By Sonny Atumah

The subsidy of gasoline or premium motor spirit, PMS was an issue in the Vice Presidential debate last week. The belief is that Nigeria has been entrapped by subsidy since 2011 when the Federal Government envisioned the idea of subsidy removal.

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The regime of subsidy on petroleum products had been fraught with dishonesty or fraud as we have been made to believe.

The argument had been whether Nigeria should jettison the subsidy scheme which many believe is a tube to siphon funds from the Nigerian commonwealth. This must have prompted the Nigerian Election Debate Group, NEDG, organisers of last week’s debate, to test the knowledge of five vice presidential nominees it shortlisted on petroleum subsidy in Nigeria. The debate organisers through its anchor Imoni Mark Amarere of AIT explained the reason for pruning the candidates to five.

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Subsidy anywhere is a cushion; to enhance the welfare and wellbeing of the people. We have subsidy all over the world; both in the more developed and least developed countries. In the more developed countries like the United States, UK and other EU countries, China, all have subsidies in one form or the other for her citizens.

Petroleum subsidy in the United States is from the production angle.  The five shortlisted candidates had various opinions on fuel subsidy in their presentations. For serving Vice President and nominee of the APC, Professor Yemi Osinbajo, the challenges of the petroleum subsidy in Nigeria are the abuses and corruption prevalent in the past administration.

The state oil company, the NNPC has been the sole importer bearing the costs. He believes that there is no country in the world that does not provide one form of subsidy support or the other for its citizens.

He argued that if subsidy is removed now Nigerians will be left for as high as N200 and above per litre for PMS, which will have adverse impact on the citizens. The government tried it in 2016 with dire consequences on the people. Osinbajo believs that the Federal Government was addressing the economic issues, to boost the purchasing power of citizens, as the petroleum subsidy will not be there for long.

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The VP candidate of the Peoples Democratic Party, PDP, Mr Peter Obi, believed government was subsidising inefficiency in the name of petroleum subsidy. To Obi, the subsidy payments made were higher than the budgets for health care and education sectors annually. He believed that subsidy removed should be channelled to human capital development, that will address the plight of over 80 million poor Nigerians.

With the right policy, the price of PMS will not be as high as presented. The Alliance for New Nigeria, ANN candidate, Mrs Khadijah Abdullahi-Iya believed that petroleum subsidy, over the years, has been fraught with corruption, with strong institutional framework needed to get value from subsidy, adding that her party will drive an aggressive diversification of the economy from oil dependency.

Her party will reallocate the amount budgeted for subsidy to address the infrastructure issues in the country. The VP candidate of the Young Progressive Party, YPP, Mrs Umma Getso alluded to a pre-2015 view credited to President Buhari that subsidy is a scam which she said aided corruption and has not benefitted the masses but only aided corruption.

The Allied Congress Party of Nigeria, ACPN candidate, Alhaji Ganiyu Galadima, said his party will do away with subsidy and focus on deregulation of the petroleum sector to attract investments in the industry.

As we discuss subsidy it is imperative we know where we are coming from to determine the right step forward. Many have discussed subsidy from the point of withdrawal, retention, deregulation, corruption, inefficiency etc.

Between 2006 and 2018, nearly N10 trillion has been paid out as subsidy claims by the Federal Government. Funds for infrastructural and human capital development have been frittered on the utter of subsidy claims and payments because we import petroleum products.

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was doubtful whether some of our ‘applicants’ comprehended the subsidy question. In the 1990s, we started the importation of petroleum products into Nigeria as a result of inadequate maintenance of our four refineries. Our refining capacity went down to near zero that we now rely wholly on NNPC to import petroleum products.

With volatility in international markets appropriate petroleum pricing becomes difficult. It is determined by the economy, weather and competition between retailers and from other fuels.  Feedstock prices (crude oil) are influenced by the above demand factors, geopolitics, actions by OPEC, governmental regulations  and other international influences.

We subsidise taxes on our crude we sell to refiners abroad, duties we pay to refining countries for refined products, maritime charges for importing, and all other unimaginable economic charges we pay for importing petroleum products from non-producing consumer nations in the Amsterdam-Rotterdam-Antwerp trading hub.

As long as the petroleum subsidy in Nigeria is based on products imported, we get it wrong. Our conversation on subsidy should be domestic and on products we refine locally. It will make economic sense to subsidise what we produce and refine. Value addition will solve the subsidy riddle.


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