Tinubu, Subsidy Removal And The Morning After

The Insight by Lateef Adewole

This week, I was part of a programme centered on discussion about the removal of subsidy on petrol that has started to be implemented recently. I was among the lead contributors and panelists, being someone who has been involved in the Oil and Gas industry, especially the downstream sector for over two decades, both as an employee when I worked for the first indigenous oil marketing company in Nigeria and as a private business owner, whose businesses span few other sectors, with greater interest in Energy: Petroleum and Power.

In the programme, there were many well educated, top professionals and experts in various fields like Engineering, Oil and Gas, Academics, Legal, Accounting, Business, Politics and so on, based in Nigeria and foreign countries. It is safe to say that they are “elites”, in Nigeria’s context. At the end of the two-day marathon sessions of about three to four hours daily, resolutions were reached, which was issued as a communique. It has been published and widely circulated since Wednesday. It was a very enlightening experience for me as I learnt so much from other peoples’ perspectives, especially those who disagreed with the removal, a position that contradicts mine.

After listening to many brilliant contributors who either disagree completely with the removal of the petrol subsidy or the manner in which the new President, Bola Ahmed Tinubu, went about it in a shocking manner, announcing such a serious issue that will have serious consequences on the life and welfare of the citizens, in his first speech on the first day as the president of Nigeria. They highlighted so many valid reasons that I almost changed my mind about supporting the removal (Lol).

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However, like the Yorubas would say: “eni to w’eju leru nba”. Some of us in the industry have seen enough to know that, no matter the argument against its removal, the opportunity cost of not removing it is damning. The negative implications are too grave. One thing that is constant is that, the same reasons are given year after year. What these were zeroed on was the inefficiencies of government due to corruption. It is believed that the government is punishing the people for their inefficiency in tackling the corruption that has plagued the administration of the fuel subsidy in Nigeria for decades. This is very valid.

Now that this has been the case, what should we have done as a country? The anti-subsidy removal proponents demand that government should have risen or rise up (as in the case of the new administration of Tinubu), to their responsibilities, instead of transferring the pains of their ineptitude to the people. This is also reasonable. Sadly, in over four decades that the subsidy regime has been introduced, and this “rise up to their responsibilities” has not worked, what’s the way out?

In arguments, the pro and anti subsidy removal campaigners might never agree. Those against it are “activists” by nature. Many who support it are “business-minded” majorly. These two live in suspicion of each other. The majority people in-between are confused as they don’t even understand why all the brouhaha. Their only concern is why should they be suffering for something God has blessed them with. Therefore, over the years, they are easily “convinced or manipulted” to fight against any government that attempted to remove fuel subsidy.

However, something seems to be different this time around. In actual sense, the last administration was responsible for removing the fuel subsidy with lack of provision for it beyond June 30, 2023. Even the first six months that were appropriated for, NNPCL claimed it was not funded and that the FG is owing them to the tune of N2.8 trillion. So, President Tinubu only re-echoed what was already concluded, in that inaugural speech. He did not remove it. But trust his traducers, they are doing everything to pin it on him in what looks like calling a dog a bad name so that it can be hanged.

Right now, it seems larger majority are beginning to understand the whole thing and, though, prices of goods and services have skyrocketed immediately after the pronouncement, the people are trying to adjust or see how they can adjust to the new reality, while waiting and hoping for what the government will do to ameliorate their sufferings. As for me, this is now my concern. We are beginning to see efforts in that direction with many plans being put in place. Some state governors have taken the lead with reducing the number of work days to three in Kwara and Edo States, and increase in minimum wage from N30,000. to N40,000. by Edo State government. These are commendable.

Today, this article is not about justifying the removal of subsidy on petrol. I have written many times about that in the past. My focus is what happens next? Before I proceed, l also believe the corruption in the management of subsidy is the biggest problem, not the subsidy per se. Every country subsidises one thing or another for their citizens, especially essential commodities and consumer goods, which petrol is considered as one of, in many countries. So, if in real sense, all the trillions of Naira spent on subsidy yearly go directly to benefit the Nigerians, then, there should be no problem about that. But, that is not the case.

