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In defence of fuel subsidy in Nigeria, By Chidi Chinedu

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This argument is for the people.

There is now a near-unanimous rejection of the petrol subsidy regime in Nigeria. This is now the popular position. I fear that with the deification of this position, some valid arguments in favour of petrol subsidy within Nigeria’s unique socio-economic context are being denied oxygen, with grave, even existential, threat to the people. To surrender the argument to a government uninterested in ending its imperial status— with all its attendant costs— and an egotistic liberal economic elite buoyed by affirmations within its intellectual bubble, and determined to test the furthest free market theories on the already pulverized masses, is a position I cannot accept.

There has been a growing socio-economic inattentional blindness among Nigeria’s ruling and liberal economic intellectual elite regarding the petrol subsidy issue. They have almost entirely embraced the Bretton Woods position on the petrol subsidy expenditure which isolates it as a drain on national resources, costing the country multiple other development opportunities. This position is flawed, I reckon. In Nigeria, isolating fuel subsidy as a purely wasteful consumption spend is an error. Within the context of Nigeria’s energy crisis, inflation surge, purchasing power squeeze, and general cost of production challenges, petrol subsidy cannot be so rightly isolated.

Caution and contemplation are key in this debate. Scholarly tentativeness and intellectual humility are paramount. One ideological strand in economics cannot be gospel. It cannot be unchallengeable. It cannot be treated as an absolute truth. Our pro-subsidy removal economists (who also champion free float of the currency and other free market reforms) must be realistic enough to recognize that economics is not an exact science. An economic proposal, more often than not, cannot solely determine its own destiny; it depends on some other variables. It is only this realization that will allow for expanded thinking and pragmatic, as against ideological, propositions. I reckon that what has become the subsidy conundrum has a hybrid solution, not an entirely free market solution, given the peculiarities of Context Nigeria.

The fuel subsidy regime does not exist in isolation. In Nigeria, it is simplistic, even inaccurate, to suggest that petrol subsidy is merely subsidizing consumption (not that it is entirely indefensible to argue for subsidy on consumption); it is subsidizing production as well. The Nigerian subsidy story is different. The Nigerian context strips some of the general oft-repeated theoretical principles against subsidy, like “don’t subsidize consumption”, “it is the rich that are being subsidized” and “government needs the money to drive development” of their force of truth; I will explain.

“In Nigeria, petrol subsidy is a purchasing power argument. It is a production argument. It is a local economy energizer argument. It is not merely a consumption argument”. 

Regarding production and energizing of local economies, petrol subsidy within the context of Nigeria’s energy crisis provides useful insights. According to the World Bank, 85 million Nigerians (43% of the population) do not have access to grid electricity, representing the largest energy access deficit globally.

To survive the grid energy exclusion, individuals, households and businesses resort to reliance on generators. According to the National Bureau of Statistics (NBS), generators powered by petrol, diesel and gas provide 48.6 percent of the electricity consumed by power users across the country. Of this figure, petrol-powered generators account for the bulk of the share, at 22.6 percent.

Overall, an estimated 60 million people use generators to provide electricity for their homes and businesses. According to the International Renewable Energy Agency’s (IRENA), 84% of urban households use backup power supply systems such as fossil diesel/ gasoline generators, while 86% of the companies in Nigeria own or share a generator, making Nigeria the highest importer of Premium Motor Spirit (PMS) and diesel generators in Africa as of 2022.

“Nigerian households and businesses spend an estimated $22 billion annually to fuel generators powering their homes and business”. 

The June 2022 report by Stears and Sterling, titled, “Nigeria’s State of Power: Electrifying the Nation’s Economy,” provides some useful insights. It reveals that:

“Over 40 per cent of Nigerian households own generators, and bear the associated costs. First, the cost of purchasing generators – an estimated $500m between 2015 and 2019, higher than the proposed capital expenditure in Nigeria’s 2022 budget.

“There is also the cost of powering these generators. Sources and estimates vary widely, but the African Development Bank estimated that Nigerians spend $14bn fuelling petrol or diesel powered generators.

“While PMS (Premium Motor Spirit) or petrol prices have been kept artificially low for the consumers through subsidies, variations in AGO (Automotive Gas Oil) or diesel prices can have a severe impact on households and businesses as Nigerians are currently experiencing.”

