When the new administration finally removes subsidy, it is only a matter of equitable justice that those people that have syphoned the commonwealth of Nigerians through subsidy should be prosecuted,” says Zeal Akaraiwe, an experienced treasury and financial advisory executive and CEO at Graeme Blaque Advisory.
During a discussion via a local radio station on Wednesday, Akaraiwe said the incoming government must bring them to book, to restore confidence in the people.
“Petrol subsidy has to go because what we are spending on it is not real. It is a benefit to a small percentage of individuals,” he said.
According to Akaraiwe, there was a massive subsidy scam under the two previous administrations. If we allow people that are committing fraud to get away with it, then we are sending a subliminal message to all people that fraud is ok once you can get away with it.
The financial expert added that subsidy without accountability is fraud. “If there is anything, anywhere by human nature that is subsidised and not accountable, it will lead to fraud,” he said.
“There is an inverse correlation which is unnatural between our consumption and crude oil price. As the price goes up, consumption comes down. However, in our case, as the international price of crude goes up, our consumption was going up.”
Speaking on President Bola Ahmed Tinubu’s petrol subsidy announcement during his inaugural speech, Akaraiwe said it was a very basic mistake and a psychological disaster.
“There is an inextricable link between human behaviour which is psychology and economics which is choice regarding consumption and pricing,” he said.
“By that announcement, you are inducing those that do not have petrol to acquire it, which is an increase in demand. And, you are also giving those that have it, an incentive to hoard it, which is a reduction in supply.”
According to Akaraiwe, the announcement increased demand, reduced supply and price increased. It was totally unnecessary because subsidy, in our case in particular, is not something you announce like that. It is such a sensitive issue.
“What I expected from Tinubu during the inaugural speech was to state generic terms around how to address Nigeria’s unemployment, high-interest rate, poverty, foreign exchange issues, and fuel subsidy. What he said induced panic,” the financial expert said.
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The CEO further said that the way Nigeria is spending on petrol subsidies is detrimental to our existence. “I do not support subsidy on petrol because it is not sensible economics to subsidies consumption that does not lead to any productive activity,” he said.
Akaraiwe added that earlier this year, Nigeria was consuming around 60 to 65 million litres of petrol a day, which is two vessels a day. “I was deeply involved in working on petrol import under the Diezani era. We were consuming 30 to 35 million litres a day. In under ten years, our consumption has doubled,” he said.
“I did an analysis before covid-19 pandemic and got data on different consumption items including petrol per state. I checked fuel consumption per capita and Lagos, Abuja and Kano had the highest.”
According to the CEO, out of the top ten states that had the highest consumption per capita, seven were border states, which were classified as poor states.
“If a border state is consuming so much fuel and your boarding country has petrol twice the price we are selling it, it is been smuggled out. With a higher margin, it becomes easier to compromise,” he said.
The financial expert added that the previous administration had the best opportunity in recent history to remove the subsidy in the least chaotic manner possible in the fourth quarter of 2015.
“By October 2015, it was possible to import petrol at the same cost at the pump price because the price of crude was going down,” he said.
“The condition at that time was to instruct Petroleum Product Pricing Regulatory Agency to make the correlation between the pump price of petrol and international crude oil prices clear so that if crude oil price start rising, this is how the petrol price will adjust. However, it was not removed.”
