onsider the following scenarios: Would you rather pay N264 a litre for petrol in exchange for a good education and healthcare? Alternatively, pay N162 per litre for subsidised petrol, but with a badly supported educational system and a neglected health system? This has been Nigerians’ constant situation for the past three decades, since the bitter debate over fuel subsidies erupted. The subsidy dispute, phrased in various ways, has always been a source of tense relations between the government and the people, dating back to General Ibrahim Babangida’s days as Military President. At various times, it has resulted in strikes, protests, riots, and murders.
You can receive superb education and fantastic healthcare while paying N162 per litre of petrol. In terms of modern classroom architecture and great education, I want Nigeria’s government-owned schools to be at par with State schools in the United States — and for free. I want government-owned hospitals to have the best doctors and other staff, as well as the most advanced medical equipment, ample hospital beds, and the best care – all topped off with free consultations, treatment, surgery, and drugs.
My decision, however, has severe flaws because it is founded on some absurd assumptions. First, I am presuming Nigeria is “wealthy,” and so has enough money to support fuel subsidy while also providing great healthcare and education to hundreds of millions of its residents. I am ignoring the reality that the country is currently paying over 90% of its revenue to cover its debts and is running out of money. Second, because Nigeria is an oil-rich country, I believe it is my birthright to purchase cheaper petroleum products. That is why, even if I purchased my car at a non-subsidized price, I believe I should purchase fuel at a cheaper price than what is available in other nations.
On the other hand, if I argue that I should buy gas at N264 per litre and then use that money to get world-class healthcare and education for next to nothing, I am making a lot of bold assumptions. First, I am assuming that the money saved this year would have gone to the Federal and State governments to boost social services. The money is more likely to go into erecting ultra-modern Governor’s lodges, refurbishing the National Assembly building, and dealing with FEC (Federal Executive Councils) excesses than it would be used to improve healthcare and education, based on past history. Second, I assume that the government has both the competence and the desire to manage social services in a way that benefits the homeless.
The burden of fuel subsidies, on the other hand, is no longer a laughingstock. As crude oil prices continue to rise, economists predict that the cost would reach N2 trillion by the end of 2021. We consume 60 million litres every day, according to the NNPC. The petrol subsidy increases as the price of crude oil rises. In the last ten years, we must have spent over N10 trillion on fuel subsidies, and I cannot argue that this has improved our lives. To say the least, the vast sums of money squandered on petrol subsidies would be sufficient to construct many state-of-the-art refineries in Nigeria where our crude could be refined locally. However, due to our leaders’ self-interest in the fuel subsidy process (exporting crude oil and importing refined petroleum products back into the country), they would prefer to keep it going. Nigeria is on the verge of defaulting on its debts. States may end up crying during a Federation Account Allocation Committee (FAAC) meeting if things keep going this way. Poor oil income, low FX (Foreign Exchange) inflows, large debts, and a massive subsidy cost are all looming over us at the same time. Meanwhile, insecurity is stifling economic productivity.
I feel profoundly upset and conflicted whenever I consider the subsidy amounts and what we could have done with the funds. In 2021 alone, we might see $4 billion put into the fuel subsidies. Some compare it to storing tens of millions of dollars and setting them ablaze. Nigerians would feel the impact and delight if $4 billion was divided in half and invested directly, honestly, and judiciously in the education and health sectors. The outcome will be visible to Nigerians. However, they are forced to ask: what has happened in the past when subsidies were removed in exchange for promises to fix hospitals, roads, and schools? Have things improved in our lives? What advantages did you gain?
Maybe I am exaggerating, but I believe it was only one time when petrol prices were hiked and Nigerians were able to appreciate what was accomplished with it. General Sani Abacha, the then-Head of State, raised the price of gasoline from N3.25 to N11 in October 1994, allocating N5 per litre to the Petroleum (Special) Trust Fund (PTF), which he established to invest the profits. It was led by our present President, Major General Muhammadu Buhari. PTF, among other things, constructed roads, outfitted hospitals, and completed water projects. PTF signboards might be seen at project locations all around the country. The removal of fuel subsidies in some cases, on the other hand, simply resulted in the production of public transportation buses. The rest of the conversation was mostly written.
