THE ATIKU POLICY DIALOGUE!!!#NORTH EAST CAMPAIGN AA PU.....

The Atiku Policy Dialogue

40 excerpts from the #AtikuPolicyDialogue

Episode 1: Fuel Scarcity and Subsidy

1. Petroleum Sector Reforms were initiated by Atiku Abubakar as the then head of the economic team of the Obasanjo/Atiku Administration. The recent reforms were inspired by his vision. His master plan was to privatize the NNPC and the refineries. #AtikuPolicyDialogue

2. Commercializing NNPC is like going back to square one. It is still under government ownership and managed by government people. Corruption and mismanagement are bound. Atiku’s idea is to open the majority of the NNPC shares for interested individuals, while a portion of the shares is retained by the government.

3. The government must raise money through the sale of the NNPC shares to build critical infrastructure that will diversify the economy. Better efficiency is achieved with private sector leadership. #AtikuPolicyDialogue

4. The one-off removal of diesel subsidy was not thought through by the APC administration. Diesel price has more effect on the cost of production. It should have been phased out after the phasing out of the PMS subsidy. #AtikuPolicyDialogue

5. The continuation of subsidy after commercializing NNPC will hurt the federation account more. The NNPC limited will no longer be responsible for subsidizing PMS on behalf of the government. #AtikuPolicyDialogue

6. Under the new PIA, the extension of the subsidy to June 2023 will mean Nigeria losing either its share of crude or directly paying NNPC ltd. from the federation account. This means losing an average of N33 billion daily. #AtikuPolicyDialogue

7. It was Obasanjo as head of state that started the subsidy in 1977 to temporarily protect Nigerians from inflation caused by rising oil prices. It was easy for the government to pay for the subsidy because then “money was not a problem but how to spend it”. #AtikuPolicyDialogue

8. Now, with the growing population and economic advancements, energy consumption is growing exponentially. Hence the growing burden of the subsidy. N16 trillion was spent on subsidies in the last 20 years.

9. With the money spent on subsidy in 20 years, we could have built a refinery with 1 million barrels per day capacity, or world-class hospital or eight world-class universities, or 60,000 miles of new modern electricity transmission lines.

10. In 2022, N3 trillion was budgeted for the subsidy, and N6.7 trillion in 2023. If continued, one day the subsidy will consume entire Nigeria’s budget. The 2022 subsidy bill is the highest ever. Next year’s subsidy will be higher than this year’s. #AtikuPolicyDialogue

11. Whenever oil price goes high, subsidy payment goes higher. A 1% increase in oil price leads to a 0.58% increase in subsidy payment. The Nigerian government would prefer lower oil prices to reduce the subsidy burden. #AtikuPolicyDialogue

12. The major influencers of petroleum subsidy are crude oil price and exchange rate. At the moment, the crude oil price is high and the dollar price is high, so does the subsidy bill.

13. There is more spending on subsidies than on education. Subsidy spending has doubled education spending. But, the subsidy has not fixed inflation, nor has it fixed poverty. The government can't fix poverty and unemployment because subsidy has eaten the money.  

14. Due to subsidies, the government can’t fund budgets and had to resort to borrowing to fund budgets. Borrowing forsakes future growth. As of 2022, external debt stood at $38 billion, a 533% increase in just a decade. Now, external debt equals external reserve. Bankruptcy.

15. When investors see our debt stock and our deteriorating foreign reserve, they will shy away from the country. An economy with too much government intervention is not an attraction to investors.

16. The petroleum subsidy has incentivized petroleum importation and importation has led to the depreciation of the Naira, and hence the rising inflation. #AtikuPolicyDialogue

17. The World Bank has warned that if this kind of subsidy continues, the government will have to borrow money to pay salaries. The World Bank said, “generic subsidies are expensive because they go to everyone, and they are often used by people with upper incomes than by people with lower incomes so they are not targeted”

18. Some Nigerians argue that the subsidy is the only benefit they get from the government, but at the same time, that little benefit has deprived them of many more benefits because the rich who do not suppose to benefit are the biggest beneficiaries.

19. More than 40% of subsidized PMS in Nigeria is smuggled to neighboring countries. The subsidy has created room for arbitrage. Buying in a cheap market and selling in an expensive market. We now lose more in a period of high oil prices due to the arbitrage.

20. The rich class benefits more from the subsidy. 80% of the subsidy benefits go to the rich and only 20% goes to the poor. In Ecuador, it was discovered that $1 of the subsidy goes to the poor and $20 of the subsidy goes to the rich. So who is subsidizing who?