There is telling data from the report on how the largely stable price of petrol due to the subsidy regime helps small businesses survive. “These prices make the small petrol generators more attractive to households and MSMEs (micro, small and medium enterprises)”, the report stated.

“It is estimated that…In countries with low electricity reliability, the proportion of SMEs using a generator is higher, reaching 86 per cent in Nigeria.”

I have taken pains to show how inextricably linked access to electricity is to petrol subsidy because this point is hardly stated by anti-subsidy advocates. Only recently, the NNPC boss, Mele Kyari, in defending the removal of subsidy, said the country was mostly subsidizing the rich. He, like others, uses car-ownership status as one key measure of ‘the rich’. I’ve always found this argument puzzling. The number of small commercial vehicles relying on petrol belongs to the rich too? Millions of Nigerians relying on petrol-powered commercial vehicles because of the absence of public transportation are enjoying some subsidy luxury?

It is also curious that the argument about lack of capacity for local refining of petrol being largely responsible for the cost of subsidies is now being abandoned. The NNPC boss said the coming of Dangote refinery and eventual return of Nigeria’s refineries would not impact price of petrol significantly. So, what is being said is that the people will now be at the mercy of the markets, essentially having to deal with another heavy cost burden in the foreseeable future, within an already killing cost of living crisis. This is the new normal. An era of price hikes. The argument on how competition and market forces would swing price eventually to the consumer is a curious one too. Swing it to what range? If what has happened with the deregulated diesel and kerosene prices are anything to go by, the petrol price band will for the foreseeable future remain a menacing threat to the people’s standard of living.

The reliance of SMEs, especially, on petrol (as with owners and passengers of petrol-powered commercial vehicles) and petrol-powered generators is a counter to the argument that we are merely subsidizing consumption. SMEs within the formal and informal economies rely greatly on petrol. Removing the subsidy has just triggered an unprecedented price disruption with grave implications for these businesses and their consumers.

I have heard the argument about the unsustainability of petrol subsidy, given Nigeria’s revenue and debt crises. That’s a government argument, a convenient one. That’s not the fault of the people. If the government were serious about waste, prudence and efficiency, then a holistic reform proposal should be advanced. It must include, reining in the size of government, blocking leakages, cutting waste, fighting corruption, and ending subsidies for the actual rich.

“..the total waivers granted by the Nigerian government surpassed its total revenue by 71.3 per cent”

Speaking of subsidies for the actual rich, data from the nation’s Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) 2023-2025 show that Nigerian government granted waivers, incentives and exemptions worth N2.296 trillion in 2021 to different beneficiaries through the Nigeria Customs Service (NCS) while Customs’ total revenue collection in 2021 was only N1.34 trillion. This implies that the total waivers granted by the Nigerian government surpassed its total revenue by 71.3 per cent.

The Federal Government’s introduction of import Duty Exemption Certificate (IDEC) through the Ministry of Finance exempting critical players from payment of import duties and other statutory Customs charges has been alleged to have cost the country a whopping N16 trillion in fraudulent manipulation of the system. Some companies, individuals and other entities were alleged to have abused the system and shortchanged the Federal Government of revenue by hiding under the waiver policy to evade duty on imported goods that are dutiable.

“Senate Committee on Finance had frowned at the N6 trillion tax and import duty waivers proposed by the Nigerian government in the 2023 budget, while pushing for wastages and leakages in the nation’s public sector to be blocked”.

It helps to remember that the Senate Committee on Finance had frowned at the N6 trillion tax and import duty waivers proposed by the Nigerian government in the 2023 budget while pushing for wastages and leakages in the nation’s public sector to be blocked.

I have seen calls for interventions to cushion the impact of the subsidy removal on the people. Things like provision of public transportation and minimum wage increase have been proposed. I believe these proposals underestimate the multiplier force of petrol subsidy in Nigeria. With its removal, the price of virtually every commodity has gone up significantly. Yemi Kale, former NBS boss, estimates that the removal will take inflation to 30 percent. This is at a time the people have been battling high prices of commodities. How can limited provision of public transportation or marginal increase in minimum wage mostly for federal workers stem this system-wide disruption? There are structural issues, like electricity deficit and other cost of production issues, which put these interventions in their proper context— a dangling reed in a deserted island.

