Nigeria, the most populous black race on the surface of the earth is a nation endowed with abundant natural resources prominent amongst which is crude oil. Discovered in the 70s, Oil had become Nigeria mainstay contributing to its foreign earnings by more than 90 percent and its most viable element in assessing the nation’s gross domestic product. In fact, Nigeria’s revenue projection from oil, on a yearly basis for over three decades has been hovering around 80 to 85 percent in its national budget.
Against this background, the oil sector has thus become a veritable source of livelihood for government expenditures and giving the endemic corruption in its management, the country has lost its production and refining capacity, as its refineries and petrochemical companies are in comatose with the result that the country can no longer refine its crude oil but export same and import refined products to meet the nation’s daily needs, the quantum of which is uncertain.
This strategy rather than be a stop gap measure, became an established norm for a country that is now ranking 15th oil producing nation of the World. This, coupled with the volatility of global oil prices resulted in the introduction of a regime of subsidy in order to bridge the price gap between the landing cost of imported refined products and the actual selling price to the citizens.
Thus, for every litre of fuel purchased by a citizen the government was paying to the importers a certain amount to reduce the burden of high cost of fuel on the citizen. This, as was soon discovered became the most indolent, incompetent and ineffective way of running an oil economy and therefore inevitably unsustainable.
The discovery that the oil subsidy regime is not sustainable has been longstanding and successive governments have attempted to dare the consequences without success. Of remarkable significance was January 1st, 2012, when President Goodluck Jonathan courageously announced fuel subsidy removal but was resisted by Labor, the Civil Societies, opposition political parties and even the National Assembly. Indeed, it was the reason the House of Representatives called off its Christmas and new year recess and convened a sitting on Sunday, 8th January, 2012, the very first time such could happen in the history of democratic Nigeria.
As a member of the House of Representatives then, let me confess that the resistance to President Jonathan’s bold attempt was borne out of crass ignorance and politics. With the benefits of hindsight, I can say President Jonathan administration was right and we were all wrong.
Now, fast forward we are not unaware of how querulous the immediate past Minister of Finance, Mrs. Zainab Ahmed has been in the last few years by churning out mind-boggling figures required to continue with the fuel subsidy regime for this fiscal year 2023 and beyond. The truth is that we are all aware but, as with every issue in Nigeria we pretend about serious issues and when it finally happens we cry blue murder.
I recall vividly that the President Buhari administration was to remove subsidy by July 2022, but it considered the lingering impact of Covid-19 and the biting rate of inflation at the time, hence in considering the 2023 Federal government budget the government considered the final implementation of the subsidy policy from the second quarter of 2023.
Hear the Minister when she granted an interview to Arise TV at the World Economic Summit in Davos, Switzerland reported by Premium Times on January 18, 2023.
“In June 2023, we should be able to exit payment fuel subsidy” She noted further that “the country needs to exit the fuel subsidy regime because it is a very significant contributory factor to revenue loss”.
Continuing she said: “You can look at it in two ways, the payments made are revenues that would have come to the government but don’t because it is being spent on fuel subsidy. Also, where there is not enough revenue to buy the refined petroleum products, we have to borrow to buy the products, so, if we take that out, that is over N3 trillion, it’s a significant relief if we do not incur any more than that number that we projected for 2023”.
This is a very startling revelation that no responsible government that desires progress for its country and citizen will tolerate ad infinitum and there is abundance of evidence that Nigerians including all the political parties and their Presidential candidates in the last elections have accepted this. So, no one can or should play politics about the bogus consumer of our collective patrimony called fuel subsidy.
Come to look at it: has subsidy payments by government improved the living conditions of Nigerians for the past decades? are Nigerians going to be better off with government continuing with subsidy payments? Or what impact will continuing payments of subsidies to a few marketers and importers of petroleum products have on the overall economic well-being of our nation and its beleaguered citizens?