How does anyone explain what we have seen as reactions since this removal, not in Nigeria, but in our neighbouring countries. A video of some “okada” riders in Cameroon who were protesting and “cursing” our president for removing petrol subsidy went viral within the week. Similar reactions have been reported in Republic of Benin, Chad and Niger. The Business Day of June 2, 2023, reported that Nigeria has disrupted the “stolen” petrol market in West Africa with petrol subsidy removal. It showed an infograph that showed Nigeria’s current petrol price at an average of N526.4/L still remains the cheapest in the subsahara Africa. What did all these point to? Nigeria has been subsidising petrol for our neighbours and many other countries in Africa, while we groan under heavy loads of debt as a result.

Can’t we just fight the corruption in there? Sincerely, this is easier said than done. Many who champion this position will failed woefully if given the responsibility to fight it. Corruption has become a monster that is deeply entrenched in all fabrics of our society in Nigeria, not just government. It has become the blood that flows in our system and it’s nearly impossible to completely eliminate. This should have been clearer to Nigerians now, after former President Buhari failed to tame it. In fact, corruption escalated under him, with this petrol subsidy as a typical example. How could we be consuming 65 million, sometimes higher, up to 100 million litres per day under him, from the 30-35 million litres per day in 2014/15, which experts still criticised?

These volumes were the basis on which the humongous subsidy payments were made. So, focusing on fighting corruption as a strategy has proven not to be effective. A more effective way is to completely remove the avenue for perpetrating the corruption from the source, where possible, which the complete removal of the subsidy and Petroleum Equalisation Fund (PEF) have done. In the chain of petrol subsidy, how many channels can government block? How many agencies can government sanction? How many personnel can government punish, redeploy, suspend or sack?

It starts from the importers, who demand for forex at official rate to import petrol, but susceptible to round-tripping it, along with their collaborators in the CBN and commercial banks, without importing anything or import less than claimed when collecting forex. Then, the products brought in, accounted for by the various government agencies at the ports, captured for subsidy payments, only to be taken back and diverted to neighbouring countries to be sold at higher prices. The ones discharged at the various depots’ tankfarms, on which money is paid on storage, most of which are privately owned, with their tendency to game the system.

The marketers load the product out in trucks and bridged them across the country. For same pump price to be maintained across the country, Petroleum Equalisation Fund (PEF) pays for the bridging freight. The volume moved determines the amount to be paid per truck. This encourages “bridging by air”, in which case, a marketer could bridge just 1 million litres but makes claims for 2 or more millions of litres. These are in collusion with fraudulent officials of various government agencies involved in the management. Many of these same products that subsidy has been paid on and PEF paid for their bridging freight, are then smuggled through land borders to neighbouring countries, all because of the differential in our “unrealistic” local price and the cost reflective prices in those countries. So many other government agencies working at the borders are also involved.

Let us now imagine the number institutions and agencies of government, private organisations, the the number of people who would have been involved from the beginning of a single transaction to the end, which have compromised. How many of these can government sanction, just to maintain a subsidised petrol price for the citizens? Imagine the stress and cost of personnel. All or nearly all these avenues for corruption have been eradicated by fiat, with that singular action of removing the subsidy. It is like surgical operation of a cancerous part of the body. Putting balm or even chemotherapy might not stop its spreading, when what it needs is simply to cut it out. This will be undesirable, and it will be more painful in the short term, but it will prevent death of the person, eventually. Which is better?

Going forward, my advocacy is what government has to do next? As Nigerians are making sacrifices to adjust to their new post-subsidy removal realities, what proportionate sacrifices are people in authority making? In the first place, President Tinubu needs to gain the trust of Nigerians the more. Still having a peaceful country today means they want to trust him, he cannot afford to betray this trust and mess everything up. Therefore, there must be transparency and accountability in government from now on. The savings from the subsidy should be seen as being deployed to areas that will benefit the larger society, especially the poor, aged and most vulnerable Nigerians, like in education, health, Infrastructure, security, etc.

Tinubu is known for good governance, based on his antecedents. He is expected to bring this to bear on Nigeria. He has actually started showing traces of that in his 12 days in office with actions that he has been taking so far. People need to enjoy the dividends of democracy. Where to start is the cost of governance. Removing subsidy should not be seen as freeing more money for the government officials to mismanage, squander and steal, as used to be the case, at all levels. It is such trust deficit between the leaders and the led, that made the removal impossible for decades. Tinubu cannot afford to fail in channeling the funds to more productive ventures that will benefit the populace.