And if increase in minimum wage triggers further inflation, what value of the increase would be left? Won’t this just amount to a circular price movement— akin to taking us on a deluded journey to escape a cost of living crisis and arriving at the same point of departure ?

“how can the government which has failed to manage a subsidy regime that has inherent capacity for inclusive reach, design and manage a benefits system entirely dependent on its managerial capacity and integrity?”

Some have argued that the savings from the subsidy would be channelled to proper development priorities. This is the argument of the government as well. They seem to be arguing that the subsidy spending is a waste, a drain on national resources. While I can relate with the corruption part of the subsidy regime, I vehemently reject the dismissal of the petrol subsidy as a waste. They appear to be saying that unless we subject public expenditure to some government programme that plans the disbursement of funds and decides winners and losers, the spending is of inferior value. I reject this. This stems from unreasonable faith in the capacity of government; how can the government which has failed to manage a subsidy regime that has inherent capacity for inclusive reach, design and manage a benefits system entirely dependent on its managerial capacity and integrity?

“I believe petrol subsidy is the most direct, inclusive, impactful and far-reaching government benefits distribution system within the Nigerian context”

Contrary to this position, I believe the petrol subsidy is the most direct, inclusive, impactful and far-reaching government benefits distribution system within the Nigerian context. We have seen failed attempts at palliative distribution. The social welfare system of the Buhari administration continues to suffer credibility issues as many believe it has been neither widespread, verifiable, or inclusive.

Some have even pointed to how many hard infrastructure projects could have been executed with the monies used for subsidy payments. It is as if they are saying hard infrastructure takes precedence over human development. This is a flawed argument. There is a reason why HDI is deemed an essential measure of a country’s development. Both can, and should, be prioritized.

“In the long run, we’re all dead”.

Finally, to the economists who ask the longsuffering Nigerian masses to exercise further patience, to have faith that the government’s reforms would yield lasting fruits, and that the free market would resolve the issues in their favour in the long run, may I kindly remind them of John Maynard Keynes’ famous quote that “In the long run, we’re all dead”.

In fact, I reproduce it in full:

“But this long run is a misleading guide to current affairs. In the long run, we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again.”

Chinedu Chidi, public commentator, writes from Abuja, Nigeria and can be reached via chlobe24.cc@gmail.com

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Don’t cry for Mandela’s party; ANC’s poll loss is self-inflicted, By Jenerali Ulimwengu

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There is losing, and then there is losing. The loss that the African National Congress suffered in the recently concluded elections in South Africa is a loss of a special type. It is almost as if the erstwhile liberation movement willed this loss on itself.

This is Africa’s oldest political organisation, which, with its longevity and the special task imposed on it by history, became more than a party or a movement but rather became more like a nation — the nation of Black South Africans.

I mean, if you were a Black man or woman in South Africa and you wanted to identify as somebody who wants to be respected as a human being, you were automatically ANC.

True, this is somewhat exaggerated, but it is not very far from the truth. For most of its life since its founding in 1912, it always identified with and represented the people of South Africa, taking an all-inclusive approach to the struggle for all the racial, ethnic, and confessional groups in the country, even when the exactions meted on the country by the most nefarious ideology on the planet could have suggested, and did indeed, suggest a more exclusivist outlook in favour of the majority racial cohort.

It sought to unite and to mobilise energies nationally and internationally, and create a more equal society for all, that would be in sync with the most advanced and progressive thought of the world at different stages of its career. It became home for all South Africans regardless of colour, creed or social station.

Even after Apartheid was officially promulgated as the philosophy and practice of the national government after 1948, the ANC hardly veered from that steadfast philosophical vision. To galvanise adhesion and grow ownership, the ANC adopted strategic blueprints for the future, including the Freedom Charter of 1955, setting out the basic things the movement would do when it came into power.

In the face of intransigence on the part of the Boers, the ANC saw the need to alter strategy and accept that armed struggle was inevitable, and launched the MK (Umkhonto we Sizwe, or Spear of the Nation) to spearhead armed insurrection.)