It is my considered opinion that the answer to the first two questions can only be answered resoundingly in the negative. As for the third question the answer can be found in the Matthew Effect or principles (Matthew 25:29- The Parable of The Talents) which was attributed to Percy Bysshe Shelley in “A Defense of Poetry where he remarked that the promoters of utility had exemplified the saying, “To him that hath, more shall be given; and from him that hath not, the little that he hath shall be taken away”. This is encapsulated in the regular parlance of “the rich getting richer why the poor are getting poorer” and has also been re-echoed by one of our national Musical Artiste Late Majek Fashek.
The subsidy regime since its introduction has created emergency billionaires out of our collective sweat and it is more depressing when one discovers the so many phantom fuel importation transactions for which billions of naira and millions of dollars were paid out to cronies of Ministers of Petroleum and other persons in high places. One would weep profusely for Nigeria.
Only recently, our neighboring country Ghana, precisely Wednesday, March 15, 2023 announced the removal of fuel subsidies as that was part of the overall strategy of implementing the regulatory measures to ensure stability across its downstream sector. According to Chief Executive Officer of Ghana National Petroleum Authority (NPA) “the removal became necessary because industries were shutting down as government had subsidies challenges.
Soremekun (2023) in his paper titled Dynamics of Fuel Subsidy in Nigeria raised the poser “Considering Ghana recent action, the International Monetary Fund (IMF) would seek Nigeria to do the same. Will Nigeria follow the same path?” Here we are today, with President Bola Ahmed Tinubu heeding the clarion call.
The Constitution of the Federal Republic of Nigeria 1999 (as severally amended) Section 80 provides:
“[2]No moneys shall be withdrawn from the Consolidated Revenue Funds of the Federation except to meet expenditure that is charged upon the fund by this Constitution or where the issue of those moneys has been authorized by an Appropriation Act, Supplementary Appropriation Act or an Act passed in pursuance of Section 81 of this Constitution.
[3] No moneys shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorized by an Act of the National Assembly.
[4] No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly”.
Now, we are aware that the 2023 Federal Government Budget was a whooping 21.83 trillion Naira, a breakdown of which shows N11.34 trillion deficit while N6.31 trillion is for debt servicing.
Also, of the N21.83 trillion total budget, recurrent expenditure has the highest allocation of N8.33 trillion, representing nearly 40% of the budget.
The budget which is possibly Nigeria’s largest budget in history as well as Buhari’s last budget as the President is based on a N10.49 trillion revenue. In this budget, the sum of N3.6 trillion was budgeted for the payment of fuel subsidies for the first half of this year (January to June 2023).
According to former President Buhari “N3.6trillion is to fund fuel subsidies from January to June next year with a warning that the subsidy regime must stop in order to save the Nation’s economy from avoidable bleedings on yearly basis”.
According to the former President: “As we seek to grow our government revenues, we must also focus on the efficiency of utilization of our limited resources. Critical steps we are taking include immediate implementation of additional measures towards reducing the cost of governance and the discontinuation of fuel subsidy in 2023 as announced earlier.”
The critical point to note here is that Appropriation for subsidy payments by the National Assembly is for only the first half(January to June) 2023 and post June 2023 there will be no budgetary provision for subsidy in the Appropriation Act and no moneys can be spent from the Consolidated Revenue Fund of the Federation without Appropriation in view of Section 80 of the Constitution (supra).
As a matter of fact, the objective socio-economic conditions prevailing in our country today does not support additional Appropriation for subsidies as the existing budget is already in huge deficit of expenditures over revenue.
A parliament can only appropriate what the government has or hope to get in terms of revenue. So to the extent that the country is bleeding as a result of inadequate revenue over huge expenditures, the illegality of the continuous payments of subsidies surfaces when the Appropriation Act or any other Act of the National Assembly makes no provision for such expenditures.
In the light of the above, I submit that it will be needless to insist that the Federal Government of Nigeria should embark on illegality to sustain the subsidy regime. The Petroleum Industry Act 2021 is the Legislation that was enacted to regulate the entire Petroleum Industry in Nigeria. Apart from consolidating all existing Legislations on the various sub sectors of the Oil and gas sector (Upstream, Midstream and Downstream), the PIA has deregulated the entire oil and gas sector and commercialize all operations in the industry by the provisions of the Petroleum Industry Act (PIA), the subsidy regime vanished on 17th of February 2022.
