Senators were on Wednesday divided over the issue of complete removal of subsidy on petroleum products to save the nation the huge sums being spent by the federal government on the product. The matter came up as part of deliberations on the 2016, 2017 and 2018 Medium Term Expenditure Framework, MTEF, submitted to the red chamber by President Muhammadu Buhari, as a prelude to the 2016 Federal Budget.
The contention of many of the lawmakers was that, with subsidy petroleum products still sell above the regulated price in all parts of Nigeria apart from Abuja, Lagos and Port Harcourt.
The idea of doing away with subsidy has been on the burner for years with successive governments developing cold feet at the end of the day. Money spent on subsidising petroleum products could serve as additional revenue that will be used to improve basic infrastructure such as roads, schools, hospitals and power generation and distribution.
Nigeria, despite being the 4th largest crude oil producer in the world, still sells the product at a price higher than many other countries. For instance, whereas premium motor spirit, PMS is sold at a subsidised price of N87 per litre, same product is sold between N4 to N5 equivalent in Venezuela. Similarly, in Libya, the product goes for just N22 per litre.
Suffice it to say that with dwindling revenue from oil, government needs to cut down on unnecessary expenditures, while shoring up its revenue base through other non-oil sources. One step in this direction would be the discontinuance of subsidy on fuel which will reduce the inflationary pressure our economy is facing. We should have a departure from the subsidy era as soon as possible. This departure is necessary because our economy has not grown in the manner it ought to. The economy will not progress if government continues to subsidise consumption of commodities such as fuel and the likes.
Funds realised from this should be channeled to the power sector, a major area that needs more funds to be revamped.
As a palliative measure, government should introduce a modern mass transit scheme across the country so that ordinary citizens will not fill the impact of subsidy removal if eventually done.
It is in this line that we agree with former Central Bank governor and now the Emir of Kano, Sanusi Lamido Sanusi that it does not make sense at this time for government to continue paying for petroleum subsidies.
Said the risk management expert, “When you are not earning because oil prices are down, you have to shut down those expense lines that had been known historically to be the site of rent-seeking.
“Fuel subsidy has to go, our tax base has to expand, Value Added Tax (VAT) has to go up. We can’t continue having an economy in which we collect tax from oil, collect tax from telecoms companies, and then 60-70 percent of the Gross Domestic Product (GDP) does not pay taxes. This is something that has to be looked at.
“But if we have to go through fiscal consolidation, which in this time would be pro-cyclical, should we continue with pro-cyclical monetary policy? These are questions that we need to answer.
“It is wrong to continue with the fuel subsidy. It is wrong to continue to pretend that you can keep the Naira at a certain level, when the price of oil is falling, without depleting your reserves”, he stated.
Indeed, in view of the present economic realities, both the government and the governed have to make a choice about our future as a nation. And the time to do that is now.