As a result, preaching to average Nigerians that they must give up fuel subsidies, regardless of the fraud involved in the application is always a mammoth undertaking. The effort to eliminate government subsidies has been packaged in a variety of ways. In the 1990s, I recall a campaign for “reasonable pricing.” The main issue was that gasoline (and other fuels) should be priced to represent the cost of production, just like any other product in the market. The term “deregulation” was later coined. That was portrayed as the government ceasing to intervene and enabling the private sector to take control. It is all about imposing extra suffering on poor Nigerians, as far as activists are concerned. Everything else is merely speculation.
While advancing the case, government officials have made a number of insensitive remarks. “A bottle of Coke is more expensive than a litre of petrol,” a publicity campaign under Babangida said. What was the aim of comparing tennis balls to oranges? Professor Olatunji Dare wondered at the time if Nigerians were suddenly drinking gasoline instead of Coke because it was cheaper. Colonel David Mark, one of Babangida’s ministers, wondered why students were protesting over the increase in fuel prices “since they don’t have cars.” He most likely assumed they walked to school from their village. All of these arguments merely fueled union and student opposition.
Smuggling was a source of contention. Nigerian fuel was being trafficked into neighbouring countries for arbitrage because it was selling above market pricing. As a result, we were essentially subsidising our neighbours’ gasoline consumption. The motive for smuggling and manipulating security agents at our borders would vanish if pricing were uniform across board — organically. This is a rational argument that makes great economic sense, but campaigners countered that the government was implying that it was incapable of policing our borders and that Nigerians should be “punished” as a result. It is akin to the buck being passed.
While we were advocating for the government to “defend” the poor by keeping gasoline prices low, the big cats were busy buying private aircraft. A colleague, a frequent traveler, informed me that when he arrived at the Abuja Airport a few years ago, in the year 2012, he was taken aback by the sheer quantity of private jets parked inside the General Aviation Terminal (GAT). He described them as being parked wing to wing. He went on to add that the majority of the plane owners were subsidised con-artists. They would say “oil and gas” if you asked them what they did for a living. There was no physical address for the company. There were no tanks on the property. There were no refineries in the area. He became increasingly interested in the workings of the subsidy regime at that time period. Since then, he has come to the conclusion that we were only protecting the wealthy.
He did not become an anti-subsidy activist as a result of the wake-up call. Instead, he began to inquire about what we should subsidise. His findings convinced me that a government struggling to find its economic footing should not rely on petroleum subsidies. I would rather see the funds invested in other areas. Allow Nigerians to receive free or reduced-cost healthcare and education. Redirect a portion of the fuel subsidy to public hospitals so that we can provide the equipment, drugs, and personnel needed to prevent impoverished Nigerians from dying in cheap deaths. Redirect a portion of the fuel subsidy to education to allow underprivileged Nigerians to receive world-class education for little or no cost. I told myself that this was a more efficient use of funding.
Truthfully, ask the typical Nigerian on the street today whether they would prefer to pay more for fuel or receive better treatment at public hospitals, they are more likely to defend the current fuel price of N162 per litre. Why? Simply because people are acutely aware of the impact of increased fuel prices. If you tell them that the subsidy budget would be redirected to build world-class hospitals, they would scoff and say, “Na there way. No be wetin dem dey always talk?”. Nigerians believe their government is unconcerned about them. They believe that they have been forgotten about. Because of their PVCs (Personal Voter’s Cards), people believe they are only required during election season.
Honestly, I could analyse how lovely and pleasant it would be to re-direct the $4 billion subsidies to social services from now till eternity, but the truth is that the poor would be the ones who suffer the most, at least in the near term. The cost of transportation and food will skyrocket. However, we cannot continue to spend N2 trillion a year on fuel subsidies. It can not go on forever. The most difficult task is removing us from the subsidies programme. Ghana produces oil as well, but the price of gasoline in the country is N459 a litre. As oil prices fluctuate, they immediately alter the pump price. Do Nigerians have a lower standard of living than Ghanaians do? No. The trick is as follows: Unlike us, Ghanaians have never had access to government-subsidized gasoline. This is the situation we have found ourselves in. Entrenched!!!