Professor Pat Utomi |
Is
it a must for the Federal Government to remove fuel subsidy?
I think fuel
subsidy is a source of enormous haemorrhage from the federal treasury; a
haemorrhage that is benefitting a few people — scam artists. And the marginal
delivery of value to the Nigerian people is questionable because, in most
places in Nigeria, we are not getting people to pay those (official) prices
anyway. In essence, I am not sure we can justify what is going into it, whereas
you could take the same resources to do a lot to transform the economy, and
maybe invest in an environment that would create more jobs, etc. But if I were
to do it, and I could, I would find a way of taking a portion of that money and
paying directly via a cash transfer to the poorest of the poor so that they can
use it to buy their own fuel as they see fit or subsidise their transport. The
big problem is that we have chosen not to have a proper headcount or biometric
data of citizens, in spite of national identity cards and programmes like that.
Indonesia
just went through a similar process of removing huge subsidies. That was the
first thing that the current president, Joko
Widodo, did after he was elected. And there cannot be a more
masses-oriented leader than him, who is basically a small guy from a small
business that rode his bicycle around and so on. He is a man of the masses, yet
he realised that it was important to remove the subsidy. However, they were
able, with the support of some international aid agencies, to pay money
directly to the poorest of the poor. In our place, a similar strategy could be
thought of. Unfortunately, we still have this challenge of ‘Where are the
people? Who are the people?’ Before we know it, some agents will go and share
these monies and pocket them like the scammers in the oil industry are doing.
But
it is widely believed that fuel subsidy removal will be an enormous burden on
the majority of Nigerians. Is this true?
In many
parts of Nigeria, if you make sure that there is availability of the product
and so forth, the competition can only force prices down. The reason that
people are comfortable with what they (marketers) are doing now is because
there is a quasi-monopoly — an oligopoly of sorts — which is taking advantage
of the ordinary citizen. But if there is competition, as you saw in
telecommunications, we are going to get to a scenario where, in a short period
of time, prices will drop from competition. I do believe that the net effect
over a short period of time will not be higher prices, I am almost confident of
that. In fact, around December last year, when prices dropped to the upper 40s
(in dollars), if we had removed it (subsidy) and encouraged competition and
refused to give licences without ensuring that the quality was right, prices
would have to be forced down. They would have come down significantly from
where they are now, if the government had given such an order.
I was in the
United States last December on New Year’s Eve, when I was driving to catch a
flight from the Midwest to New York. I remember that my host was shocked,
positively, that petrol prices had fallen below $2 (per gallon). The price used
to be about $5; it suddenly dropped to a mere $2 a gallon (about 4.5 litres).
Basically, the same should happen here in the oil industry, just like it
happened with per-second billing and general pricing of the telecommunications
business.
The
Nigeria Labour Congress, during the fuel scarcity in May that lasted for about
two weeks and nearly crippled the country’s economy, warned that there was a
conspiracy to remove subsidy on fuel and this could plunge the nation into
crisis. What do you think?
That is
absolutely incorrect. I think we like to get ourselves into these strange
debates (based on) personal interests. Those who are benefitting from these
subsidies are the ones pushing all kinds of people to create these kinds of
arguments that they are profiting from; it is not true. People have been paying
N150 and waiting in queues for hours; then you tell the person that if you
remove subsidy, prices would be very high. It is not true. Simple logic shows
that it cannot be that high. But so long as we ensure that there is competition,
it will get lower than today’s prices, if crude (oil) prices are not going up.
Are
you saying the oil marketers are the ones to blame for this disinformation?
There is no
question in my mind that they are a part of it. Not all of them; there are
different kinds of players in every market. You can’t paint everybody with the
same brush. But there is no question that there are people who are making out
like bandits and the first rule of change is that those who profit from the old
order will do everything to prevent a new order from coming about.
Members
in both chambers of the National Assembly had moved motions to remove fuel
subsidy during the recent fuel scarcity, but the motions were voted against. Do
you think the fuel subsidy removal plan can get past the lawmakers, seeing as
they are obviously against it?
I am not
sure where the laws of our country say that the National Assembly has to vote
on the price of Bournvita, and fuel is just as much a product as Bournvita. Why
should the National Assembly get involved in the price of any product, even
petrol? We have had some people during the course of our history who dabbled
into such things and that is part of what has caused some of our problems
today. I don’t know what the National Assembly has to do with whether or not
fuel subsidy should be removed.
Why
are fuel scarcity and the consequent hike in prices of petroleum products so
common in Nigeria nowadays?
Precisely,
it is because it profits some people. Why is it not common in next-door Benin
Republic, which is poorer and does not produce crude oil? Why do they not have
queues (at fuel stations)?
What
do you think the Federal Government should do with the resources, if fuel
subsidy is removed?
This
business of what it (proceeds from subsidy removal) will be used for is what is
creating all these problems. The whole country is a basket. There are leakages
from everywhere. Whatever government exists to do for its people, the
government should do it and revenues that come to the government, whether from
taxes or from royalties, should go into serving the people to improve the
quality of their lives. It should go into providing infrastructure, ensuring
that there is adequate regulation to enable businesses to grow and provide jobs
for people. All of those things are part of what the government should do.
Looking
at the inability of some states to pay the salaries of their workers, what do
you think is the best option for the Federal Government to take?
I think that
we need to first review and rethink our fiscal federalism. I think that the
time has come to have some very clear conditionality attached to the receipt of
revenues, especially debt management revenues. And what we should do in that
regard is ensure better behaviour so that we do not get into this situation
again.
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