• Sunday, June 23, 2024
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BusinessDay

The chocolate bar and oil subsidy

Global oil, gas investment projected to grow by $26bn on 2022

My grandchildren came over for the Seasonal holidays, and behold, something of an epiphany came over me as regards the ongoing debate about oil subsidy. My other half came up with a bar of chocolate for the kids, and behold, the chocolate was made in Ile-Oluji in Ondo State. This means that in that part of the country, a measure of value addition had been done to our raw cocoa product.

The important point to note here is this: had we been able to do this with our crude oil, the current debate about subsidy would have been unnecessary. This is why the mind is heavy. So heavy in view of the fact that we are back to an old game: the subsidy debate. The actors are the same: the managers of the Nigerian state, the offshore actors i.e the World Bank and the International Monetary Fund (IMF). And of course the masses of the Nigerian people as well as the various indices of civil society. Not to mention the invisible beneficiaries of the decadence, which passes for our oil policy.

It is indeed an old game, made much more interesting by the fact that we are in a democratic dispensation and as such, the government must of necessity, tread very carefully. This is more so in the light of the 2023 elections. This is why; one cannot but wonder why, amidst all the contentions and counter-contentions, the voice of the main opposition party, the PDP is missing. Possibly, they are playing it safe!

Nigeria lacks the capacity to add value to the stock of her primary products, of which oil is just one. We can just imagine the counter- factual for a minute

But even then, nature abhors a vacuum and to this extent, other social forces have since picked up the gauntlet. These include student organizations and the labour movement. I am almost bored. This is because the cast is familiar. But I cannot afford to be so. If only because what is being debated goes beyond subsidy. It speaks and eloquently too, to the governance profile of this administration. It is a profile that is characterized by broken promises and contradictions.

Let us look at the former more closely. One of the pledges by the Buhari administration, when it was on the hustings was that refineries will dot the Nigerian landscape. And in the process, the infamy of an oil-producing country that lacks functional refineries would have been wiped away.

Some six years after, the promise remains a mirage – forever receding into the horizon. Even then, such is the age we are in that, it is easy to recapture records and see how, and in a blatant way, pledges of the past are yet to be honoured in any meaningful way. Luckily, we have records. Records speak to the fact that what was pledged was not redeemed in anyway. In addition to much of the foregoing is that the government also made the solemn promise that if the subsidy were to be removed, functional refineries would be put in place first. So what is happening?

At this juncture, we may as well look at the issue more closely. How and why is it that an oil-producing country like Nigeria lacks refineries? The point is that for some invincible forces, it is best for us to be locked up in this shameless practice of importing refined oil. There are stupendous profits to be made. Cooked books, phantom margins and the rest of that unflattering scenario abound.

But the shame does not end there. Even though the refineries are not functioning, still they are being run with huge resources. Are we damned or what? As the reader may have noticed this may well be a rhetorical question. So rhetorical that, no answers are really needed. One serious way of coming to terms with the subsidy hoax is to understand and appreciate certain realities in the oil industry and beyond.

And perhaps the first one is that, in substantive and concrete terms, Nigeria is not an oil-producing country. The reality is that the oil is being produced for her by international oil companies. In the light of this surrogacy, a major contradiction abounds. This is in the form of non-functional refineries. So what to do? Fall back on the expediency of importation.

Incidentally what is being stated here, runs through the entire gamut of what passes for the Nigerian economy. In other words, in a manner that borders on perverse consistency, Nigeria lacks the capacity to add value to the stock of her primary products, of which oil is just one. We can just imagine the counter-factual for a minute. If we are able to add value to our various primary products, unemployment will simply thin out and be reduced substantially. The case of oil is only so visible because it is so central to the economy and to the rest of the world.

What is also not appreciated is that, under the present circumstances, what passes for the price of crude oil is largely and politically determined by OPEC. And Nigeria figures prominently here, being a member of this intergovernmental body. So having succeeded in driving prices so high, the populace then becomes a potential victim, by the threat of oil subsidy withdrawal.

It is clearly a case of double jeopardy for the hapless Nigerian populace. This is owed to the fact that low prices also engender gruntings from the managers of the Nigerian state-that they will not be able to fulfil their obligations to the populace. On the other hand, high prices translate into the threat to cut subsidy, with the attendant negative consequences for Chike Ibrahim, Ayesha and Olu.

It is clearly Hobson’s choice for the Nigerian people. The other actors, the World Bank and the IMF have, on a predictable basis, continued to weigh in heavily in support of the idea. To them subsidy should be removed and thereafter according to them, Nigeria will be ushered into some form of economic nirvana. Unfortunately, past results do not bear this out.

Read also: Fuel subsidy removal in Nigeria: To be or not to be

What the removal portends is the deepening immiseration of the Nigerian people. And on this note, it is possible to contend that, the managers of the Nigerian State are really in exile, even though the presumption is that they live among us. Take a look at someone who lives in the expatriate bubble of Victoria Island, has an office on the self-same Island. Dashes off to Abuja where he lives it up in a place like Sheraton.

Chances are that such a person will be largely immune from the day to day realities of existence in contemporary Nigeria. And as such, it is very easy for them to contemplate a seemingly easy option like subsidy removal. Much of the immediate foregoing also holds for those well-heeled fellows in the World Bank and IMF. Worse still is that their prescription is something they do not dare advocate in their own home countries, Europe and North America. On this note, please remember that robust welfare systems and safety nets are well provided in these social formations. These reprieves are largely absent here.

A striking instance is a massive subsidy in the area of Agriculture. Woe betides the politician who decides to tinker with subsidies in this particular and important area. That will certainly be the end of his/her political career.

We may as well pose this question here, by scrutinizing another reality. This will be done by asking the question: Who is subsidizing whom? A look at the stratospheric salaries and allowances of the legislators gives an indication of those who are really being subsidized in this country. Again look at the presidential fleet, and you will also know those who are being subsidized in the Nigerian social formation. Beyond these polemical thrusts, however, is the urgent need to ease this policy log-jam.

My suggestion, therefore, is the urgent need to put in place, functional refineries. These will be fed by non-OPEC defined prices. OPEC price is politically driven and was primarily put in place to stem centuries of the historical injustice between the first and third worlds. So with our refineries being fed with non-OPEC prices, the price of petrol and other derivatives will be much lower. This is no rocket science. This is the way to go, and not the IMF/World Bank Way.

Should the hard-headed prescriptions of the Washington twins turn awry, they will be the first to hand off the country, as they did in Afghanistan recently. Therefore, we must build our house ourselves, in the light of subsisting realities that will draw the majority of Nigerians into the safety net. Else? The apocalyptic scenario inherent in the immediate foregoing is such that our leaders must take on board the lessons inherent in the home-made bar of chocolate in Ile-Oluji.

Hopefully, sometime in the nearest future, a Dangote will deliver on his refinery project. And to that extent, a refinery serviced by non-Opec determined price will deliver PMS to all and sundry at an affordable price that is consistent with Nigeria’s status as an oil producer.