The term ‘subsidy’ is undoubtedly in contention for the word of the year 2023. Ever since President Tinubu affirmed that the government of Nigeria will finally slay the subsidy dragon, several analysts and commentators have invoked and repeated it in various conversations. They seek to paint the picture of a Nigeria without subsidy. But what does the term itself mean?
Subsidy refers simply to a sum of money paid by a government to keep the price of a commodity low. In the Nigerian scenario, it is the financial burden shouldered by the government to provide the public with cheap petrol.
What began in 1973 under the military leadership of General Yakubu Gowon when the Nigerian population was about 56 million and less than a million vehicles plied our roads nationwide, has now ballooned to a six trillion naira financial albatross that the country must foot yearly.
Nigeria’s population is now in excess of 200 million and over 13 million petrol-powered cars are on our roads. Official figures from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) pegged our daily consumption of petrol at 66.8 million in 2022. This means that the Federal Government spent roughly ₦4 billion daily to subsidise every litre of petrol consumed in Nigeria.
Yet there is scant evidence that this huge financial expense profits the majority of Nigerians in any meaningful way.
In fact, the recent interview by the Group CEO of NNPCL, Mele Kyari, and market reactions in neighbouring countries such as Benin Republic, revealed what has always been obvious to the discerning.
The fact that the bulk of the subsidised product is consumed by a tiny portion of the Nigerian population that is rich enough to afford the real cost of petrol anyway. They are joined by border countries grateful for the largesse from Nigeria through the illegal cross-border trade of the product which strains our connecting highways and complicates traffic situation.
Put another way, our country has indebted itself to fill the tanks of its Prado-cruising elites and to serve as an unwitting petrol Santa Claus to neighbouring countries. It also doesn’t help that the payment process is riddled with so much corruption.
Empty vessels have been known to dock at our ports under the pretext of supplying petrol that the country must subsidise by cutting the owners a check worth billions. Overnight billionaires have been made by the scam, even as the majority of Nigerians have seen their purchasing power shrink over the years.
In 2023 alone, the outgone administration allocated ₦3.6 trillion to foot the subsidy bill for the year’s first half. That’s more than the sum allocated to other revenue-generating projects.
One could suggest, in fact, that the Nigerian government has arrived at a situation where it exists simply to pay fuel subsidies, even as it struggles to pay, let alone increase, salaries of its staff.
Yet, no one can reasonably argue that keeping the Prados of the elites on the road or providing non-Nigerians with cheap petrol is so important a goal that it is worth sacrificing the country’s future over.
The economic principle of opportunity cost implies that every penny that goes to subsidy payment is a penny away from the construction of roads, schools, hospitals and other amenities with direct and greater impact on the citizen’s standard of living.
President Tinubu captured this succinctly in his inauguration speech when he said, “Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall, instead, re-channel the funds into better investment in public infrastructure, education, health care and jobs that will materially improve the lives of millions.”
He, of course, understood that government resources is limited. This reality mandates that it must be invested in programs and projects that benefit the most number of Nigerians and guarantees the country’s survival, especially in times of global economic uncertainty such as the one we are experiencing.
Oil subsidy clearly fails to meet the bar. It is a suckhole that devoured trillions of naira with very little to show for it. It forms part of the reason the country is faced with an immigration wave that threatens to empty its pool of talent and workforce, as young Nigerians flee abroad in search of greener pastures.
Progress will remain elusive if the government continues to sacrifice other investments to carry this burden. We need to help our youths acquire in-demand skills, continue the upgrade of our infrastructure and security architecture, raise the productivity of our agric sector and expand economic opportunities to accommodate as many that are willing to work and earn.
None of this will be possible if we insist on bearing the heavy weight oil subsidy imposed on our finances, to no meaningful returns. For Nigeria to grow, the oil subsidy must go. It is that simple.
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