Taming a Fantastically Corrupt Fuel Subsidy Regime

MAKING COMMON SENSE BY BEN MURRAY BRUCE, Email: ben.murraybruce@thisdaylive.com

Just last week, the British Prime Minister David Cameron was caught in a Freudian slip calling Nigeria a ‘fantastically corrupt’ nation when he thought cameras where not watching and listening. I disagree with Prime Minister Cameron. There is corruption in Nigeria just like in many nations. To single Nigeria out when recent events show that other nations are equally guilty is a tad hypocritical.

The Panama Papers for one disprove Prime Minister Cameron’s comments. Ironically, his own father is mentioned in those records. The Panama Papers exposed the depth of corruption that goes on in many nations, Nigeria included, but Nigeria is making efforts to tackle corruption and it is most frustrating when Western nations provide safe haven to those individuals who stash proceeds of corruption in their banks. I quite agree with President Muhammadu Buhari when he challenged the British Government to return looted funds back to Nigeria.

It is not enough to condemn Nigeria. If looters of public funds are corrupt then the receivers of looted funds are also corrupt and quite clearly, the UK is a receiver of looted funds. Now in the midst of this debate about who is or is not fantastically corrupt, the federal government has increased the price of petrol. I actually believe that the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, took the right decision for our economy. But I believe that the federal government should have taken steps to cushion the effect of this policy on the masses before increasing the price of petrol.

Now even before the increase in fuel price, the cost of staple foods like tomato, rice and oil had increased astronomically. How does the federal government expect citizens to cope with this new development? Before the Goodluck Jonathan administration increased the price of petrol in 2012, they first increased the minimum wage and the monthly allowance of members of the National Youth Service Corps (NYSC).

I appeal to President Buhari to consider the immense suffering in Nigeria and increase the minimum wage to help Nigerian workers cope with the increased fuel price. It is either President Buhari increases the minimum wage to help the Nigerian masses cope with increased fuel price or the federal government must restructure our tax policies so that minimum wage earners pay no income tax. We must remember that not so long ago, the National Electricity Regulatory Commission (NERC) increased electricity tariffs nationwide.

How many increases can the masses take without breaking their backs?

President Buhari, as a father to the nation, must think about the sufferings of his people and have compassion on the Nigerian masses. Give them a break. Remember they also gave you a break in 2015 by voting for you as their president. But then again, we must remember that what the federal government has done is not really the removal of subsidy. What they have done is simply to increase the price of petrol. They have not deregulated because if there is deregulation there would not be a cap on the price of petrol, but now they have capped the price of the product at N145 per litre.

What this means in essence is that the price is likely to go up depending on whether crude oil rises or falls in the international market. So for instance, if crude oil rises from the current $42 to above $60 and the federal government and the oil majors are no longer able to sell petrol profitably at N145 per litre then they would have no choice but to increase the price of the product or the government will have to pay the difference, which will mean the return of subsidy.

So, how can Nigeria permanently solve this problem?
On the 23rd of July last year, I published the piece below, which addresses in detail how the federal government can solve this problem once and for all. Please let us all reconsider my idea, which I offer freely and without strings for love for my country Nigeria.

Tame Fuel Subsidy or it Will Tame Nigeria

If the whole idea of fuel subsidy is to pass on benefits to the poor, then we must all agree that it is not working. The benefits are going to importers of fuel, oil majors and upper and middle class Nigerians who can afford to live in the most urbanised areas of Nigeria which are the only places where fuel is still sold at the official rate.
Our people in the North-east and the Niger Delta have been buying petrol at black market prices for decades. Of what use is fuel subsidy to them? Is this not part of the reason why they sometimes feel alienated from Nigeria?
In the most recent data released by the International Monetary Fund (IMF), the Democratic Republic of Congo is rated the poorest nation in the world with a per capita income of less than $400. But the truth is that if you isolate the North-east of Nigeria from the rest of Nigeria and you compare their per capita income to that of the Congo DRC, it will be clear that the North-east of Nigeria is the poorest part of planet earth.

Yet, this poorest part of Nigeria is not really benefitting from what is meant to benefit them. And they are not alone. In the Niger Delta where I am from, particularly in Bayelsa which is my state, I have never bought fuel at the official rate. Fuel in the North-east and the Niger Delta goes for N300 per litre while fuel in Ikoyi in Lagos sells for N87!

Now tell me, who are we subsidising? The rich or the poor? You campaign in poetry but govern in prose. The time for poetry is gone. Now is a time for prose and the federal government must be creative enough to come up with ideas for passing on the benefits that the fuel subsidy is supposed to pass on to the poor but is not.

The federal government must also search out ideas on how Nigeria can generate more non oil income. As a patriotic duty, I will offer a few ideas on how I think Nigeria can make the best use of her resources instead of spending it on an inefficient and corrupt subsidy that does not get to its intended recipients. In my opinion, the federal government should stop subsidising fuel and instead subsidise public transportation.

Now, how would this work?
The federal government must gather all the providers of mass transport, be it the National Union of Road Transport Workers (NURTW) or any of its affiliates and register all of them in a central database. Next, the federal government must find out what the unit cost of transporting an individual passenger costs. Then the federal government should sign an agreement that it would pay the increased cost of a unit of transport that would ensue when fuel subsidy is abolished and the oil market is deregulated.

