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Fuel Subsidy: The basic facts in perspective



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By: Ahmed Garba-ja Abdulkadir, Sarkin Sudan Katsina. May 31st, 2023.


Soon after the Nigerian Civil War ended in January, 1970 the sale of Nigeria’s crude oil began in earnest. By early 1972 the money influx into Government coffers was so relatively suddenly huge that the General Yakubu Gowon regime (1967-75) was awash with money. adsbygoogle || []).push({});

To cut a long story short, the Govt was looking for ways and means of allocating/distributing or otherwise spending these monies. The political leaders increased, oftentimes by a factor of 1000%, their own salaries, allowances and other welfare packages. Public/Civil servants got their share in the form of an unprecedented increase in their emoluments (the Udoji and, later Adebo awards).

The Arab Oil Embargo of 1973 made Nigerian Oil even more sought-after and facilitated a sharp rise in the price per barrel. Meanwhile, earlier further investments in exploration raised Nigerian output and exportable quantities. General Gowon sought for and got advice from his Finance Minister, Chief Obafemi Awolowo, on how the general Nigerian populace, as opposed to those in Govt, were to share in the largesse; to wit, how the Nigerian masses could partake in the sharing of these huge monies coming from oil.

Awolowo suggested a subsidy in the pump price of petrol and other petroleum products. The argument was: the money comes from oil, also no other product could benefit all and sundry like petrol and its cheapness would have a multiplier effect on the rest of the economy. Gowon agreed, and from that time until the 29th of May, 2023 Nigerian petrol remained cheaper than the international market- dictated price, thanks to this Government subsidy.


To Awolowo’s (and Gowon’s) credit the economy actually bloomed and boomed. Millions of Nigerians were also brought into the formal economy as a consequence. And, we enjoyed, simple!

3. No ‘PARTY’ lasts forever: Oil price falls

By some uncanny twist of fortune and fate, most, if not all, of the countries that were exporters of oil happened to belong to what was then called the ‘Third World’. The Western world or what was then called the ‘Developed World’ were the chief importers. Anyone who has the slightest inkling into how these so-called deveoped countries behave internationally will know that these high crude oil prices could not be sustained. Again I will cut a long story short and just say what happened in the early 1980s: the price of crude oil crashed!
From about $40/barrel it came tumbling to about $7-8 and stabilized at somewhere between $11-20. The price was never to recover fully to date even though it does rally, once in a while, due to extraneous world events such as the Iran-Iraq war, 9/11, the 2008 global recession, OPEC quota limiting etc.

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4. Unscrupulous CASHERS-IN.

As it is in every Country or Community, Nigeria has its fair share (it’s not more) of unscrupulous individuals and groups of individuals that will cash-in on any situation. Cash-in illegally that is, to make personal gain. These criminals, with regards to the fuel subsidy are of two main groups:
# those who take advantage of the price difference between the subsidised price of fuel per litre in Nigeria, which until recently was between N185-250 or thereabouts, and the price per litre in our continental neighborhood of anywhere between N450-650, and
# the second group of criminals who take advantage of this subsidy regime are the collection of elites and well-connected business men and women who find ways to fleece Government while it is trying to make the necessary differential payments and/or the compensation required to keep the subsidy in place.

5. Group 1: The Smugglers.

As stated earlier these are the criminals who find a way to take petrol from Nigeria to nearby West African countries such as Togo, Benin, Nigér, Chad and Cameroun. Even the Governments of relatively far-flung countries such as the CAR, Mali, Burkina Faso, Ghana etc needed not to import any fuel: the fuel from Nigeria was cheaper than wherever they could import it from!
*The small-timers (Smugglers) among them do so using small tanker-articulated vehicles, ingeniously re-designed tanks of cars, Jerry can-carrying motorcycles & minicabs and even horses, donkeys and mules. Most border towns in Nigeria have these small-timers and collectively they constitute a large drain on our economy.
* The big-time smugglers are a different kettle of fish altogether. Perhaps the best way to illustrate the big timers’ modus operandi, to demonstrate the stupendous economic saboteurs that they have becime and continue to be as well as to show the foolhardiness of continuing with the subsidy regime is to narrate something I witnessed first hand. Please indulge me by reading my own personal experience of the phenomenon.

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Over thirty years ago, when I was a young carefree bachelor, I was a night marauder of sorts especially on weekends, when I had no work to go to the following day. I was living in Dutsen-Safé low-cost housing estate in the outskirts of Katsina, barely 40kms from the border town of Jibia. Jibia is an entryway to Nigér Republic. On one such weekend, a Saturday I think, I came back from my ‘hira’ (night outing) at around 2.30 a.m. As is my habit I stopped by the ‘mai shayi’ (tea seller) at Kofar
Guga, the then last ‘unguwa’ (inhabited ward) on the road to Jibiya. Surprisingly, I had to knock on the door of the tea seller’s shack to get him to come out and serve me my habitual tea, bread and eggs night-snack. When I enquired as to the reason why he had to close so early that night he replied in hausa that ‘ ai yau ana yin fito’. I didn’t know it then but he meant that the road from Katsina to Jibia had been ‘cleared’ for a large smuggling operation! Anyway, as I sat down to my tea a patrol vehicle with the insignia of the Nigerian Army stopped right in front of me. To my surprise it was not an Army Officer but a Customs Officer and a Police Officer that came out of the vehicle and asked me what I was doing out so late in the night. Being street smart😄, I brought out my asthma inhaler and my ID card and told them I was coming from the hospital where I’d been to get my sudden night asthma attack attended to! Being hungry, after the medications, I am eating a little something, lest I die from hunger before morning! Seeing that it was impossible to ‘molest’ me personally they turned to the tea seller and told him to close his shop immediately. I decided to be cheeky and ordered more eggs! They then left us alone. A short while later I heard the unmistakable sound of not one but a multitude of articulated vehicles thundering their way through Katsina on their way to Jibia and thence to Nigér. Before I got bored with the whole thing and left for home, I counted nothing less than 200 petrol-laden tankers that night. All leaving Nigeria and headed abroad. At a later date I counted another batch over 300 ‘trailers’ coming from Nigér into Katsina!!!

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The definite and sure deductions that can be gleaned from the foregoing story are:
√ if one assumes that similar smuggling operations, as the one I personally witnessed, were happening in all the States that have international borders at a conservative once every fortnight, the quantities of fuel leaving Nigeria is, to put it mildly, enormous.
√ the subsidy that was being paid for by the Nigerian Govt to benefit the Nigerian people was beneficial mainly to the smugglers and the countries that the fuel was being smuggled to
√ the smuggling of Nigerian petrol abroad involves nearly all of our security services being compromised. They are all ‘settled’ as we say in our country.

6. Then there are the more sophisticated thieves on Abuja and Lagos who share the over N3-3.5trn (2022) which the Federal Govt sets aside to settle the importers of the fuel. The fgn settles the difference between the import price and the pump price. Over-invoicing is the order of the day. Sometimes even, when there a wide enough collusion amongst the thieves in government and the thieving businessmen and their foreign collaborators, multitudes of completely fake invoices have to be paid by the authorities.


You, dear reader, be the judge. Is this subsidy worth retaining?

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