SUBSIDY REMOVAL: WHO REALLY BENEFITS?

On January 1^st 2012 the Federal Government finally made good its promise of removing the fuel subsidy on Premium Motor Spirit (Petrol). Due to the importance of this fuel to Nigerians, the organized labour and Nigerians embarked on a nationwide strike to protest the removal. As things stand, no major solution has been found to the impasse with Government and labour maintaining their positions.

Without doubt, government handling of the issue has been far from commendable. Why remove subsidy? Government claimed that it had expended over N600billion on fuel subsidy in 2009 and over N1.2trillion between 2006 and 2008. To save the nation therefore the subsidy must be removed. Many analysts have argued about the unconstitutionality of the removal or payment of fuel subsidy. One school of thought holds the view that there is no longer backing for the payment of the subsidy from the excress crude account. Perhaps that gave government the fillip to stop it. Another school of thought again posits that the action of the government to remove the subsidy is an act of illegality itself. Even if it will remove the subsidy it cannot do so until the commencement of the 2012 budget in March as the nation is currently running on the 2011 budget.

From the argument posited on the benefits of the removal to the citizenry, there is a wide pool of people who believe that subsidy removal will only benefits government, its patrons and cabals. But who are these cabals and how will the new pricing benefits them further?

To begin with, it is only a government and media propaganda to refer to oil companies as cabals. Who is a cabal? According to Dictionary.com a cabal “is a small group of secret plotters, as against a government or person in authority; the plots and schemes of such a group; intrigue”. The list of beneficiaries of the fuel subsidy, who import fuel and legitimately distributes cannot generically labeled a cabal. It is very possible that a few of those companies are not playing by the rules and the government therefore owes its people a duty to fish out those few and deal with them appropriately. What should Nigerians expect from a government that openly admits it cannot unravel the Boko Haram sect and that they may have infiltrated his government?

Pre-subsidy regime of N65 per litre, PPRA Product Pricing template for PMS published on its website, the pre-subsidy margins built into the cost of PMS at N65 per litre wallows only a margin of N4.60 while dealers were allowed a margin of N1.75 respectively. This margin remained unchanged with the pricing template of N141. If the masses are not happy with the subsidy removal and there is not margin improvement to oil marketers it stand to reason that government is the only and actual cabal to enjoy the benefits of this removal.

Many do not even know the challenges of the oil marketers in claiming their subsidy. When an oil marketer brings fuel it takes averagely about 90 days in some lucky instances to get paid. With the high interest rate from the banks, a marketer’s margin would almost have been wiped out. The notoriety in delayed subsidy payment led many major marketers not to import fuel and created a scarcity some years backs. It is this same problem that led to the introduction of the Sovereign Debt Note to ameliorate the plight of the marketers. Many mono trade energy companies licked a lot of wounds before the introduction of the SDN.

Is the government not creating further problems for the unemployed youth with this shortsighted plan? It will be recalled that the nation was plunged into massive unemployment when the wave of retrenchment greeted the CBN intervention in the banking sector. The nation is yet to recover from that ill though out intervention. The oil sector as a strong employer of labour should not be allowed to be plunged into another crisis.

In conclusion, if the government is certain and convinced about its intentions, let explain its position to the people in a coherent manner. It should be democratic in the commencement of the removal policy. The palliatives should have been seen to be working and effective before removing the subsidy. As a government portraying itself as honest, it should mandate the attorney general to set up a committee to review the list of oil marketers, unveil their directors, their pedigree in the oil and gas industry, verification of claims on subsidy payments made to them and evolve a new framework for registration of fuel importers, verification of fuel to check round tripping and a payment regime that eliminates kickback and compromise. Till these steps are taking, many will negatively perceive the fuel removal and see this government as a joker. It is time for the cabal to confront the cabal within its administration. There is no process or system that can be abused without the connivance of the insider.