N4tn Fuel Subsidy: Where to draw a line
Ten years ago, thousands of Nigerian youths protested on the streets of major cities. Joining the global #Occupyprotests, the #OccupyNigeria protests zoomed in on one key topic: the removal of fuel subsidy. At the time, rather than a blatant removal of the subsidy, I felt that the government needed to earn the trust of the people by first addressing its abuse of public resources. We had government spending frivolously and wanted to add more burden on citizens; I felt that was not right. We needed to fight it.
Since then, I have lost count of how many times I changed my mind on the issue of fuel subsidy removal. As a civil society leader who had been asked to seek penance for being loud-mouthed during the OccupyNigeria movement, my opinion swings wildly. In 2012, we were confident that the Goodluck Jonathan government had no right to inflict more pain on Nigerians. This still stands–no government should inflict pain on its people–however, recent revelations show that our resistance to the subsidy removal is no longer tenable. We need to adjust our perspectives.
What has changed in ten years? Nothing. We still run a bloated public service that has not sought to prune itself. We still have a government that does not feel the pain of most Nigerians. We still have a system where funds are not delivering the services they were earmarked for. For instance, the refineries have received billions but still don’t work.
Today, Nigerians even seem to live in dire conditions with rising inflation which weakens their earning power.
The first time I changed my hardline position on total subsidy removal was the realisation that the federal government under Goodluck Jonathan deducted $10.85bn from Excess Crude Account (ECA) to fund fuel subsidy between 2011 and 2014 (see image below). I realised that no matter the conviction, the position to keep subsidy was no longer tenable. In the same period that Nigeria took $10.85bn from ECA, FG only invested N3.2tn (~$15bn) on capital projects.
I did not fight the removal of subsidy when it was still drawn from the Consolidated Revenue Fund or taken at source by NNPC. However, since 2012, I realised we were taking from our savings to bloat consumption filled with inaccurate numbers. No one could tell the exact barrels of fuel being consumed by Nigerians daily. Neither could anyone ascertain how many barrels were being exported.
That was when I told myself, this can’t be right. If I bring this down to an individual level, how does this make sense? I mean how does it mean well to eat your future savings today?
In 2019, the 14th Emir of Kano, Muhammadu Sanusi II, invited Yemi Adamolekun and I to witness the marvellous Kano Durbar. We broke into conversations about the country, and of course, the fuel subsidy removal came up. His Highness used this analogy which is also a question: how do you “eat” your children’s school fees? He typically referred to the country’s wild consumption of cheap fuel we think we are fully entitled to when we do not have the resources for such outlay.
It was bizarre to learn that Nigeria isn’t going to take from savings nor ask CBN to print more money to meet subsidy payments, Nigeria would tap into the Eurobond receipts and pay for fuel subsidy. Where is the rationality in this? We are taking intergenerational debt for our immediate consumption? This is ludicrous in my view.
In another breath, I have been an ardent advocate of keeping subsidy considering how a spike in transport costs would bring cost-push inflation and more anguish on Nigerians. I don’t believe that NNPC’s Direct Sales Direct Purchase is squeaky clean nor do I accept that our consumption numbers aren’t inflated. I also accept that cheap crude flows to our borders at industrial scale. However, I still persist that in the two windows of recessions in the current administration, removal of subsidy that would spike general price level can’t be the right decision. It must be situated in a context. As discussed with friends, President Buhari had a “policy window” to yank it off but he prevaricated in this early honeymoon days. No perfect time has been in sight since then. It is sad that President Buhari received approval of N4tn for fuel subsidy in 2022, an amount that his government won’t invest in infrastructure or education within the fiscal year.
What gives now? First, I am 100% against any cost that would require us to use debt to fund subsidy. It is not rational in any context except for political expediency.
The answer lies in the removal of fuel subsidy but we must be methodical with it. We can’t remove subsidies in our current state. We might raise the price levels with a significant burden on Nigerians.
The short-term thinking is to fully remove it and start cash payments to vulnerable Nigerians. However, we can’t do this with our lack of credible and comprehensive social register. We can use the window to ensure every Nigerian gets their NIN and files taxes to ascertain income brackets; reconcile with income levels using BVN; create a credible social register and also provide subsidies for cheap mass transit in urban centres. Is this not how we gradually build the fundamental plank of social contract that engenders trust in the long run and weans off from the mindset of living off oil–a gradual myth as oil can no longer serve us?
If at least 40m deserving households (as defined in our social register) bearing the brunt of crude price increase receive N10, 000 monthly, at N4.8tn annually, is it not better than our current situation where the Federal Government is borrowing N4tn to fund subsidy ?
Why can’t we raise the price levels to what the country can afford or is this the price of political expediency? We can’t continue on this paradigm and expect things to change. We are lost in the noise of the election cycle and the N4tn bill is the price to pay. The pragmatic thing was for the government to half the subsidy while it works on a credible social register to provide support for Nigerians. But, are we ready for such hard decisions in a pre-election year? Is this the curse of democracy?
My hope is the next president will harvest their honeymoon and yank off the subsidy before the political expediency comes to the fore again. We have to be methodical with the palliatives by ensuring it gets to the most vulnerable Nigerians. Being methodical means engendering trust by reducing the cost of governance and using the entire process as a plank for accountable governance.
Once we have the social register right that nearly leaves no one behind, it is better we take off this humongous bill that has eaten not only into our savings but kept us in debt. At a N4tn cost, that our measly revenues do not provide us the latitude for, the current argument for subsidy is over.
It is only about the methods and how to mitigate impact on the poor that should be in conversation now. Anything else that the Federal Government might be doing right now is just a quiet sleepwalk into disaster.
