KINGSLEY MOGHALU FROM PREMIUM TIMES
For Nigeria to exit from its national fiscal crisis, create prosperity for its citizens and fulfill its obligations to those citizens, we must end the decades-old drainpipe of petrol subsidy. There is no good time to do it. Postponing the evil day (as we have done for too long) beyond the next three months – and even then, only to prepare well for how to do it and the aftermath – would be unwise.
A large majority of Nigerians oppose ending the subsidy despite the overwhelming economic arguments against it. Many, though, have accepted this inevitable outcome as our fiscal crisis has progressively gotten worse. We have been locked in a battle between economic rationality and the “superstition” of petrol subsidy for four main reasons. First, Nigeria has a literacy rate of 62%, which is quite low, relative even to several other African countries. From this foundational statistic we can extrapolate that the rate of economic literacy – a basic understanding of economics and the public policy that should drive its application on a national scale, so it can work to our ultimate individual benefit – is infinitesimal. And yet, we are a people of strong opinions on anything under the sun!
Second, and perhaps even more importantly, Nigerians simply do not trust their governments and the political elite to act in a manner that is remotely in the interest of the average person. This breakdown of trust is deep, complete, and has evolved over several decades of governance failure, marked by a combination of industrial-scale public sector corruption and a vanishing capacity to exercise the basic functions of the administrative state. Nigerians therefore cling to a belief that “cheap” petrol – increasingly a myth – is their basic human right as citizens of a petrostate. It is a “minor” matter that we are one of a very few oil-producing countries in the world, such as the august company of war-torn Libya, that exports crude petroleum and then import refined and expensive petrol, to which value has been added in foreign countries.
The third reason we have remained in this dilemma is economic populism. This doctrinal approach has led successive governments to pretend that they love their poor compatriots by “subsidising” the difference between the landing (real) cost of imported refined petrol and the price consumers pay at the gas station. It is, again, a minor matter that this market inefficiency has created a class of corruptly wealthy businessmen and women, and the public servants with whom they collude to inflate consumption figures that determine the rates of subsidy payments. Meanwhile, elite corruption and inefficiency have crippled our national refineries for several decades.
Economic populism is a phrase that has its origin in Latin America of the 1970s and 80s, and from failed economic policies in Chile under President Salvadore Allende (1970-1973) and Peru in the first term of President Alan Garcia (1985-1990). It is a policy approach that panders to uninformed popular opinion to create ultimately unsustainable obligations on the part of the government (and sometimes a period of economic or wage growth). The economy then crashes, and the citizens are returned to ground zero where they were pre-populism. Sometimes they are returned to “underground zero”, which is worse and, I would argue, our situation in Nigeria. Populism is what led President Nana Kufo-Addo’s government of Ghana to chalk up massive public spending, a huge import bill on the back of newfound oil wealth, eventual foreign exchange scarcity and an unsustainable debt of $58 billion, on which our West African neighbour has defaulted and is now borrowing from the International Monetary Fund (IMF) for the 17th time in the country’s history. Nigeria has similarly been afflicted by the oil “curse”.