To ensure fidelity and prevent fraud, each individual provider (be it a bus, a boat or any other transport type that uses premium motor spirit) must covenant to buy their fuel exclusively from Nigerian National Petroleum Corporation (NNPC) petrol stations (or a petrol station chain that can be monitored by the federal government) and also agree to have a fuel monitor installed into their vehicles.

The monitor will report the amount of petrol consumed by each unit of transportation and at the end of the month, the federal government, through the Petroleum Products Pricing Regulatory Agency (PPPRA) would reimburse the provider the excess money paid for fuel as a result of the deregulation and the lifting of the subsidy on premium motor spirit.

In this manner, the federal government will be able to deregulate the downstream sector of the oil and gas industry while at the same time providing relief for the poorest Nigerians from the effect of an increase in the price of fuel.

Moreover, the federal government can spend a fraction of the trillions of naira we are currently spending on fuel subsidy annually on social services that will have a direct impact on the well being of the poorest of the poor and boost out Human Development Index. For instance, Nigeria can reduce infant and maternal mortality rates, by initiating a Women, Infants and Children (WIC) Intervention Programme in all the states of the federation.

The programme could be an initiative of the federal government through the Ministry of Health and would involve giving free pre and ante natal supplements to pregnant and nursing mothers and one infant per family up to the age of five. In addition to receiving these vitamin supplements, each recipient should be given a crate of eggs each week and at least one tin of evaporated milk per day on a weekly, biweekly or monthly basis.

Doing so would have a direct impact on the health of the most vulnerable subsection of our population, women, infants and children up to the age of five. Desperate times call for desperate remedies and in case we have not noticed, these are desperate times. Oil is fast losing its value. A world without oil is a reality. Nigeria must start thinking of other ways of growing her economy that does not depend on oil.

If we really want to build our economy, we may want to take a cue from what India and China did. The economies of both countries have been built up to be amongst the world’s leading economies largely through the efforts of their Diaspora citizens who returned home after having established themselves in Europe and the Americas.

In the 80s, Nigeria suffered from a massive brain drain when our most educated intellectuals left the country for greener pastures after conditions in the nation’s Ivory Towers proved too oppressive for them. We can use a fraction of what we are spending on the fuel subsidy to facilitate a brain gain.

All over the world, Nigerians in the Diaspora are having children who are enrolled in some of the best schools world wide. Many of these universities have internship programmes that allow students intern anywhere in the world.

I propose that the federal government should seize the initiative and initiate a bring-back-the-brain scheme whereby the Federal Government of Nigeria through her MDAs (perhaps the Ministry of Education, the National Universities Commission, NUC, or the Industrial Training Fund, ITF) actively solicits for children of Nigerians in the Diaspora to return to Nigeria to do their internship.

This initiative may be promoted by roadshows in the major cities of the world, via Nigerian tribal or ethnic organisations in the Diaspora. Our embassies could be mandated to dedicate some staff to tour universities in their host countries in order to sell this idea to the students directly. The federal government may encourage those wishing to participate by offering to pay their return tickets and instruct that all MDAs that participate in the scheme should pay the accommodation costs of these students during their internship. The expected result of this scheme is a net inflow of skilled labour into Nigeria to drive our developmental effort.

Many of these highly educated and skilled expatriate children will opt to remain behind and establish businesses or use their education and experience abroad to improve businesses already in existence. This is what happened in the Asian Tigers. We should not re-invent the wheel. Let us simply do in Nigeria what others have done with great success.

Also, the federal government has to find a way to encourage Nigerians to return to agriculture either as a business or by way of subsistence farming as a way of reducing our dependence on imported food on which we spend over a trillion naira annually. The other day, I was shocked by the data from the Central Bank of Nigeria (CBN) stating that we spend N813 billion annually on staples like sugar, wheat and other food items that we have the capacity of producing ourselves in Nigeria. N813 billion importing sugar and wheat? Really? Nigerians will not die if we do not import sugar and fish. So why must we import them? We must learn to drink plain tea until we can make our own sugar.
And then it turns out that we spent another N100 billion annually importing toothpicks and furniture? Really? We need foreigners to help us pick our teeth? According to the report, the amount spent on importing rice, sugar, wheat, fish, furniture, milk and textiles in 2013 is equal to one-fifth of the country’s total budget of about N4 trillion.

With the deal Iran is entering into with America, the oil price is likely to reduce again. Can Nigeria continue spending N1 trillion on food imports? What a waste. The federal government must cut this waste. We cannot afford to be gradual with this. We will not die if we do not eat sugar, wheat and these other items. Necessity is the mother of invention. If we must have them then we should produce them! This is by no means the limit of the ideas that can help grow Nigeria’s economy and help us apply our finances to areas of growth rather than areas of waste, but it is a beginning.

In the 1980s, the Directorate of Mass Mobilisation for Self Reliance, Social Justice, and Economic Recovery (MAMSER) had a TV advertisement that went thus ‘oil go finish one day o, no let water pass garri ooo!’ That day has come. Has water passed garri? That is the million dollar question no one has an answer to. Nigeria has a lot of work to do. Two thousand years ago, Rome knew how many people it had. Mary and Joseph were counted in Bethlehem. In 2015, does Nigeria know how many people she has? If we do not know how many people we have, how can we make effective planning decisions on which to base our economic strategies on?

This is a question for another day. I just want to make common sense!

•Senator Murray Bruce is the senator representing Bayelsa East in the National Assembly and is Chairman of the Silverbird Group

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