What alternative to fuel subsidy? THE SUN NEWSPAPER By Victor Emejuiwe on July 25, 2014 · Opinion In whose interest is the decision of the national confab to adopt the recommendation for the removal of fuel subsidy? The removal of petroleum subsidy has been viewed from different dimensions. While some suggest it should be out-rightly removed, others recommend a gradual removal of subsidy. However, delegates of the national conference has recommended the gradual removal of petroleum subsidy. The decision of the confab on removal of fuel subsidy might seem to be of genuine interest in favor of the masses; but to what extent would this favor the masses? Reflecting on the concept of subsidy as obtained in other part of the world; it is worthy to note that every country has one or two things it subsidizes on behalf of the citizens. The concept of subsidy can be likened to government’s social responsibility to its citizens. Subsidies refer to a grant or a gift of money given by the government to a company or organization on behalf of its citizens. Most times, subsidy is initiated so as to lessen the burden of the poor, who cannot afford the high cost attached for the production or consumption of a particular product. So many countries in the world have different ways of subsidizing for its citizens. In India, the government subsidizes many industries and products, from petrol to food. State owned enterprises that recorded loses are assisted by the government through subsidy payments. India government also assists its farmers with free access to electricity. In the United States of America farm subsidies are given to farmers, it is also known as agricultural subsidies. The government buys up most of the product from the farmers on behalf of its citizens; who then gets the finished items in a very cheap rate. The U.S. government currently pays about $20 billion in cash annually to farmers and owners of farmland. Between 1995 and 2005, the U.S government paid about $250 billion in farm subsidies. In so many other parts of Europe, transport subsidies are offered to the citizens. More than 270-290 billion Euro of annual transport subsidies have been identified in Europe. This has made the cost of transportation cheaper and delightful. The European nations also dedicated massive resources for the development of transport infrastructure such as railway, water and road transport system. In some West African countries, products like cottons are subsidized on behalf of the local farmers of cotton. This is prominent in the ‘cotton 4’ countries namely: Burkina Faso, Republic of Benin, Chad and Mali. The government of the cotton 4 countries pays huge sum of money to cotton farmers irrespective of the global demand for cotton. Part of the consideration for offering subsidy, are to stabilize the price of the products and to cushion the effect of global price on the product on poor consumers. Subsidies are also offered to achieve economic purposes. For instance, local manufacturers can be granted tax waivers so as to encourage exportation of locally made goods; which brings foreign exchange into the country. Nigeria being an oil producing nation, offers subsidy to marketers of petroleum product, for the refining and importation of petroleum products. It is unfortunate that the introduction of fuel subsidy in Nigeria was birthed by fraud and corruption. The military regime under General Ibrahim Babangida introduced the importation of refined crude into the country as a result of the under performance of the nation’s four refineries. The expectation from any good government would have been to resuscitate those refineries for optimum utilization or building of more refineries. This was not the case; Rather, the elite conspired to allocate oil blocks to themselves and went further to build refineries outside the country; with the aim of importing fuel into Nigeria. The importation of fuel into the country was followed by the payments of petroleum subsidies. Petroleum subsidies were paid to the oil marketers who were also owners of most of the refineries, they were not just satisfied with this rather they went further to defraud the country by collecting subsidies for petrol not supplied. From various reports on the investigation of the fuel subsidy fraud, the illicit act of this marketers were aided by the corruption and inefficiency of NNPC in the management of subsidy payments. The discovery of this fraud has led to the decision of the Federal Government to consider the removal of petroleum subsidy. As earlier stated the National Confab has also adopted the recommendation for the removal of petroleum subsidy. The question begging for answer is this; would the removal of petroleum subsidy resolve the problem of corruption and mismanagement from both marketers and NNPC? It is expected that any discussion around the petroleum subsidy should be on how to prosecute the oil marketers who defrauded the country of large sums of money and also sanitize the NNPC for better management of petroleum subsidy payments. If petroleum subsidy removal is being considered it should be for other reasons but not on the excuse of subversion by oil marketers. If that is an excuse, then of what use is the EFCC and the ICPC, who are meant to beam their search light on the activities of the oil marketers. While it is necessary to condemn the corruption and fraud perpetrated by the oil marketers, it beckons on the government and the anti-corruption agencies to prosecute and recover the loots of these marketers. NNPC also needs to be sanitized; there is need for checks and balance in the activities and processes of NNPC, especially as it relates to extraction of crude, receipts of oil revenue and payments of subsidy. The endemic fraud in the NNPC calls for great concern, how can the nation entrust its mono-sourced revenue in an agency that is not transparent? This has to be addressed. The alternative solution for the removal of petroleum subsidy should be the imposition of petroleum tax on consumers. This is the modern approach devised by some other countries. This system ensures that the greatest consumer of the product pays more for it, through the imposition of taxation on the particular quantity of fuel consumed. The additional rate gotten from taxation is thereafter channeled to create safety net on behalf of the poor. For instance, if the official selling price of petrol per liter stands at N97, additional rate can be charged for consumptions above a certain number of liter. To expatiate further, purchases above 20 liters of petrol can be taxed. This idea is premised on the fact that, it is the rich who consumes petroleum products the most; they drive big cars, uses generators and plants, so they should also be able to contribute to the welfare of the poor. If government is bent on removing fuel subsidy, the necessary frame work for deregulation should be in place. This demands that investors that have shown interest to refine locally are already on ground. Secondly, the market price of the product should be determined by standard mechanisms. Thirdly, palliatives which include; availability of road, rail and water transportation should be available at cheap rates. Any policy that is against the benefit of the poor is unjust and would lead to social unrest, as experienced on January 1st 2012. The FG should note the provision of section 16 (2) b which states that “the material resources of the nation are harnessed and distributed as best as possible to serve the common good”. Prosecute subsidy thieves and maintain the status quo effectively.
Posted on: Tue, 29 Jul 2014 12:29:28 +0000
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