The law states that six months after the enactment of the PIA, petroleum products, particularly PMS must be priced at market rates,”. That means according to the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Dr Melee Kyari “by law, the subsidy regime is gone by 17 February 2022”. So legally speaking the Subsidy regime has no statutory basis for its continuous implementation, despite the dire consequences of its removal on the prices of goods and services.
The other leg of the argument has to do with the persistent blackmail of government to sustain what has become clearly unsustainable, unsupportable and unmaintainable. And this instrument has been employed over the years by the subsidy business cabal and their allies in the labor and civil society movement. Over the years opposition political parties have also leverage on it to hold government to ransom and make it buckle each time it takes steps to remove subsidy.
Interestingly, all the frontline Presidential candidates in the last general election including Mr. Peter Obi of the Labour Party who was overtly supported by the Nigerian Labour Congress and its affiliates vowed to remove subsidy once elected. At a town hall meeting organized by Channels Television on Sunday 8 January, 2023, Mr Peter Obi describes the fuel subsidy as an organized crime and noted that the money spent on petrol subsidy should be channeled into key developmental initiative. He spoke further: “I can assure you it (subsidy) will go immediately. The subsidy I have said before is an organized crime and I will not allow it to stay a day longer”.
According to Alhaji Atiku Abubakar, former vice president of Nigeria and presidential candidate of the people’s democratic party “I will remove fuel subsidy within the first hundred days in office, we should be able to make a decision and I will provide a comprehensive road map on how proceeds from petroleum subsidy removal will be invested”.
One therefore wonders, the rationale for the resistance to the removal of fuel subsidy at this time when all those who sought to be President promised to remove the economic monster. It can only be out of sheer blackmail and the propensity of the beneficiaries to sustain their illicit trade.
However, like the newly inaugurated cerebral Vice President, Senator Kashim Shettima puts it: “We Must end fuel subsidy now or it will end Nigeria”.
According to him “subsidy needs to be removed as it was only benefitting the wealthy, not the average Nigerian”. President Bola Ahmed Tinubu’s inauguration speech where he said “subsidy is gone” is only re-echoing what his opponents in the Presidential election have all agreed to do and of course the obvious taking into account the existing legal and policy reality on Fuel subsidy when he assumed the reins of power of the presidency of the Federal Republic of Nigeria on May 29th, 2023.
Some have argued that there ought to have been emplaced a regime of palliatives before the removal of fuel subsidy, but I ask the question, given the huge budget deficit that the nation is currently running how does the government provide for these palliatives? It seems to me that the pains notwithstanding, Nigerians may just have to give this bold and courageous attempt by the new President a chance to succeed and then hold his government accountable to performance.
At the moment what we are beginning to witness is availability of fuel in petrol stations although at a very high rate of over 500 naira a litre, but it is not unlikely that this may come down a little as government seeks to cushion the effects and markets forces resulting from local refining of crude from the Dangote Refinery takes effect.
For as Benjamin Frank, once said, “There are no gains without pains.”
As recommendation, I support the demands of labour to the extent that government should consider and approve increase in wages to meet with the exponential increase in the prices of goods and services following the concomitant rise in the cost of petroleum products. As a matter of fact I adopted the views expressed by an Infrastructure Economist Dr Onuoha Nnachi, when he said” If we do full deregulation within three to six months there will be market price stabilization of petroleum products and rather than subsidize fuel, government should subsidize transportation, work out how to subsidize transportation and the sector will flow naturally”.
I also recommend that upon full deregulation, government should subsidize social services like education, health care and invest hugely in infrastructures. This will alleviate the pains of the astronomic increase in the prices of goods and services that the citizens are currently experiencing.
In the final analysis, government must demonstrate commitment to transparency and accountability so that the gains of the complete deregulation of the petroleum sector will not be frittered away through corruption. That will not be in the best interest of the new administration and the Nigerian people.
Dr. Samson Osagie is a Lawyer and a Political Economist. He Lectures at the National Institute of Legislative and Democratic Studies and he was a Member and Minority Whip of the House of Representatives (2007 to 2015).