Though MK was more effective as a propaganda tool than a fighting force, it did the job of getting the white minority in the country to realise that their lives of comfort were numbered as things stood, and that it made more sense to seek some form of accommodation with the Blacks.

Once that was effected, even those Whites who had been diehard supremacists suddenly realised, with regret, how stupid they had been all along: Not only were these Blacks, long considered subhuman, not only fully human but also corruptible—just like the Whites.

And so the White establishment set out to work on their old enemies, corrupting them to the core with the luxurious goodies that up to then the nouveau riches had not imagined, with things like the erroneously termed “Black Empowerment”, a programme designed to yank from the bosom of the people a handful of individuals with sufficient appetites to make them forget about the Freedom Charter.

Probably more than anything, it was this that spelled the start of the demise of the ANC. In the past, we had seen former freedom fighters in Mozambique, Angola and Guinea Bissau scramble into the blinding lights of Lourenco Marques, Luanda and Bissau, to be destroyed by the perils of Original Sin.

But South Africa was different in that the erstwhile oppressors simply took even the former “terrorists” by making them filthy rich, detached from the depressing realities of the masses of their people, by making them, in effect, traitors. So much so that when the workers at Marikana went on strike against a company owned by the current president of the country, the latter had absolutely no qualms about sending in the police to kill scores of protesters!

Now, the phenomenon of two sitting presidents being replaced by their party is spectacular in itself, but it belied a body politic that was groaning under its dead weight of sleaze and factionalism.

It may seem to some observers that the only thing that kept the various hungry factions together was the white-run oppressive system, and that after this was replaced with money-making cabals of ex-comrades, we found an ANC that was ideologically bankrupt and politically rudderless.

Now the ANC has to deal with the electoral result that has denied it an absolute majority for the first time, its crimes and misconduct have caught up with it. It has been sent to a political purgatory to atone for its sins, but while there, it must choose whom to work with among its sworn enemies:

Will it choose the DA, a lily-White party whose feeble attempt to ‘bronze’ itself with the recent choice of Mmusi Maimane as its head failed miserably? Will it rather be Jacob Zuma’s MK party, which is shamelessly an ethnic outfit bent on rehabilitating a misfit who has been disgraced multiple times as a rascal and a thief? Or could it be the EFF’s Julius Malema, whose day job has become, for some time now, to lambast the person of the current president and chief of the ANC?

We shall see.

Ulimwengu is now on YouTube via jeneralionline tv. E-mail: jenerali@gmail.com

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Appraising 25 years of return to democracy, By Jide Ojo

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Last Wednesday, May 29, 2024, marked exactly the silver jubilee of Nigeria’s return to civil rule. However, the celebration has been shifted to June 12 in commemoration of the 1993 presidential election won by the late Chief MKO Abiola which the military junta of Gen. Ibrahim Babangida annulled. It was the immediate past President, Muhammadu Buhari, who did that. In a tweet posted on his X handle on June 6, 2018, Buhari said inter alia “Dear Nigerians, I am delighted to announce that, after due consultations, the Federal Government has decided that henceforth, June 12 will be celebrated as Democracy Day. We have also decided to award posthumously the highest honour in the land, GCFR, to Chief MKO Abiola. In the view of Nigerians, as shared by this administration, June 12, 1993, was and is far more symbolic of democracy in the Nigerian context than May 29, or even October 1.”

Chief Abiola’s running mate, Babagana Kingibe, was also awarded a GCON. Furthermore, the late Chief Gani Fawehinmi (SAN), a tireless fighter for human rights and democracy, and for the actualisation of the June 12, 1993 election was posthumously awarded a GCON. Buhari said further that, the June 12, 1993, election was the freest, fairest and most peaceful election since Nigeria’s independence.

1999 to date has been described by political historians as the Fourth Republic. Recall that the First Republic was between October 1, 1960 and January 15, 1966. The Second Republic was between October 1, 1979, and December 31, 1983, when the military struck. The Third Republic was between 1990 and June 23, 1993, when IBB annulled the June 12 presidential election. Thus, the Third Republic was inchoate and inconclusive as it was aborted without a president being sworn into office. Out of Nigeria’s 64 years as a sovereign nation, 29 years were administered by military junta.

