As a follow up to my previous post on ‘Why I support the fuel subsidy removal’, I would like to contribute a summary of the main arguments against the Fuel Subsidy Removal flying around. My account of these arguments is based on information freely available on the internet and free of any sentiment or influence. Your comments will help to point out any prejudice or miscommunication that may have inadvertently trickled into account. I have listed a number of sources at the end of this post.
General Argument, the general argument against the fuel subsidy removal is the impact it is having on the prices of goods and services across the nation. Oil rich Nigeria currently has close to 90% of its population living below the poverty line ($1 a day). It is inarguable that the greater proportion of Nigerians experience untold hardship, worsened by the absence of utilities and public amenities such as good roads, public health, power, public transportation, security of lives and property (especially in the volatile areas of Northern Nigeria currently under the scourge of Boko Haram), etc. The general and obvious argument is the multiplier effect the increase in the pump price of petrol is having on transportation, which is affecting the price of all goods and services. According to Nigeria’s Consumer Price Index May 2011, ‘Transportation’ as well as ‘Housing, Water, Electricity, Gas and other Fuels’ come up to about 23% of the average household expenditure. However, such changes in the price of PMS have been known to have a severe multiplier effect on general price levels – especially food (over 50% of CPI) and imported items.
To further enrage Nigerians, various analysis of Government expenditure including N1 billion to be spent on feeding in the statehouse in 2012 proposed budget.
Proposed Solutions:
- Reverse the decision and restore fuel prices to pre Jan 1
- Government should live up to their responsibility to provide for Nigerian people
- Government should cut down waste
Tam David West. His argument is that the cost of producing PMS locally should amount to about N40, therefore – the people of Nigeria have been paying an ‘incompetence tax’ of N25 per litre to the government. His opinion stems from the change in government policy during IBB’s regime in the second republic to stop ‘off-shore processing’ in the interest of fuel importation. On whether the refineries will be fixed, he says ‘they will not do it, because the refineries have been recurrently sabotaged to cause recurrent fuel scarcity to justify recurrent fuel importation’. He also talks about the lack of transparency in the oil sector and contrasts it with the success of Buhari’s government in checking illegal oil bunkering. He also harps on the level of waste in government, including salaries of Governors. He alluded that Obasanjo changed fuel prices on a whim, being an argument for the non-existence of a subsidy.
A video interview with General Muhammad Buhari which tows the same line with David-West’s argument describes the process of ‘off-shore processing’ in more detail. The difference between local refining capacity and anticipated needs of the Nigerian people would be anticipated ahead of time and oil companies would be issued a commiserate amount of Nigerian crude oil to refine and bring back into the country.
Proposed Solutions:
- Good governance, election of worthy individuals who are not thieves
- Repair refineries first and sell petroleum at lower price
- A return to off-shore processing, rather than importation is insinuated
Nasir El Rufai via his AIT interview on the same issue, had this to say
‘Ideologically, there is no one that would support the waste inherent in this subsidy, but this administration has showed no interest in solving the problems of corruption, in getting the refineries to work – they have made no effort at all. And they have not even threatened to audit the 1.4 Trillion subsidy that somebody has taken that we all know, and everyone in the government knows that it is impossible for that quantity of petroleum products to be imported into this country…. You can audit these things and catch all those people who have stolen money from this country, you have not done that and you are asking every other Nigerian to pay more for petrol… it is not the best option to address the issue.’
He further states that there is only one point through which refined petroleum products are getting into Nigeria, the Atlas Cove Jetty in lagos, and that an audit of the on-goings at that Jetty will provide information to bring the fraudulent oil importers to book. (See Endnote – On Corruption at the Atlas Cove Jetty)
Proposed Solutions:
- Audit the additional 1 trillion expenditure on oil subsidies during 2011 and prosecute the cabal
- First put in place palliative measures
- Stagger the removal of subsidy over time
- Reduce the cost of government – cut down the number of special assistants and aides and other expenditure responsible for the ballooning cost of government. He laughed off the 25% reduction in basic salaries announced by President GEJ, comparing it to the 50% pay cuts of the Northern Regional Government in 1962 before embarking on national austerity measures.
Femi Fani-Kayode expresses vehement rejection of the fuel subsidy removal, blaming the World Bank and the IMF for being behind the decision. Notable also is his intense suspiscion of Ngozi Okonko Iweala about whom we said:
She serves the interests of the IMF and the World Bank more than she does the interests of the Nigerian people. That has always been the case but OBJ controlled her with a firm hand when we were in power and he used her to secure a good deal for us on the foreign debt issue because she knew the system. If the World Bank asks her to jump she will ask ”how high”?
I do not trust these foreign international monetry institutions and those that work for them and my vast knowledge of history shows me that wherever they go in the world they only spread misery, poverty, unreasonable conditionalities, misery and wickedness. Their yoke is heavy and they are simply tools of oppression that are firmly in the control of all-mighty America and western Europe. These are the forces and the people that are causing GEJ to derail.
Proposed Solutions:
- Prosecute the cabal that have robbed Nigeria of 1 trillion within 2011
- Rejection of arm-twisting by the IMF/World Bank
- Restoration of pre-Jan 1 fuel prices
Endnote: On Corruption the Atlas Cove Jetty
The Atlas Cove Jetty, commissioned in 1981, is designed as a transit depot to supply all the depots along system 2B- Ejigbo Satellite, Mosimi, Ibadan , Ilorin and Ore , regarded as the most active depot system in the country. According to the Managing Director of the NNPC (July 2009), the Atlas Cove Jetty ‘accounts for 12 million litres out of the 30million litres of fuel that is consumed everyday in Nigeria’. He said this shortly after the attack of the Atlas Cove Jetty by MEND and the subsequent heroic repair of the Jetty by staff of the PPMC. His response to a previous newspaper report alleging massive fraud in the Jetty as culled from the official news article on NNPCs website is as follows:
Stanley remarked that it is weird for anybody to insinuate that the NNPC has abandoned the Atlas Cove in preference for private depots because of the phantom pecuniary interest of a `certain clique’ within the corporation as alleged by the newspaper report.
“it sounds unreasonable for anybody to argue that we have abandoned this place. It is not possible and practicable for us to do so because this is the heartbeat of fuel storage and distribution in the country’’.
“There is nothing to suggest any form of underhand dealing or sharp practice, rather Capital Oil and Folawiyo Energy Services Limited should be commended for supporting the NNPC and PPMC instead of accusing the officials of going into the partnership for selfish reasons,” he concluded.
_________________________
The Fraud in Subsidy at Atlas Cove
http://www.vanguardngr.com/2012/01/the-fraud-in-subsidy-business-the-shady-deals-at-atlas-cove/
Femi Fani Kayode on Okonjo Iweala and the IMF/World Bank https://www.facebook.com/femifanikayode/posts/2284472000711
NNPC News Article on repair of Atlas Cove Jetty http://www.nnpcgroup.com/PublicRelations/NNPCinthenews/tabid/92/articleType/ArticleView/articleId/122/Atlas-Cove-Attack-How-Gallant-NNPC-Engineers-Saved-Nigeria-from-Fuel-Calamity.aspx
Ben TV Interview with Femi Fani Kayode http://www.youtube.com/watch?v=mFZ1CbZR9Qw&feature=share
Tam David-West interview on Channels TV
http://www.youtube.com/watch?v=f0MUoK2Xuw4
El Rufai interview on AIT ‘Matters Arising’
http://www.youtube.com/watch?v=MJUuz-KHgj0
General Buhari on subsidy http://www.youtube.com/watch?v=YmG_dYY7YRA&feature=related