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Interviews, Issues In The News

FUEL SUBSIDY: TO REMOVE OR NOT TO REMOVE? THE 1.2 TRILLION NAIRA QUESTION

‘’The Federal Government which budgeted N240billion for fuel subsidy this year has spent more than N600 billion. It is believed that government would have spent N1.2 trillion by the end of the year. This is a colossal waste of money when we should be refining our products because we had refining capacities which were left to fallow and must be upped for developmental goals to be attained in Nigeria’’ – Wale Tinubu
Reports from news media presented the government’s stance.  According to the 2012-2015 Medium Term Fiscal Framework (MTFF) and the Fiscal Strategy Paper (FSP) which the President sent to the National Assembly, “ A major component of the policy fiscal consolidation is government’ s intent to phase out fuel subsidy, beginning from the 2012 fiscal year.That, the President noted, “ will free up to about N1.2 trillion in savings, part of which can be deployed into providing safety nets for poor segment of the society to ameliorate the effects of subsidy removal.” Nigerian Tribune also gathered that Dr Mrs Ngozi Okonjo-Iweala, the minister of finance, opined that it was only the removal of fuel subsidy that would guarantee the success of the Medium Term Fiscal Framework (MTFF).
With the claim that the subsidy would have risen to N1.2trillion by the end of 2011, the federal government insisted that there was no going back on the removal.
Apart from the organised labour, who has promised to shut down the country if the government should go ahead with the planned removal,  Nigerians see the removal as a tool of the IMF to tele-guide the Nigerian economy; a situation difficult to understand by the average Nigerian who does not see the country’s minister of finance and the head of the government’s economic team, Dr (Mrs) Okonjo-Iweala, as one of them. Between Tuesday October 4, and the time of going to press, the issue of the removal of fuel subsidy had generated a lot of furore, with individuals, groups, labour leaders and labour groups, threatening to embark on an action or the other.
Why remove fuel subsidy at all?
Giving reasons why the government embarked on total removal of fuel subsidy, President Goodluck Jonathan said funds saved from the removal would stimulate private sector investments to bridge infrastructure gap and create incentives for investment in refineries and the petroleum industry.
Speaking at the opening of a presidential retreat with the private sector on Economic Development and Job Creation at the State House Banquet Hall, Abuja, President Jonathan further explained that the plan to remove petroleum subsidy was still at the proposal stage, saying if it scaled through, the resources hitherto used as subsidy on the importation of petroleum products, would be invested in tangible infrastructure and provision of social safety nets to cushion the impact of the reforms. According to him, discontinuing with the subsidy remained the only responsible way of harnessing revenue for capital stock formation, among others.
Jonathan said: “ There are proposals to phase out petroleum subsidies in a deliberate and responsible way that will harness revenues for capital stock formation and leverage on private sector investments in public-private partnerships (PPPs).”
But the federal government has cited long term benefit as its main focus. It said the gradual removal of subsidies is a step towards deregulating the sub-sector. Moreover, the level of investment in the sector is inadequate, as the four refineries in the country are over-aged and are only able to produce about 50 per cent of their installed capacity and meet only about 40 per cent of the daily 30 million litres domestic demand for refined petroleum products.
Nigerian Tribune’s investigation revealed that the drive was to woo investors who could establish refineries in the country and would be encouraged to do so, since they would get returns on their investments.
HEATED DEBATE ON SOCIAL MEDIA
‘’On this issue of the removal of the subsidy on fuel, Nigerians must make sure that their voices are heard. Are you for or against it? Let us send a message to Mr. President through his aide on New Media on what you and I want. Should the subsidy stay or should it go? If the subsidy must go for the economy to grow then what are the palliative measures you want to see implemented before it is removed? Should we have free education as a more effective means of passing on the subsidy to Nigerians? Make your voice heard on this issue because you are the ones affected. PU’’.
That was from Pat Utomi’s wall on Facebook. And expectedly, democratically discordant tunes were sung.  That is the beauty of social media.  New vistas of airing opinions have been opened by technology.
To evaluate the Strengths, Weaknesses, Opportunities, and Threats of the fuel subsidy removal plan, we should attempt a SWOT analysis and use it to itemize internal and external factors that will either help or hinder the plan or the individuals involved in its implementation from reaching the goal of bettering the livelihoods of Nigerians, and present them in a logical, easy-to-understand format.
This SWOT analysis was carried out to actually grasp a picture of all the odds for and against the petrol subsidy and proffer possible measures to smother the potential, initial heat on the average Nigerian.
However, before we proceed, we must be conversant with terminological differences in addressing this contentious issue of petrol subsidy removal:
Oil subsidy, kerosene subsidy, diesel subsidy, petrol subsidy, aviation fuel (Jet A1) subsidy.
Much opposition to the subsidy removal erroneously think it is Oil subsidy removal (sounds like removal of subsidy on kerosene, petrol, jet A1, and diesel, all at once).
STRENGTH
The enumerated are the generally perceived strengths or internal factors that are favourable to the fuel subsidy removal plan.  
All other products (except kerosene and petrol) already deregulated, some as far back as year 2000.
Confirmed production capacity for crude oil
Kerosene not included
Petrol supply is stable
3 Greenfield refineries coming on stream in Kogi Bayelsa and Lagos states
Possible Rehabilitation and Turn Around Maintenance  of existing refineries
Improving/improved  power supply
Good Economy Managers
Vibrant Civil Society
Availability of 1.2 Trillion Naira freed funds
We must identify these strengths by examining the subsidy removal plan. We must ask ourselves, what are our competencies? Where are we making the most money? What relevant experience do we have? What are our assets? Our strengths can also be intangibles such as good public reputation of the national economic team and good relationships among citizens. These must be maintained and nurtured so they will remain positive forces for the fuel subsidy removal plan.
WEAKNESSES