The current humongous emoluments of public office holders are obscene in a country, whose citizens are wallowing in abject poverty. It is unacceptable. Tinubu needs to lead by example. The people asking the masses to be financially disciplined, as imposed by this petrol subsidy removal, cannot be extravagant in public or private, using the same inadequate resources. The ridiculous budget heads that usually reoccur in annual budgets like expenses in the presidency for kitchen, utensils, and all sorts, should give way. The long convoy of cars that government officials move around in will require same expensive fuel. Of what use or benefits to the people are such convoys? These are applicable to states too.

Many wasteful spendings that MDAs instert in their budgets, the National Assembly budgets, all need more serious scrutiny at this time. Even if any of these people can afford to live ostentatious lifestyles on their own, it should not be brought to public service. Same goes for President Tinubu, whose wife already made us know that “God has already blessed them. And that they have no need for our money”. He is a public figure and symbol now. He must lead by example not precept. The Oransaye’s Committee report on rationalising the MDAs is still gathering dust. He should revisit it and begin to implement the recommendations therein.

The promised palliatives have to start. I don’t believe in physical sharing of cash to the people. It is a waste and another avenue for corruption. My own idea is for government to work for the citizens. Let there be basic necessary infrastructures for people to strive and make ends meet on their own. Provide enabling environment for businesses (big, medium and small scale) and many self-employed, to survive and succeed. Power is key to our economic revolution. That was mentioned in the inaugural speech. Tinubu must walk his talk. He just sign 2023 Electricity Act Bill to law, yesterday. That will liberalise the sector further and expect to improve access to electricity by the people.

Meanwhile, in the immediate, things like increment in salaries of workers, adjustments in work days, paying outstanding salaries, pensions and gratuities where owed, provision of staff buses, and so, will help relieve the government workers. What about private sector and non-government workers? Companies and organisations should be encouraged to do the same. They can be given incentive in short term, until things normalise.

Many states have promised to procure mass transit buses for public use. Oil marketers have promised the same. There was a plan to establish Compressed Natural Gas (CNG) conversion centres for vehicles across the country, by the government. This should be activated immediately. There is need to diffuse the pressure on petrol. When many cars start to use gas, which is cheaper than petrol, the demand for petrol will drop drastically. Same as using gas to provide electricity, instead of petrol or diesel. It is cleaner source of energy, and more economical. Alternative renewable energy sources should be explored and supported to reduce the high demand for petrol to power generators. Solar power system should be invested in large scale.

In anticipation of surge in demand for gas, Nigeria needs to increase her investments in gas exploration and processing. Nigeria is blessed with more gas than crude oil. Why do we suffer for what God has blessed us with?

In addition, the increase in vehicles that will use diesel and gas, which will be the fall out of more demands, government should evolve more robust policy that will promote local car manufacturing. Let it not be that the boom in that market will benefit foreign countries from where the vehicles will be imported. There should be deliberate action to make local manufacturing of them compulsory. This will create employment opportunities for Nigerians and contribute to our GDP. In time, we can begin to export to other African countries.

Our moribund refineries need to be revived. Even when we are expecting Dangote refinery to start production by July/August, the country must make our own work. This will also prevent monopoly that could happen if only Dangote refinery is solely depended on. Nigeria is the only oil producing country without a functional national refinery. That should be sacrilege to us. More investors should be encouraged to establish more private refineries. The more the merrier. When Nigeria becomes a net exporter, it will be good for our foreign reserve. It also means more jobs for the citizens and betterment of their life. We would have been seriously addressing our poverty problem in more articulated manner, rather than the tokenism of the wasteful “tradermoni” and co.

The petrol subsidy is gone. We need to live with it in the greater interest of our country. I have seen many becoming more disciplined in the use of their cars, generators and petrol associated facilities. People are beginning to be more prudent with their finances. These are good things on their own. But, it must not start and end with the masses, leaders must do the same, and be seen to be prudent in managing public finances too, on our behalf, from top to bottom. Enough of all these wastes.

May God continue to protect us and guide us aright.

God Bless Nigeria.

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June 10, 2023.