How has Nigerian democracy fared under civil rule in the last 25 years? Poorly. Leadership remains a bane of Nigeria’s progress. Although there are 11,082 elective political offices in Nigeria, the occupiers have been more concerned about personal aggrandisement than selfless service. That is why our elections are heavily monetised and prone to violence. Politicians, more often than not, adopt the Machiavellian principle of ‘the end justifies the means.’ They do all they can to compromise the electoral process and manipulate it to their advantage. For instance, campaign finance laws are breached as they spend far above the legal spending limits. Though there are copious laws against electoral violence with stringent penalties, the masterminds and the arrowheads more often than not do not get caught while their minions who get caught are bailed out of detention without prosecution.

If the Independent National Electoral Commission should publish the list of those successfully convicted for electoral crimes in the last 25 years, most Nigerians will be surprised at the infinitesimal number. This has sustained the culture of impunity in our electoral process. Little wonder INEC has been in the forefront of asking for the setting up of the Electoral Offences Commission and Tribunal. Will Nigeria’s devious political class allow that law to be passed? That will be political hara-kiri!

So, since many of Nigeria’s political leaders ‘bought’ or procured their electoral victory, their loyalty does not lie with the electorate but to themselves and their rapacious political class. Because of the heavy spending on elections, the primary objective of Nigeria’s political class is to recoup their investment with super profit. Thus, there is a nexus between unbridled political spending and corruption. The truth is that if all the political officeholders were to live and survive on their basic salaries, there would be so much left for infrastructural development and good governance. However, while they are quick to show us their pay slip, the humongous amount they receive as allowances, estacodes and kickbacks are never mentioned.

Does it not occur to you that nobody will spend billions of naira to contest for a political office only to collect a sum of money that will not defray his or her political expenses? The truth is that not all politicians are bad but the good ones are very few. According to the former American President, Abraham Lincoln, “The true rule, in determining to embrace, or reject anything, is not whether it has any evil in it; but whether it has more evil than good. There are few things wholly evil or wholly good.”

I watched a vox pop conducted by a lady in the United Kingdom asking Nigerians in that country if they would like to get £100,000 and move back to Nigeria. All the respondents said no to the offer. She probed further why they didn’t want to come back home, and unanimously they said it was because of our leadership problem. They all fingered leadership as Nigeria’s number one challenge. The irrefutable fact is that Nigeria is a crippled giant to borrow the words of renowned Professor of Political Science, Eghosa Osaghae. Yes, while I admit that we are not where we used to be, we are at the same time not where we ought to be. For many years, Nigeria laid claim to being the biggest economy in Africa but today we are number four after South Africa, Egypt and Algeria according to the International Monetary Fund.

Twenty-five years into this Fourth Republic, we have had seven general elections in 1999, 2003, 2007, 2011, 2015, 2019 and 2023. We have also had five presidents namely, Olusegun Obasanjo, Umaru Yar’Adua, Goodluck Jonathan, Muhammadu Buhari and the incumbent, Bola Tinubu. Two political parties have ruled at the centre; the Peoples Democratic Party which governed from 1999 to 2015, while the All Progressives Congress has taken over the leadership mantle at the centre from 2015 to date. Unfortunately, whether you’re talking of the APC or the PDP, or the three tiers of government namely, federal, state and local; what is common to all of them is poor governance. All the development indices that are pointing south are a cumulative non-performance of all the former holders of political offices and the incumbents. As we say, governance is a continuum.

I have said, time and again, that no individual has the magic wand to turn things around for the better in this country. The President, being the overall boss should work collaboratively with state governors and local government chairpersons. However, the president must lead by good example so he can serve as a moral compass to helmsmen and women at the sub-national level. I’m not comfortable with the spending spree of our political office holders who luxuriate in ostentatious lifestyles with their families while the majority of my compatriots languish in poverty.

Nigeria’s political leaders should imbibe the culture of prudence in the management of public finance. The borrowing binge should also stop. Many in the executive arm holding political offices are indulging in reckless borrowing under the guise of funding developmental projects. At the end of the day, there is nothing much to show for the huge public debts. It is important to block revenue leakages and stop oil thefts. It is an act of selflessness, not selfishness, of our political officeholders that will lead the country out of its current economic doldrums.

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