October 31, 2011
Fuel subsidy to gulp about $50bn in 5 years
As professionals call for phased removal
By YEMIE ADEOYE
NOT less than $50billion would have been spent in the next five years if the federal government yields to the ongoing pressure to allow the continuation of fuel subsidy according to Sweetcrude investigation.
Oil subsidy in a single year gulps anything between $8billion and $9billion, and in the next five years with increase in fuel demand and domestic consumption, the country would have spent about $50billion subsidising fuel.
Oil industry operators, who spoke with Sweetcrude exclusively, opined that if the entire budget for Year 2011 is N4.972trillion, which is about $31billion, then it would be destructive to continue with the subsidy scheme, especially as it has been established that most parts of the country don’t enjoy subsidy.
Those opposed to the subsidy removal argued that the federal government would impose untold hardship on the people if the oil subsidy is removed outright, hence, government should consider a phased removal of subsidy to ameliorate the hardship on the people.
They said, “The Labour Union and other stakeholders at this point need to engage the government from a position of knowledge. They should make government commit itself to laudable and economic-driven infrastructural projects, as there is currently lack of trust for the government due to past experiences over the years.”
Meanwhile, the former Deputy National Chairman of the ruling People’s Democratic Party Chief Olabode George, has also joined other professionals to throw his weight behind the federal government’s proposed subsidy removal by 2012.
George spoke on the sidelines of the Practical Nigerian Content forum, which held last week in Port Harcourt, South-south Nigeria.
According to him the subsidy is only beneficial to the fat cows who unfortunately are also saying they are against it, now we should note that subsidy gulps a lot of money, where is the direct benefit to the people? He queried.
“In all, our neighboring countries petrol sell far higher than we sell here. What the government should do in this instance is to have the Central bank Governor, the ministers of petroleum, finance and information, to come out and sensitise the people on this issue.
“They can go to as many state capitals as possible to speak to the people in the language they understand through a kind of public hearing. They can also bring the opposition people to the debate, so they can discuss the matter and clear all grey areas.
“It is my view that when the people see the loophole in the treasury as a result of deregulation, they’ll be alarmed. Hence, to change that policy government needs to effectively engage and educate Nigerians.”
Meanwhile, a highly placed industry professional who pleaded for anonymity, argued that the only way the subsidy removal as laudable as it is, would make sense to the average Nigerian, is if the removal is structured in phases.
According to him, the effect on the people would be too severe and government would be unpopular for it. He, however, urged government to make public what it would be doing with the over $8billion of annual saves if it must remove subsidy.
He further noted, “Part of the problem with government is improper analyses. They need to work with verifiable statistics on this issue of subsidy removal. They need to know how many Nigerians go by diesel powered public transport to work every day and how many go on petrol powered vehicles. In Paris, for example, about 3 million people go about in public buses daily, and with such a figure government can plan.
“They need to be able to tell us for instance, that in the first phase of the subsidy removal refineries would work at optimal level; in the second phase, the power generation would rise to a particular level; and in the third phase major road contracts in the country would be awarded and completed in a particular period of time. This is the only way government can show that it is responsive to people oriented issues and would not end up doing the right thing in the wrong way,” he said.
But George differed and opted for an outright removal of subsidy, as according to him, it is benefitting but only a few. “I believe outright subsidy removal is necessary. It takes a lot of courage, but it should be properly explained to the people. The ministers should leave their seats and go out there to enlighten the people that is why they are there.
“The fat cows benefiting from subsidy have a lot of money at their disposal to fight through the press so as to misinform the people so that it can continue. It is a large chunk of our treasury and if it goes on and the people meant to be impacted are not impacted, then what are we doing? It simply means government has failed.
“There cannot be sanity in this system when even beneficiaries of the fuel subsidy are also calling for its removal, probably to shield themselves from the fact that the system has benefited them.
Government should also ensure that the refineries are optimal and create a level playing ground for investors who may be interested in the business of refining. People should be able to go to the bank get money if need be and invest in the business of refining as this is the only solution.
Government cannot run refineries and cannot be in business. All they need to do is create the enabling environment to allow for more investor to flood the system. All over the world if government goes into business it loses money. About 18 companies have been given licenses to build refineries and they have not proceeded, it simply means there is a problem and any responsible government would want to know what went wrong with such a process” he enthused.
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