10 March 2009
editorial
Lagos — Finally, the federal government has endorsed the full deregulation of the downstream sector of the oil industry. With that, among other implications, comes the removal of subsidy on petroleum products. Considering the precarious state of global economy and the dire situation the government finds itself, that action appears financially correct. But there is more to governance than the pursuit of profitability and convenience.
This latest move is made even more discomfiting by the platform that gave birth to it. As its own way of responding to the current worldwide economic crunch, the federal government set up the Presidential Steering Committee on the Global Economic Crisis last January to figure out remedial measures. But while it was announcing some measures to cushion the effects of the economic meltdown in one breath, it was in another, announcing subsidy removal which is synonymous with additional hardship
However, the Steering Committee did arrive at a cost effective but socially insensitive solution. However, its argument is worth revisiting here. In the last three years, government spent N1.63 trillion on subsidy of oil, with last year alone accounting for N640 billion. It has also argued that continuing along the path of heavy spending in the face of dwindling revenue profile is tantamount to government driving down a cliff. Equally disturbing is government's inability to meet its production quota for various operational and infrastructural reasons. The effects of these roadblocks are aggravated by the predatory presence of inefficiency, ineptitude of regulatory agencies, particularly the Petroleum Product Pricing Regulatory Agency (PPPRA), fraud and racketeering - vices which, according to the committee, have conspired to milk the nation's purse for too long.
On the economic front, this attempt at justifying subsidy discontinuation is credible but a scrutiny would expose defects that, if not tackled, could cause the country a lot of corporate damage.
To begin with, subsidy withdrawal is synonymous with hike in the prices of petroleum products and, eventually, other commodities as well. For a nation that literally runs on generators, the affordability of oil products ought not to be ignored by the authorities. For many years, Nigeria has been a victim of power failure, a condition that has affected domestic life and national productivity. Now that the government has chosen to stop subsidy, the availability of the major means of alternative energy is threatened.
It is also worrisome that instead of confronting the identified impediments in this critical sector such as the racketeers and corrupt officials, the government has taken this step to throw away that baby with the bath water. In these trying times when governments around the world, even the acclaimed pillars of global capitalism, have been trying to bear part of the burden of economic meltdown in which they have found themselves, ours is busy abdicating what clearly is its social responsibility to its citizens.
Although no government, no matter how robust its pocket is, can afford subsidy on any good or service perpetually, the practice is to ensure that the atmosphere is ripe for any major policy change like this one; effective privatisation and functionality of refineries, for instance. Approving both subsidy removal and privatization at the same time, instead of prosecuting the latter before the former, could lead to chaos if not properly handled.
The government should, therefore, cease to take actions that can further inflame the sensibility of Nigerians who are yet to enjoy meaningfully the socio-economic obligations of their leaders.
We, however, caution that this should not heat up the country unnecessarily. Rather than resort to strikes, Labour should put up convincing debate on behalf of the suffering workers and others.
For, in the end, what determines the success of any government is its ability to interpret and safeguard the social contract it has with the people. For example, we believe it is proper for government to tell the people of Nigeria, what it plans to use funds to be garnered from the removed subsidy for. We believe that and all other vital issues would be considered by the committee, but there is need for all stakeholders to reach a peaceful landing as soon as possible.
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