•Not yet adequately improved power supply situation
•A reputation for poor civil service delivery
•Previous decline in public trust for ‘politicians’ government policies.
  • Remedial actions: Perceived thoughts about weaknesses in implementation should be addressed (FOI Act, civil society groups) and corrected as soon as possible with visible, prompt and quality commitment to the efficient and effective use of the proceeds from the petrol subsidy removal, with clear goals and timelines to achieve those goals
  • Erring public officials must be dealt with according to existing anti-corruption laws
  • Set up a subsidy fund monitoring group made up of an admixture of govt and civil society people. Headed by the president, this group should include ministers and permanent secretaries of government departments directly involved in the expenditure of the removed subsidy; (especially Finance, Works and Housing, Education, Petroleum  Resources. and Agriculture).
  •  Two (2) representatives each of the print and electronic media, women, students union, OPS, Diaspora Nigerians, organized labour (NLC/TUC) and, coalition of civil society groups.
All eyes and hands will then be on deck to assure Nigerians of milestones or bottlenecks in the prudent and effective use of this religiously guarded source of succour for struggling Nigerian masses.
OPPORTUNITIES
Opportunities are external factors that can potentially help our plans, endeavours or businesses. Opportunities examine the parts of the current cultural and economic climate that we might use to our advantage (for example, the recent explosion of social media is a good platform to exploit for constructive criticisms geared towards improving and sustaining performance). With social media,  jobs done can be showcased in a few minutes on online social media and shared globally in a flash. Thus, there is no hiding place for non-performance as much as there is now ample opportunity to present progresses on promised services; the needs of Nigerians that are not currently being met will also be addressed:
  • Good road networks, resurrection of the railways, free education at both primary and secondary levels;
  • New technologies that may make life easier should be encouraged and zero import duties for hybrid vehicles and other greener machinery. Encourage investment in solar and wind energy systems etc
  • This is an opportunity to become world beaters in rice and wheat production. If we can get, say, 774 bulldozers out to every LGA in Nigeria, prepare hectares of land, include farm houses and recreation facilities, each with at least 1000 youths, in two groups of 500, working in  monthly hitches and focused on cash crops and livestock farming in a National Youth Farmers Corp setting. This should save us another 1.6 trillion or so on rice and wheat importation.
  • Tens of thousands of jobs will also be created with the speedy passage of the petroleum industry bill (PIB), which we blame for delay in the commencement of investment by oil and gas ventures in Nigeria.
  • Opportunities are “future strengths” and should be prioritized as we proceed.
THREATS
  • Skepticism and apathy towards implementation due to failed past attempts
  • Bottlenecks in civil service bureaucracy
  • Reflexive hostility towards anything the government or Nigerian politicians do, in some cases, without cross checking objectively verifiable progress.
  • ‘Unwarranted’ security situations in some states mostly in the top half of the country
  • Potential or possible hoarding of petrol prior to implementation day by some product dealers
  • Potential hiking of commodity prices
  • Insufficient public enlightenment campaigns on the visible gains and palliative measures in place for potential removal of subsidy in both English and vernacular. These can include unfriendly economic and social conditions (such as a recession), the unresolved petroleum industry bill is slowing down action in job/wealth creation, and competitors’ positions.
  • Threats are “future weaknesses” and need to be countered effectively as reasonably practicable.
PALLIATIVE MEASURES
Set up a subsidy fund monitoring group made up of an admixture of govt and civil society people. Headed by the president, this group should include ministers and permanent secretaries of government departments directly involved in the expenditure of the removed subsidy; (especially Finance, Works and Housing, Education, Petroleum  Resources. Agriculture) Two (2) representatives each of the print and electronic media, women, students union, OPS, Diaspora Nigerians, organised labour (NLC/TUC) and, coalition of civil society groups. All eyes and hands will then be on deck to assure Nigerians of milestones or bottlenecks in the prudent and effective use of this religiously guarded source of succour for struggling Nigerian masses.
Provide subsidised mass transit buses to Labour, secondary and tertiary institutions of learning if feasible
Expedite action on road rehabilitation and construction
Good road networks and the resurrection of the railways
•Free education at both primary and secondary levels; the new technologies that may make life easier should be encouraged and zero import duties for hybrid vehicles and other greener machinery
•Encourage investment in solar, biomass and wind energy systems
•Reactivate prospecting other sources of income from natural resources like gold, coal, bitumen, tin, columbite, tantalite, lignite, limestone, bentonite and barytes.

•This is an opportunity to become world beaters in rice and wheat production. If we can get 774 bulldozers out to every LGA in Nigeria, prepare hectares of land, include farm houses and recreation facilities, each with at least 1000 youths working in 2 shifts of 500 youths, one month apart, focused on cash crops and livestock farming in a national youth farmers corp. This should save us another 1.6 trillion or so
•Tens of thousands of jobs will also be created with the speedy passage of the petroleum industry bill (PIB), which we blame for delay in the commencement of investment by oil and gas ventures in Nigeria.
LAST WORD
‘’Nigeria’s economic problems will be solved. The problem with the economy is not potentials but implementation. All stakeholders should support efforts geared towards reviewing the economy’’ – Dr. Ngozi Okonjo-Iweala

Analyzed by Henry O. Omoregie

About TransformationWatch

TransformationWatch is an online news site founded by Henry Omoregie It is focused on keeping tabs on the Transformation Agenda set out by the Nigerian leadership in the Local, State and Federal Governments. My mission is to observe, analyze and report milestones or slowdowns in promised service delivery in all the facets of governance in Nigeria (2011 and beyond). Readership is open to all Nigerians and friends of Nigeria alike, regardless of Tribe, Religion or Political divide. We are all in this together

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