FUEL PRICE

By Abdulwahed Ibrahim Omar mni

The issue of fuel subsidy removal has been on since the seventies. It is true that Government subsidises the citizens on fuel purchase in order to stabilise the price of the commodity and to ensure affordability. Oil being the most widely used commodity (other than foodstuff), bears the highest determining factor when it comes to price fluctuations.

Successive governments keep telling Nigerians that the fuel subsidy payment is impeding progress in other sectors of the economy.

They claim that when subsidy is removed, more development projects will be executed for the welfare and wellbeing of society.

One thing that stands clear is the fact that none of the Successive governments ever made sincere declarations regarding the amount that constitutes “subsidy”. When in 2011 the Jonathan administration wanted to increase fuel price, they claimed that if subsidy was removed Government would have had more money to enable it execute more capital projects.

specifically, they lined up over 30,000 kilometres of road for construction; Rail lines construction stretching from logos to Kano, Portharcourt, Sokoto, Warri, Maiduguri and other places.

Health, education and other sectors were also lined up as beneficiaries of the subsidy surplus. When Labour analised the claims, it turned out that whereas the total cost of the projects would have been in the region of over 12 trillion naira, the subsidy removal would only fetch Government additional 1.3 trillion naira.

In fact the minister of finance had earlier explained that the money that was to accrue from subsidy removal would be split among the tiers of Government thereby bringing the share of Federal Government to a mare 400 billion naira.

It is worth noting that to execute the project that Government earmarked from the savings of subsidy removal, that paltry 400 billion would have to be multiplied a whopping 30 times. It is easy therefore to see that subsidy money is not the solution to our economic problems. Rather, the subsidy plays major role in easing our social problems. Let us try to understand the principle of subsidy.

In this case subsidy simply means Government paying for other services on the product in order for the marketers to maintain certain level of price regime that is considered reasonable enough to prevent the escalation of prices of other items in the country. Subsidy is not peculiar to Nigeria.

Infact developed countries pay multiple of subsidy to various aspects of their citizen’s welfare and wellbeing. If to remove subsidy by Government means to allow international market forces to determine the price of fuel, it is my candid opinion that Nigeria is not ready for the consequences.

Let me give a small scenario for us to figure out how to deal with the situation when it eventually manifests itself. Assuming the barrel of crude oil sells for $80 and therefore the local price per litre is #250, when the international crude moves up to $100, the domestic price will be expected to move up to about#300.

This will definitely make almost every other thing to move up. The major implication here is inflation which lowers the purchasing powers of the majority. Poverty level grows higher and living standard of the people lowered. Government might still be happier with such a situation in the sense that more money comes into government coffers.

But where the reverse becomes the case, will Government be ready to live with the situation as it should? Can Government be able to control the activities of marketers when the need arises?

An example of reverse scenario is in a case where international crude prices crash- lets say to $25 per barrel, will Government be willing to ensure that the domestic fuel price is also crashed proportionately?

In this case the price should ideally come down to about #40 or #50 per litre. One obvious thing is the Government loss of resources. In a country where prices that go up very rarely come down, it will be a herculean task to get our capitalist entrepreneurs and marketers to conform with the standards.

It is interesting to hear that Government will pay #5,000 per head per month to 40,000,000 Nigerians. I dare to say this is not even practicable. First who are 40,000,000 that qualify? What are the terms for qualification? Why are the other Nigerians numbering over 160,000,000 excluded?

How can anyone believe that Government will be diligent in this payment that is not backed by any law, when salaries and wages that are legally binding are not being paid diligently? Think of some cases like school feeding program. where are we now?

Aside all these, What does 5,000 cover for an adult especially a married one with children. More importantly, we may see 5,000 as good money today. But remove subsidy and fuel sells for 300 naira, the 5,000 will be worth less than 2,000 naira.

like I said earlier, every Government from the seventies contemplated removing fuel subsidy but in the end voices of reason prevail and the idea jettisoned. May the voices of reason continue to prevail for Nigerians to enjoy the much talked about DIVIDENDS of DEMOCRACY.

Abdulwahed Ibrahim Omar mni. Past president on NLC.

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