The Presidency — By Prince Emeka Obasi
Business Hallmark Newspaper, November 8–15, 2009

The Nigeria National Petroleum Corporation (NNPC) says it spent about N500 billion to subsidize petroleum products in 10 months. Whereas that may be true, it is not the real story about the subsidy and deregulation debate. By publishing such intimidating figures, the NNPC is trying to persuade the public that subsidy is an expensive and wasteful venture that should be discontinued. But the NNPC should not have bothered at all. The public does not need much convincing.

Whether it accepts it or not, the government will certainly have its way. I have refused to be bothered about the deregulation argument and may not even have cared to comment on it at all, were it not for my increasing anger with the pathetic lies officials of government have repeatedly told, all in the name of deregulation. By lying so shamelessly, they obscure the truth and promote a false sense of reality.

The core argument against subsidizing the price of petroleum product is that it is too expensive and wasteful. Government argues that it can channel the huge resources so wrongly used towards other critical sectors of the national economy, perhaps like education, power generation, infrastructural development etc. On the face of it, such an argument becomes unassailable and is indeed so. But when you look deeper, the reality is radically different.

I am a free market lay economist. I accept as an article of faith that subsidies are not acceptable for the simple reason that they distort fundamental market realities. At any rate, subsidies are not sustainable in the long run. Nevertheless, I recognise that subsidies are often more politics than economics. Almost every country in the world subsidises one product or service or the other, depending on its strategic national interest. America, the home of free market economy, subsidises agricultural products heavily. France, Italy and Germany all promote measures which protect some of their strategic industries.

If the Nigerian government has decided not to continue subsidising the price of petroleum products, it is acting entirely within its prerogative. But the claim that the proceeds will be used for more productive purposes is a lie. Governments in Nigeria do not have a record of living up to their words in such matters. I recall the era of Ngozi Okonjo-Iweala, who as Minister of Finance also dealt with similar issues. On one occasion, she appeared on the popular BBC programme Frank Talk and waxed lyrical about how she would use the proceeds of the subsidies to build roads, create jobs and boost power. We are all living witnesses of whether or not she did that.

Today, roads in the country are in terrible state, electricity is worse than epileptic, unemployment soars and the education system is almost in shambles. The question to ask is, why didn’t Dr. Iweala meet her objectives? The answer is rather simple and obvious: governments in Nigeria hardly live up to their promises. In this context therefore, yet another question arises: what happened to the money? Well, the government used it to service itself. Perhaps unknown to many, governments are the most expensive group to maintain. Much of the income of governments at all levels is spent in maintaining public officials. To be fair, the presidential system of government is the most expensive in the world.

Much of the resources of our country are used to maintain public officials. A careful examination of the annual budgetary provisions will show this glaringly. It is therefore safe to argue that rather than free up funds from subsidies for other strategic sectors, the government is merely seeking for additional funds for itself. The failure of subsidies testifies eloquently to the failure of government. In the last ten years, Nigeria has earned hundreds of billions of dollars mainly from the sale of crude oil. Yet, if you look around, you cannot see exactly what that huge sum of money was used for. The national road network is like an open sore, infrastructural facilities are in hopeless shape.

You can go on and on. But the most critical area of failure is in human resources development. For the last thirty years, there has been a steady decline in the quality of manpower as the educational system spiralled south. Poor and inadequate investment in education has led to a rapid decline in the quality of education to the point where the average graduate of our public universities is barely literate. Nigerian students now flood neighbouring countries, notably Ghana, to seek opportunities for higher education. Recently, I learnt that Ghana has started rationing the number of Nigerians that can be admitted into such high-power professional studies, like Medicine.

Industrialisation and productivity have all but disappeared from government lexicon. The policy of commercialisation and privatisation initiated by the Babangida government has worked so well that government has almost totally disengaged from all manners of business apart from regulation. But while doing that, it has failed to provide the enabling environment for the private sector to fill the gap. So there is a productivity and industrialisation gap. The effect is massive unemployment at horrendous levels. Recharge card hawking, motorcycle taxi, kidnapping, youth militancy and all manners of other malfeasance have all become the occupations of choice. Yet, this is a country which in the last ten years earned more money from crude oil exports than it had earned previously in its entire history.

The Real Truth… The real truth is that the Nigerian enterprise is not working efficiently. In economic terms, we will say that the country is not productive. In other words, it is not adding value. It is misapplying resources and is not returning sufficient dividends on investments. If it were a corporate entity, it would either be radically restructured or face liquidation. Governments would rather withdraw the subsidies on petroleum products and free more resources for a continuation of the spending spree.

It is amazing that our governments, at the federal and state levels, are tax-and-spend liberals. Each time they confront a funding challenge, they call the tax man. Yet, no one is bothering about the resources of the citizen who is being taxed. What volume of production is going on in the private sector? What wealth and how many jobs are being created? What resources have government deployed to catalyse the private sector?

The real truth is that the present structure of the country is unviable, unproductive and unsustainable. The thirty-six states structure is an economic drain. The government bureaucracy, at the three tiers, is unwieldy and hardly adds value. Together, they constitute a big hole on the resources of the country. Instead of deploying the proceeds from crude oil sales to productive ventures, our governments have used it to finance themselves. Crude oil is a limited resource. Yet no one is bothered what will happen when the wells eventually run dry. All our government is interested in is to keep milking the wells and the people.