Govt must be mindful of hardships with subsidy reduction

Debate is under way in this oil/gas producing country of ours and has been so for sometime as to whether the “subsidy” citizens are afforded should be reduced or eliminated altogether. While we debate, the subsidy for premium gas has already been reduced, and the omen is that subsidy reduction could become an across-the-board measure affecting all types of fuel sometime in the not too distant future. 

 

While a lot of our economic brains see the logic of bringing an end to our gas subsidy, we should take heed of the logic of former Nigerian Petroleum Minister Professor Tam David West which is an interesting contradiction to what is emerging from our own think tank on the matter. Put bluntly, West says, “Coming to Petroleum, there is no oil subsidy. Oil subsidy in Nigeria is a fiction; it doesn't exist; it is a fraud!

 

West rejects the idea that an item such as oil that is produced in Nigeria could be rightly be regarded as subsidised because foreign companies are refining it and then returning it to Nigeria to sell at a higher price. Under his watch as the minister, he boasted he established three refineries so that this kind of exploitation did not occur and that the idea of a subsidy was an an irrelevant factor in the price equation. West also expressed his views on the political ramifications of taking away the subsidy in Nigeria: He said, “No government should exist if it can’t serve the people, because gov’t is a trust. Any gov’t that can’t satisfy the needs of the people is irrelevant and must be overthrown and kicked out.”

 

Right next door to us is Venezuela, the country known worldwide as the land of the 12-cents gas. When Chavez first came to power in 1999, gas price was already at 12 cents. Now in his fourth term, Chavez has refused all suggestions that he does something about the 11 billion dollar a year subsidy that his people enjoy. Gas is actually cheaper than water and milk in Venezuela, but what tempers presidential interference in that sector is that the last time it was just reported that subsidy was to be reduced was in 1989, when thousands of Venezuelans died as a result of rioting that followed the news. 

 

It is one thing to see issues from a purely economic viewpoint, but every gov’t must also be forever cognisant of the human factor, of the possible hardships that its citizens might endure based on its decisions, of the political consequences. While therefore we try to balance the economics, we should take Chavez mortal fear of interfering with his country’s cheap gas and West’s warning on the matter.

 

L. Siddhartha Orie 

via e-mail