In its lead article, the influential London weekly, The Economist, quoting the late prime minister, Tafawa Balewa, wrote, “This is a wonderful day, and it is all the more wonderful because we have awaited it with increasing impatience, compelled to watch one country after another overtaking us on the road when we had so nearly reached our goal.” That was on October 1, 1960. The wonderful day came almost five and a half decades later, on May 29, 2015, at Eagle square, Abuja. I was happily there.
Since 1960, Nigeria slid into near failed state as one military regime after another, a civil war and successive kleptomaniac civilian and military governments interlaced. The single common thread among all governments, civilian and military alike, was corruption.
Subsidies on petrol cost the government a whopping $6 billion annually, some NGN9,000 per annum for every Nigerian. It provides the biggest opportunity for corruption to thrive. The subsidies are stolen as the subsidized fuel finds its way into the black market or smuggled to neighbouring countries where it fetches higher price. I bought only yesterday, at a station on Murtala Mohammed, Ilorin, with ease, petrol at NGN110/litre. Drive round the town at major marketers’ stations, idle attendants tell you, nonchalantly, “no fuel”.
But perhaps the most compelling reason to remove the subsidy is its hindrance to investment in the downstream sector. Solidarity with anti-apartheid and anti-minority struggles in South Africa and the then Southern Rhodesia (now Zimbabwe) led to foolish nationalization of the downstream sector in the late 1970s. British Petroleum (BP) became African Petroleum (AP) and Shell became National Oil (NOLCHEM). Today these entities are back in private hands under dubious privatization that saw them sold to inexperienced and incompetent traders unwilling and unable to build any refinery but happy to import and claim subsidy.
Remove the subsidy and dismantle attendant price control of petroleum products, private refineries would balloon and the country would rightly no longer perhaps export one barrel of crude. Competition for market share would inevitably bring down prices.
If anyone is in doubt, take a look at what happened to the telephone business. NITEL, a state monopoly prior to deregulation, operated a mere 400,000 lines (for perhaps 100 million citizens) and for so long kept us not talking to each other. You have to pay its officials to have your application processed. You woke up at 3am to risk your way to its call kiosk to make an international call. David Mark, then a communication minister, made the infamous remark that “telephones were not for the poor”. Alas, today – and thank God he is alive to witness it – even the destitute have telephones as over 120 million lines are reported operative.
Today we import more than 80 percent of our premium motor spirit (PMS), thanks to public-owned NNPC refineries in comatose most of the time. But reduce the role of the state in the economy as the system distorts and thwart production. The market is the best arbiter. The Soviet Union had the world’s most educated and disciplined and skilled workforce, yet the system collapsed and gave way to the market.
Or take the shiny example at home here of a tiny Exploration and Production (E&P) start-up that I consult for and barely 10 years into oil and gas production. Its mini-refinery at Ogbele, Ahoada East LGA, Rivers State, is probably the only functioning refinery today in the country. The company (thanks to regulated PMS) refines only automotive gas oil (AGO). It sells (thanks to deregulated AGO) its product at market price. When its price is high, no buyer shows up. When its price is low, buyers happily queue. The market is supreme. The company increases or reduces price at the whim of the market. That’s what works. It eliminates official permits – synonym for corruption. Wherever and whenever anyone is sitting in an office to exercise discretionary decision on economic matters, you provide the perfect recipe for corruption. Remove it. Let the market sort it out.
All that talk about inflationary consequences of petrol price hike is pure scaremongering. Commuter buses consume less than 15 percent of the stuff. And most inter-state goods haulage are executed by diesel engine trucks whose fuel, AGO, is deregulated. Despite the noble intentions, cheap petrol does little to help the poor. 80 percent of petrol is consumed by car-owning city dwellers commuting to work and affluent rich families some of whom between them have half a dozen cars. They fret needlessly over petrol price hike. The subsidy, alas, is for the affluent few. Remove it today.
Tele Adedokun
Adedokun, a consulting petroleum geologist, writes from GRA Ilorin, Kwara State.
