By
Bala Funsho
c/o: webmaster@dawodu.com
A lot has been said about the government's recent moves to deregulate
fuel
prices. This article intends to inform this discussion by presenting
an
objective and fact based look at some of the commonly heard views on
the
subject.
"Fuel prices are not (really) subsidised"
Wrong. Current world market prices mean that it costs about N40 per
litre to
purchase petrol abroad, ship it into Nigeria, distribute it in coastal
cities
such as Lagos and sell it at a reasonable mark-up for distributors
and
retailers. It costs even more to ship it further inland. If it is
mandated
that petrol be sold at N26 per litre, as it was when the current round
of
deregulation started, this represents a clear loss (or subsidy) of N24
per
litre.The government was covering this difference and was therefore paying
a
heavy price to maintain fuel prices at this level. This cost was estimated
to
be about US$1.5.billion in 2002, or approximately 8% of Nigeria's budget
($18
Billion), or almost twice more than was spent on health care for
Nigerians.
This was clearly not sustainable in the long term. Even the fuel produced
in
Nigerian owned refineries can be regarded as subsidized, although the case
is
more subtle. Essentially it revolves around the fact that by selling
petrol
below the cost price, the governments is forfeiting additional revenue that
it
could use to support its budget. In fact, even if all Nigeria's petrol
were
produced in local refineries, the effect on the government budget would be
the
same, although it would be less obvious as it would occur in the form of
lower
revenues, rather than cash costs that would need to be paid out to suppliers
of
fuel.
"Subsidised fuel prices benefit the poor"
Not really. Subsidised fuel prices benefit some people, but not
necessarily the
poor. Who gains more from cheaper fuel, the rich businessman with three
big
petrol guzzling cars or the poor farmer who has to walk to his farm every
day?
The fact is that cheap fuel benefits richer, more urbanized people more than
it
benefits poorer, more rural people (15% of urban Nigerians own cars, compared
to
only 4.5% of rural Nigerians). It is true that urban workers do
benefit
somewhat from lower bus fares and other ancillary transportation costs
(and
since the labour unions tend to represent those who tend to be urbanized
and
have jobs, this could explain why they were so opposed to this
deregulation
process). But what of those who are unemployed or those who live in
rural
areas. Even for the average urban worker, how much more would they benefit
from
having well paid teachers for their children or a better functioning
healthcare
system than getting a small subsidy on their daily bus fare. This
highlights
one major missing component of most analyses ? what are the alternative uses
of
the always limited resources. The $1.5 billion mentioned above could be
spent
on improving health or education status of poor Nigerians. These would
also
have a much more direct effect on the often neglected rural poor ? who tend
to
be much worse off than the city dwellers. For example, only 50% of
Nigerian
children born in the poorest half of Nigerian households are immunized,
compared
to almost 90% who are immunized in the richest half of households. Only a
third
of the poorest pregnant Nigerian women have access to a medically
trained
person, compared to 90% of the richest.
"Subsidised fuel is the only way the average Nigerian sees benefits
from
Nigeria's oil endowments"
Probably. This is probably the strongest argument in favour of
continuing with
regulation. Virtually all past Nigerian governments have succeeded
in
squandering Nigeria's oil wealth. Since, the 1970s, over a hundred billion
US
dollars of income has accrued to Nigeria from its oil resources. Despite
this,
the country is worse off that it was 25 years ago. While the income per
capita
in Botswana (another country with a mineral windfall) increased seven fold
in
that time period, that of Nigeria declined by at least 30% in real terms.
The
reasons for this are no secret: corruption and mismanagement. Given
this
history, it is understandable that Nigerians have come to see cheap fuel as
the
one benefit of the oil resources that they actually see. However, this is a
bit
like treating a malaria patient by putting him in a bath of ice water ?
treating
the symptoms rather than the disease itself. If Nigerians spent the energy
and
resources fighting corruption and mismanagement in the same way in which
they
have fought against deregulation then there would be real improvements in
the
Nigerian situation.
Nigeria has some of the lowest human development indicators in the world.
In
terms of child survival and maternal health, we are in the company of
countries
like Rwanda, Sierra Leone and Liberia that are in, or just emerging from,
civil
wars or other similar domestic conflicts. One in every ten Nigerian infants
born
dies before the age of 1, compared to one in every 20 Ghanaian infants.
This
does not take into account, the new scrouge of HIV/AIDS. A health system,
such
as ours, which cannot cope with basic diseases of infancy and has been unable
to
eradicate polio (Nigeria is now one of less than 20 countries in the
entire
world where polio is still present), should be truly fearful of having to
cope
with HIV/AIDS.
Of the 85 million Nigerians who live in urban/semi-urban areas, less than
half
have regular access to water and modern sanitation. To improve this coverage
to
80% of the entire Nigerian population, about $1 billion per year is
required
annually over the next 20 years. Yes, an extra $1.5 billion annually
from
removing the fuel subsidy could help make a significant change to the health
of
all Nigerians by immunizing the other half of Nigerian children not
immunized
today, by funding our deteriorating primary health care system or by
improving
our almost non-existent water and sanitation system. Yes, given
our
innovativeness and vast needs there is no shortage of alternative options
for
expenditure. But, Nigerians should ask the Government where these funds would
be
spent. You should ask your local representative or your senator, where
these
funds (and the rest of Nigerian funds) are spent. The Labor unions could
help
Nigerian workers monitor this expenditure on services that would benefit
them,
their families and the future Nigerian families of tomorrow.
This article has been written by Bala Funsho, a patriotic Nigerian interested
in
the welfare of all Nigerians.