Subsidy Removal, The Reality And The Advantages (A MUST READ)

Subsidy Removal, The Reality And The Advantages (A MUST READ)

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Posted by bigboluet (M) » 13 May,2016

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Over the years Nigerians have been faced with series controversies
surrounding subsidy removal and many Nigerians have frowned
against this with great ferocity each time the government of the day
makes any move to remove it either totally or partially.
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Many opposition bodies have used this to campaign against the
government of the day and that was the case during the period of
President Goodluck Jonathan and many Nigerians were also made
to believe that it was indeed a callous move by previous governments
to inflict hardship on Nigerians but just yesterday,we got a very
surprising news that the APC led government have decided to
finally remove subsidy as Petrol will now sell for a maximum of
N145 per liter..
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The question on the minds of many is why was there a strong move
against this in the past? could it be to lack of proper sensitization
of the populace by the previous governments?or was it because the
lack of trust in the previous administrations or shall we say we have
suddenly realized the true picture of the situation on ground? I
guess these are questions we will continue to ask ourselves but this
write up will address the reality and advantages of subsidy removal
from a very layman’s perspective and professionals are welcomed to
shed more like and correct any form of misinformation.
.
THE REALITY
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FUEL SUBSIDY :
Understanding the madness called “fuel subsidy” requires a walk
down memory lane. However, let me start by saying a country like
Nigeria, which is also the largest crude oil exporter in the African
continent, imports fuel into the country.YES we know this makes no
sense. Unfortunately, it does. Nigeria has four national refineries
that are barely functional because of the country’s poor planning
and maintenance culture, and even more, our refining plants are
aging while the pipelines linking these plants have lacked adequate
investments and they are terribly unreliable to support
uninterrupted domestic production and sadly enough as determined
as the government are in ensuring that these refineries are
repaired,some interest groups have taken up the habit of destroying
these facilities thus Nigeria is forced to refine its crude oil resources
outside its borders and then it imports the refined products, mostly
from European suppliers, to satisfy the energy needs of its large
population.
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WHO BENEFITS MORE FROM FUEL SUBSIDY?
Now lets assume the governments spends an average of N40 to
subsidize a litre of petrol that is bought by each Nigerian,it means
for every 20 liters you buy, the government helps you to pay
N800. But the truth is that the rich benefits more because in a
month they buy thousands of liters to power their office,homes,cars
and so on while an average citizen with a tight budget might just
manage to buy 50litres in one month.
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Lets ask each other this question;Does it make sense for a
government to spend over 1 trillion naira on fuel subsidy
yearly to help the rich while lesser amount is marked for
other infrastructures that would impact more positively on
the average man?
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Now lets take a quick look at 7 advantages of subsidy removal:
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1. IT REDUCES CORRUPTION IN THE DOWN STREAM
SECTOR:
According to the statement made by the former finance minister and
coordinator of subsidy removal, Dr. Ngozi Okonjo Iweala. “ The
removal of oil subsidy will drastically reduce corruption in the down
stream sector.” Moreso, deregulation will also help to end the
waivers enjoyed by powerful “cabals” at the expense of the Nigerian
people…this needs no explanation.
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2.PROVISION OF BASIC AMENITIES
The Nigerian governments spends over 1 trillion naira on fuel subsidy
each year and this has made it extremely difficult to provide other
amenities that would impact more directly in the lives of the citizens.
However, if half of the money spent oil subsidy is channeled to
other sectors of the economy, Nigeria would have been better for it.
Consequently, the money saved from subsidies will be used to
improve infrastructure, building good roads and bridges, fund
agriculture,pay higher salaries,improve education and health
sectors.
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3.REDUCTION OF GOVERNMENT DEBT
According to the words of the former Central Bank Governor,
Malam Sanusi, one of the long term benefit of the withdrawal of the
subsidy is the reduction of government debt and at least help direct
that debt to the finance of infrastructure that should create jobs
and more inclusive growth. However, it is important to note that
Nigerian government often borrow to enable it finance this oil
subsidy so as to make the petroleum pump price affordable to a few
rich Nigerians who operate or control some of the devices which
actually consume the petrol.
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4. TRANSFORMATION OF THE PETROLEUM SECTOR
A lot has been said of corruption in this nation, and the time is now
to effect the change we need. Reformation of the oil sector which is
the life wire of the nation could take the lead.
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5. INCREASE IN FOREIGN RESERVE AND SAVINGS
With subsidy removal, Nigerian, government will get to keep more of
the money raised from sales of its petroleum product and savings
made on its foreign earnings, this will uplift the countries foreign
reserves and greatly improves our ratings by international agencies.
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6. ESTABLISHMENT OF MORE REFINERIES
It is noted that since 2000, government of Nigeria had issued
licenses for refineries, but none was been built for these reason.
This is not unconnected to the financial and structure imbalance
created in the huge sums, of money expended on petroleum subsidy.
However, it is obvious that with subsidy removal, Nigerian
government can now use the money saved from subsidy to build
refineries which will inturn provide enormous opportunities for
employments of our jobless youths.
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7. MAKES WAY FOR TRANSPARENCY AND COMPETITION
IN THE OIL INDUSTRY
When petroleum subsidy which is rife with corruption and unhealthy
practices is no longer there, transparency and healthy competition
will return to the petroleum industry.
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Lets give the government a chance and make this sacrifice
with hope that we will have a new story to tell.Yes we may
see a sharp increase in the price of commodities and
transportation but in a short while, we will see the positive
outcome just as we now see in previously deregulated
sectors.
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