing out the fuel subsidy from next year will “free up about N1.2 trillion in savings, part of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effects of the subsidy removal”. According to the President removing the subsidy will, “free up about N1.2trillion in savings, PART of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effect of the subsidy removal”.
Haven’t we all heard this before? Flashback to 2005 when the Government gave reasons for wiping out the country’s external debt see here they came up with all sorts of stories telling us how paying $12b at the time will free up money for the badly needed capital expenditure. Oh well, 6 years later, we still don’t have power, good roads, quality healthcare, accountability, quality education etc. The list is endless…in fact add security to it now with the bombing and killings going on in certain sections of the country.
What really is this subsidy? Well according to the PPPRA (the body in charge of regulating the downstream sector) Nigerian Government pays additional N75.27 on every petroleum product imported into the country as subsidy see here . Meaning a litre of fuel imported into Nigeria actually cost N140.27 per litre per thursday price. Based on that they think it make sense to remover it because if they do importers of the products will bee open to the forces of demand and supply which with time will usher in competition and efficiency resulting in prices crashing sooner rather than later. Well, that’s on the assumption that the Independent Markets are so many that their supply will eventually out strip demand. It also assumes that our refineries will be working in full capacity to augment supply. In fact it also assumes that the demand for petroleum products may even drop if Nepa improves as Nigerians start to depend less on fuel generated power supply. All of these offcourse isn’t possible, at least not now. Marketers do not have the capacity to meet the demands of Nigerians. A lot of the major marketers are heavily in debt and as such cannot afford to get requisite finance to import enough products. Based on this prices will only soar. It is not like GSM where the companies are already established and had the capacity to source funding from the world market to help build capacity and improve on technology resulting in dropping prices. That’s the grammar of it…
Why take away the fuel subsidy even? No matter how plausible their argument are why take it out? We do not have any form of social security in this country and nothing to placate the suffering of the Nigerian people. The entire amount comes to about N8k for every Nigerian so what the heck?? If they feel they do not need to pay for it from the existing sources of revenue, then heck let them raise taxes on the rich. Bottom line is, the only subsidy Nigerian have as a collective people is the subsidy on fuel. We do not have any welfare programs, education is not free and neither is healthcare. These guys already bailed out the rich by setting up the Asset Management Corporation, something that has cost Nigerians about N770b. So if N25banks cost us N30.8b each what is wrong with spending N8,000 on every Nigerian??
