The wisdom of subsidy, the folly of palliatives in simple mathematics
By Jal Ibn Yohanna
My analysis:
Government’s Palliative of N25,000.00 for 15 million households for a period of 3 months: N25,000.00 x 3 x 15,000,000.00 = N1,125,000,000,000.00 (One trillion, one hundred and Twenty-five Billion Naira only.)
If there are three months is one quarter of the year, and the Federal Government is “pushed” by Labour and other forces to extend the palliative for a year, since the condition of Nigerians may not change after the first quarter, thetotal for four quarters will be N4,500,000,000,000.00 (N4.5 trillion).
Question: Isn’t this already close to the so-called subsidy amount of N6.5 trillion, which served the whole nation of over 220 million citizens and put less pressure on citizens and the economy?
Moreover, the cost of governance has significantly increased due to associated costs of services and price increases.
The distribution of the palliative is still very questionable on who gets the subsidy.
Remember the Government had released money to States for palliative, and the distribution of that is steeped in controversy, and some say, in monumental corruption. Already, a civil society organisation is threatening to take governors to court for explanation on how they are spending the huge sum.
We are yet to factor the job losses, reduced government revenues from taxes, etc., due to less productivity and reduced sales, even on petroleum products. Meanwhile, note that sales of petrol reduced by more than 55 per cent. Not counting the increase in criminal activities and desperation that is leading many to prostitution to make money for survival…. which would result in unwanted pregnancies, destitute, social problems….
The removal of subsidy the way we did, was it really strategic or just worsened things? The answer is obvious. Achieved nothing and only took us backwards.
Should subsidy return? Yes, but not in the way it was being practiced.
Suggested solutions:
1. Government should be honourable and courageous enough to investigate the former subsidy regime. How much fuel was really being imported into Nigeria? We heard the former Comptroller-General of Customs cry out that the figures were highly exaggerated. Those in the industry were in agreement with the then Customs boss.
2. How much was the real cost of import and true subsidy value?
3. If there was fraud, who are the culprits, and what has been done or will be done to them?
4. Subsidy that is objective is not paid in cash. It is by Government reducing import duties, clearing costs, taxes and other means possible, which would be an actual products imported and not fictitious persons or products as was practiced. It’s a win, win because no money is paid out to anyone.
5. We can improve the security of our borders. Inability to control the borders is an indictment on our security agencies responsible for this, and should be viewed seriously.
6. We can formalise fuel distribution/sale to the neighbouring countries and it would form another form of export for the country.
In addition to the Government’s intention to invest in Mass Transit (which should be a normal process, but in this case it is attributable to palliative for subsidy), but is already resulting in increased gas prices.
Moreover, remember that when contracts are awarded, 30 – 35 percent of the Contract cost is profit for the boys. Hence, divertjng the unsubstantiated subsidy payment to National infrastructure only results in about 60 – 65 percent of the value. The balance is to prep up more multi billionaires.
The approach we have taken over the years are not progressive and cannot build a nation. If we are to make Nigeria great again, we have to be objective and strategic in our decision-making processes. While appreciating the efforts and initiatives of our leadership, we are still very far from what it should be, and it is really not difficult to achieve.
Last words: When an equilibrium exists, you really have to be careful how to manage it. Aim at reducing the reactions with a view to minimising the effects rather than focusing on letting it loose. You never know what would be the result of letting a reaction go uncontrolled. It usually costs you more and can be more difficult to return to the original state of balance.
● Ibn Yohanna, an Abuja resident and public affairs commentator sent this via WhatsApp.