Anyone who knows jack about political timing knew the proposed removal of subsidy on premium motor spirit this 2022 was a profoundly bad idea. This is an electioneering year in Nigeria preceding the 2023 general election when all intelligent political players should be out to endear – indeed, ingratiate – themselves to the electorate with a mind to secure support in the forthcoming poll. Governance, even by global best practice, makes room for this factor and Nigeria can’t be an exception. You may want to argue that good governance ought to entail measures stemming from hard-headed reasoning with facts and figures, not political expedience; but it is hard reasoning being expedient by not acting on dubious facts and figures to effect measures that draw blood in an election year.
And so, it was a matter of expedience, but by no means for lack of hard reasoning that the Muhammadu Buhari administration pulled the breaks on its plan to unleash the price of petrol on Nigerians this year. Government had prepared ground for the policy when early in 2020, it said the domestic retail price of petrol would henceforth be determined by market forces, particularly the international cost of crude oil. At the time, it set a monthly price band for the pumphead price of petrol and even lowered the rate a couple of times to reflect slumps in crude prices at the international market. But every long sighter knew it was a fluke because refined fuel for local consumption in Nigeria is imported nearly wholesale, and crude prices that dipped at the time because of the Covid-19 pandemic were certain to rebound sooner than later and drag up the domestic cost of petrol. Besides, there is the dynamics of foreign exchange rates that is totally outside the control of government. These made anchoring domestics prices of petrol on those external factors tantamount to abdicating governance and handing Nigerians over to wild foreign forces beyond the reach of the Nigerian government to modulate. A way out was to have worked at reversing how petrol is sourced, by building up local capacity for refining the crude that we have and eliminating importation. But the argument plied was all for saving monumental resources being wasted on subsidy by floating the price of a product that is a must-use for every category of the Nigerian populace, but whose pricing would be determined by wild external vagaries that are in no way within the ambit of government to modulate in protecting Nigerians. The spill-on effect of fuel price hike has always been rampaging inflation in all sectors of the economy, affecting the lowly the most. But arguments were waged in denial that only a privileged few benefitted from subsidy, whereas ordinary Nigerians derived no benefit while also being deprived of resources needed for social intervention programmes.
While the National Assembly worked at cracking the obdurate nut of a needed legislation to give statutory effect to the deregulation policy (i.e., the Petroleum Industry Bill), government announced plans to disincentivise Nigerians from using petrol by providing a cheaper alternative in compressed natural gas. Petroleum Resources Minister of State Timipre Sylva said early in 2020 that the Buhari administration had put necessary infrastructure in place for the switch by motorists from petrol to gas, which according to him was being piloted in selected states of the federation. As part of that drive, government launched a Central Bank-funded N250billion intervention facility intended to stimulate interest in the gas value chain. This was packaged into the National Gas Expansion Programme unveiled by President Buhari in December 2020, which was touted as designed to facilitate conversion of petrol-powered cars and generators to gas, as well as installation of auto gas stations across the country. The promise was that millions of cars would be converted within a short time span, with government subsidising costs incurred by motorists on the conversion.
As at when the PIB got signed into law in August 2021, however, neither the gas alternative nor local capacity for refining petrol was in place. Business mogul Aliko Dangote held out some promise with his upcoming multi-purpose refinery in Lagos, but that private sector initiative won’t come on stream until the end of 2022. The four government refineries remain comatose, and modular refineries not harnessed for significant output. Meanwhile, government had wrapped up plans to terminate import subsidy from the end of June, this year, when budgetary provision expires. Late in 2021, top government officials including Nigerian National Petroleum Company (NNPC) Limited boss, Mele Kyari, hinted that subsidy might indeed be pulled in February 2022 in line with the Petroleum Industry Act prescription that regulation of prices of oil resources by government give way to free market in six months from when the law took effect. It was to apparently to sell this plan that government offered to give five thousand naira handouts to 40million vulnerable Nigerians. But since there were no buffer structures in place for the proposed policy, we were back to government abdication and a bid to hand Nigerians over to wild vagaries.
State governors pushed for hurried implementation of no-subsidy regime all because they needed more money to spend from the Federation Account. Organised labour however opposed, arguing that the inflationary effect would finish off many in the citizenry of which some 43 percent (89million people) already live below the poverty line and another 25 percent (53million) vulnerable. While supporters of subsidy removal waged the argument that the capital outlay isn’t sustainable, Labour and like minds counter-argued that price deregulation anchored on importation of petrol without internal buffer mechanisms neither is sustainable. Not that anyone opposed subsidy removal per se.
Well, it is official: government has shelved the subsidy removal plan. Its decision marked a triumph of reason because, for the first time, it conceded arguments that have been canvassed against abdication. Petroleum Minister of State Sylva acknowledged that the plan is ill-timed politically and economically; while Finance Minister Zainab Ahmed agreed that building blocks which should precede the measure were not in place, and that the potential of the measure to worsen inflation that is still high in the economy portends acute hardship for the citizenry which President Buhari is reluctant inflict. These will now be remedied. And there are other quick-wins: the National Assembly has resolved to scrutinise shady claims associated with the subsidy regime, like the exact quantity of petrol Nigerians consume daily. Government deserves praise for giving in to bitter facts. But with Mrs. Ahmed darkly stating later that it will cost N3trillion to fund petrol subsidy this year, we must make clear it is the price Nigeria is paying for government incompetence over the years, not wasteful expenditure on unruly Nigerian appetite.