21. Maintaining or removing the subsidy has consequences: should the government go for lesser pain or a better decision. How much would a liter of fuel be without subsidy? What if it is refined locally?

22. If a liter of PMS is to be refined locally, you can only remove the cost effects of freight, foreign country taxes, and seaports charges. Put together, there is a maximum difference of N100 between imported and locally refined liter of PMS. #AtikuPolicyDialogue

23. Without subsidy and at an exchange rate of N600/$, a liter of PMS could be sold at N200 per liter at $40 per barrel of oil. Or N500 at $100 per barrel. It will depend on the oil price. The future might be uncertain, it is inevitable, but let's face it with a plan.

24. Countries like South Africa, Ghana, Niger Republic, Indonesia, and Brazil have all removed petroleum subsidies, and their average liter price at the moment is within a range of N500 to N600 per liter. Subsidy which was supposed to be income redistribution to the poor ended up benefiting the rich.

25. We have to embrace new ways of life. We have to invest in modern transportation systems. 75% of PMS consumption is for transportation purposes. Alternative transport fuels and mass transport systems can substitute the demand for PMS.

26. Nigerians now have no option but to own their cars. An increase in private cars has increased the subsidy burden. There must be a transportation revolution, especially in major-consuming cities, like Lagos, Abuja, Kano, and Portharcourt.  The subsidy is the driver for increased PMS consumption.

27. Southwest is the biggest consumer by far. Followed by northwest and then south-south, targeting these areas will be good to reduce the PMS consumption. The zonal consumption analysis is useful for deciding how to apply subsidy removal strategies and detecting smuggling possible routes.

28. Removing subsidies must be through certain stages. First, sell the refineries to save and reinvest. There are older refineries that are working because they are managed by private companies. Fifty modular refineries can refine more than 250,000 barrels per day. The idea is to save to build.

29. Before removing the subsidy, energy conservation, and tracking must be applied to reduce the consumption level to about 40 million liters per day. This is possible through investment and incentives to use the public transport systems.

30. A maximum subsidy threshold of N500 billion should be set to target only the deserving population. Deserving Nigerians should subscribe to benefit from the monthly limited subsidy quota. Depending on the consumer category.

31. Subsidy must be narrowed to only the poor. Beneficiaries must be verified through biometrics to ascertain the citizenship of the beneficiary and vehicle ownership and to track their subsidy quota. Filling stations should subscribe to the new subsidy regime. Filling stations that do not subscribe to the subsidy will sell at the market price.

32. There must be compensation after subsidy removal, not through cash palliatives but through investment in critical areas like affordable and accessible healthcare and education, affordable and efficient public transport systems, improved electricity, sufficient local refineries, reduced inflation, and creating business environments.

33. The government can do a lot if relieved from the jumbo subsidy bills. The frequency and intensity of foreign debt will reduce. Infrastructural development will be enhanced, and investments increased.

34. The objective of the petroleum sector reform is to achieve sustainable development and to create enabling environment for every Nigerian to thrive. It is not for any personal interest. It is for the people’s benefit. The future is doomed if we continue with this kind of subsidy.

35. I see a future where Nigerians are comfortable with new transport fuels and alternative public transport. They will benefit from low pump prices when the crude oil price is low and when there is so much competition in the downstream sector. However, the right stakeholders must be identified and engaged in this reform.

36. Strategic removal of subsidy is a systematic redistribution of income to reduce the wide gap between the rich and the poor. The saving should benefit everyone equitably. A lot of people fear inflation. But that’s just a temporary reaction, prices will stabilize afterward due to more local competition and alternative transportation means.  

37. Mitigation plans will not include cash grants, but critical investments like healthcare, education, transportation systems, roads, electricity, and security.

38. Citizens will be actively involved in every step of the reform for transparency and engagement. There must be new legislation to direct the reinvestment of the subsidy removal savings to stimulate more growth and development.

39. If we know subsidy is not sustainable and it costs us a lot, we should not allow President Buhari to prolong it, because the more it lingers, the more it costs us. The national assembly should not amend the law that has just been enacted. #AtikuPolicyDialogue

40. Therefore, Atiku Abubakar is the candidate with the plan and confidence to take us through the challenging future that lies ahead. We need a strong and informed President. Atiku is the man for the job. Let us keep the conversation going, and we look forward to your contributions or questions…