We are at it again. Subsidy removal is again being brandished by government as the imperative to balancing next year’s budget and the cornerstone of our infrastructural upgrade that the entire nation has been clamouring for .
Indeed, it is instructive that since 1986 when the first subsidy removal debate was ignited, government has been unable or unwilling to get the withdrawal of subsidy on petroleum products right. This is because the government usually formulates the policy and the related debate that trail it as targeted at price increase rather than the creation of an enabling environment where market forces can inject efficiency and effectiveness into the downstream sector of the petroleum industry such that the engineered competition can eliminate the corruption and rent seeking that the current structure and processes in the sector reflects. It is this misguided view of government that makes the subsidy withdrawal a continuously recurring decimal in our national economic discourse.
The debate should therefore be focused on what needs to be done in the short and medium term and indeed the long term to ensure that competition is injected into the sector and the laws of supply and demand give Nigerians a realistic pump price as they will certainly do when government removes its soiled hand from the sector. From my position in the industry and from the organised labour think tank, a well managed deregulation that gets government completely out of the sector will give us a pump price in the medium term of less than the current pump price if crude oil prices were to remain at today’s prices. This should form the kernel of government policy and the related debate that we should be having between now and December.
When the government talked about withdrawal of petroleum subsidy, it was clear that, as usual, it had not thought through the import of the problem that confronts it and the people .It was also evident that there was no clue on how to get itself and the people out of the mess that it has unwittingly created for everybody. Unfortunately, this is what we see happening in all other sectors including politics where government usually act before it thinks. Hence we are continuously going down with the fat cats continuously milking the system in all sphere of our national life to the detriment of the people!
We must at least get this one right as it is very important to us economically. But let us understand what the removal of subsidy means to the government and the people before we delve into the substance of the debate. Take a look at this scenario: A lady returning from the farm with yams for her young children has the yams loaded in a basket with loads of garbage (this garbage represents more than 50% of the entire weight) that weighs her down. The lady is now no doubt tired of bearing the weight of the basket. She could do four things. She could painfully continue to carry the basket, garbage and all and perhaps sorrowfully break her neck.
She could share the load all amongst her young children to carry and of course ensure that their young necks break instantly which may perhaps send some of them to their untimely graves. Yet, there are still two other sensible options that are less painful and fatalistic than the above two. I bet that the mother with all the love it has for herself and her children will explore the other two options. The options are that she will bring down the load, wash off the garbage that weigh down the basket, make the load lighter before she decides whether to continue to carry the load or share it amongst her young children to carry. Sharing the load to her children will free her to do other things and because the load is shared amongst her children, it will be light for each to carry and they will also be able to carry other things along with the load.
This simple analogy makes a few points very clear on this issue. First, why is government not willing to allow competition, efficiency and effectiveness in the downstream sector so that it can directly reduce the dead weight that it is carrying? Why is government afraid to take on the barons, the petroleum product cartel that continues to weigh government and the people down? Until the government can deal with these crucial issues, withdrawal of subsidy on petroleum products will be a mirage.
The second issue is the disconnect between the government and the people. This disconnect is epitomised by the following question: Who is best able to carry the load occasioned by the garbage of corruption and inefficiency represented in the bloated subsidy? Is it the government that is currently carrying it on the people’s behalf or the downtrodden, recession stricken masses? I posit that it is the government for the simple fact that the masses cannot influence or change anything in the system.