The lost opportunity in Buhari’s fuel subsidy solution

The fuel subsidy imbroglio has become a problem, a form of puzzle to be solved. The challenge may seem insurmountable and too difficult to resolve but the harder the challenge, the greater the opportunity intertwined with it. It has been with us for decades but, last week, the Federal Government and people missed an opportunity to resolve it once and for all. Alternatively, we missed the opportunity to take concrete and targeted steps towards its resolution. This discourse reviews the contending issues and proffers a way forward in the overall interest of the country.

It is imperative to understand that we have two parties on different sides of the challenge. The first is the three tiers of government at the federal, state and federal levels, who were positioned against the second, being the common men, women and children of Nigeria, from whom government derives all its powers and authority. The government had announced its intention to stop providing consumption subsidy on premium motor spirits, which is still heavily subsidised. Organised Labour reacted with an announcement and massive mobilisation for the mother of all strikes and probable civil disobedience. The government quickly chickened out and the President, Major General Muhammadu Buhari (retd.), now seeks an amendment to the Petroleum Industry Act to push back removal of PMS subsidy until fifteen months from now. Essentially, the administration is running away from the challenge and transferring it to the yet to be elected successor.

What are the issues? Governments at all tiers are cash strapped and could even be said to have become insolvent and if they were private sector companies, their creditors may have applied for their liquidation and winding up to cut short their losses.  A prominent demonstration of the government’s insolvency is the federal government that recorded a retained revenue of N4.3 trillion between January and November 2021 and used N4.2 trillion to service debt. The sum used for debt service is 97.6% of the revenue leaving a paltry 2.4%. The same government used N3.05 trillion to pay salaries implying that it borrowed about N2.9 trillion to do so as well as borrowed all it spent on capital projects. The government had its back to the wall and was bereft of ideas on how to proceed further in meeting the day to day demands of running the regime. Already, the government had piled up incredible debts that even shocked its key fiscal officials. As such, it has little or no credible elbow room for borrowing in a fiscally sustainable manner.

On the other side of the divide, we have the common people of Nigeria who have been pauperised by the obnoxious economic, security and social policies of the Buhari regime. For the first time in our national history, we had unemployment at an all-time high of 33.3%, while the unemployment figures for youths, who are the most active and productive segment of the population, has been in excess of 50%. Inflation had been averaging 15% and the most troubling aspect is that the high inflation is driven by the food index. The implication is that so many Nigerians cannot satisfy the basic need for food and, of course, shelter and clothing have become a matter of luxury. The gross domestic product figures of 2015 when the regime took power had plummeted and factory closures have become the order of the day. The regime had lost the ability to maintain basic law and order. Insurgents, terrorists and sundry criminals are in control of some parts of Nigeria collecting taxes, levies and fees in broad daylight.

The foregoing is the background to the proposal by the Federal Government to remove fuel subsidy and the opposition by the people led by organised labour. It would have been a battle of epic proportions, the mother of all strikes and civil disobedience, maybe greater than the #EndSARS campaign. This is in consideration of the fact that the government had its back to the wall in terms of having mismanaged the economy while the people could take it no more. The people were tired and they could only agree to a further slash in the standard of living at the risk of self-immolation.

But there was a bright ray of light on the horizon when Labour stated its willingness to negotiate and laid out reasonable proposals for the resolution of the crisis, while the government cannot be heard to refuse a negotiation on such a critical matter of national importance. Furthermore, there were quick wins in sight, which could have been plucked rather than the government throwing in the towel. The first quick win would have been to establish the actual sum spent on subsidy and the quantum of PMS consumed in the country every day. Everyone knows that the sum claimed as subsidy over the years has been inflated. This also reflects on the quantum of litres the Nigeria National Petroleum Corporation claims it dispenses every day. Before the handover to the Buhari regime in 2015, NNPC claimed that we were consuming 35 million litres of PMS every day. This was the situation at the time various probes by the executive and legislature found inflated claims running into hundreds of billions of naira. With the poor economic indicators listed above, NNPC’s claim that Nigerians use 65 million litres of PMS a day cannot be true. The Federal Government provided about N450bn for six months of subsidies in the 2022 budget and, after the labour faceoff, NNPC came forward with N3 trillion in subsidies in 18 months being one and half years. What manner of brazen effrontery and announcement of intention to steal is this?

The second quick win would have been to identify and publicly shame the criminals who have been fleecing the treasury with false claims of imported PMS and thereafter send them to jail so as to send the right message to criminals while the third would have been to rejig the system to ensure guarantees of non-repetition and an apology to the Nigerian people.

The other tranche of opportunity would have been to enter into good faith negotiations on the steps and timelines to finally stop fuel importation into Nigeria and what to do with existing refineries. Considering that Dangote’s refinery has been scheduled to start production in the third quarter of this year, will the government continue to import subsidised fuel after the refinery starts producing enough for local consumption or would the government grant subsidies to the refinery to ensure that it sells at below the cost of production? Will the government refineries that have failed to produce a litre of PMS at a time they had no competitor be able to compete in due course with Dangote’s refinery? Where and what is the plan for the government refineries after the third quarter of 2022?  To be left to rot away? Sold as scraps? Who will buy these refineries to compete against a brand-new refinery run by a savvy and astute businessman? So many questions with no viable answers.

Even though the Federal Government has called a truce in the interest of the ruling party, Labour should insist on an answer(s) to these questions. Otherwise as indicated by Femi Adesina, we have signed a blank cheque for the regime to continue its profligate borrowing. This cannot be in the interest of the majority, being the poor and marginalised Nigerians represented by Labour.