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Nigeria’s Oil Subsidy Is Nothing But A Scam

During the 2015 presidential campaigns, as a presidential candidate, Mr Buhari rhetorically stated that there was nothing like oil subsidy. In fact, ‘I don’t know what subsidy is’ he concluded.

Now that he is the president of Nigeria, Mr Buhari is subsidising the same petroleum products that he claimed never existed. So, what changed?

Perhaps Buhari was ill-informed when he asserted his statement. Maybe he was insincere when he made his declaration. Whatever the reason, by setting aside funds to subsidise petroleum products, the president has confirmed that, indeed, this phenomenon known as oil subsidy exists in Nigeria.

However, Nigerian government has always subsidised petroleum products since independence from Britain in 1960. Petroleum products have always been cheap in Nigeria despite the international market value of crude oil.

Nevertheless, in the early 1960s and late 1970s the subsidy worked. It served the purpose for which it was established – providing cheap petrol to the ordinary citizen.

Then, oil subsidy functioned because the refineries were operational. It was as simple as taking Nigeria’s crude oil from the fields to the refineries. And so, government could fix the price of petrol as they wished. They didn’t have to be concerned with changes in the market value of crude oil.

More so, there was less corruption in the system, and there were more dedicated leaders who had the interests of the governed at heart.

But the way oil subsidy is operated in Nigeria today is nothing but a scam. I call it a scam because, firstly, the purpose of the subsidy has been defeated. Instead of subsiding ordinary citizens, today’s politicians subside themselves.

On average, ordinary citizens drive 1.6 engine cars while the politicians drive the gas-guzzling vehicles. From Mercedes G63 AMG to Rolls Royce, Bentley, Range Rover etc. For instance, a G63 AMG consumes a gallon (4 litres) of petrol for every 13 miles. Whereas a Toyota corolla consumes a gallon per 30 miles.

Recently, Nigerian officials stated that there is an increase in the demand for fuel. There’s unemployment in Nigeria, an ordinary citizen can barely feed his family how much more fuelling his small car. So, where is the demand coming from?

Well, Femi Gbaja, a member of Nigeria’s house of representatives just bought a new Mercedes G-class SUV for his wife as a birthday present. That’s an example of where the increase in demand for petrol comes from.

Politicians who have stolen so much from Nigeria can afford to buy their wives and girlfriends super cars. The more they buy these gas-guzzling vehicles, the more the demand for fuel increases. And the more they put pressure on the supposed oil subsidy. Apparently, petroleum subsidy in Nigeria is for the rich.

Now, the biggest scam of oil subsidy in Nigeria lies in the product pricing. Today, refineries in Nigeria are partially operational. Thus, most petroleum products are imported, and based on international market value of crude oil.

Nigeria under president Buhari has fixed petrol pump price at N145 - Naira (US 42cents) per litre. This is the cheapest price per litre in west Africa. In Ghana and Senegal for example, pump price is US$1.01 and US$1.21 per litre, respectively.

And so, when the international market value of petrol exceeds N145, Nigerian government pays the difference. That’s what they call “price differential” and that’s what Nigeria’s oil subsidy is all about.

Besides, when the international market value of petrol falls below N145 per litre, that’s “price differential” as well. But the price of petrol will remain at N145 per litre. That means Nigerian citizens are now paying more than the market value of petrol.

Ordinarily, in this instance, government shouldn’t be making payment for subsidy. That’s where the scam crystallises. Not only will they claim to have made payment to subsidise the product, the downward difference in the price differential will never be accounted for. Some government officials have pilfered the allocated funds.

Moreover, if a Senegalese can pay $1.21 for a litre of petrol, why won’t a Nigerian pay at least $1 per litre? And Nigeria prides itself as the biggest economy in Africa. The answer is that government officials feed fat on the supposed oil subsidy.

The earlier Nigerian citizens realise that the so-called subsidy is a scam, which doesn’t favour them, but the rich, the earlier they will demand for its termination. The savings from the subsidy scam can now be used to uplift the country’s infrastructures.

Overall, the irony of this subsidy scam is that Nigerian citizens keep subsidising the life style of the politicians who have looted their commonwealth. In fact, anybody who prefers to drive a gas-guzzling vehicle should be ready to fuel the car without subsidy. That’s how it works everywhere in the world.

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