According to a statement he released yesterday May 19th, Tinubu said President Buhari acted right by removing subsidy from oil.
President Buhari after carefully weighing the options decided to do what is right. In an act of courage he removed the oil subsidy thereby freeing the downstream component of this strategic sector of the economy from the distortions of price fixing. However, this decision was not to be a step toward conservative austerity as practiced by the former government. That government simply wanted to end the program that they may prove obedient to neoliberal economic doctrines. They offered no programs of valid compensation to the people. Instead, they instigated a policy of monumental fraud known as Sure-P. However, the only thing sure about it was that its architects would siphon the public’s funds to fatten their own wallets. They wanted to save money (for themselves) yet expend the people for no good reason at all.
Read his full statement below...
Ending Price Fixing, The Making of Economic Sense
To construct the right building sometimes means we have to tear down the wrong one standing in our way. Our economic development hinges in equal measure on saying good bye to debilitating and corrupted old practices as it does on embracing efficient, wealth creating new ones.
As political progressives, we are anchored by a healthy and strong regard for the positive role government must assume in ensuring fair play and the just allocation of wealth and benefits within our political economy. We understand that the so called free market is not always fair. This is the major reason that we advocate a comprehensive policy of economic development projects coupled with social programs. These development projects will build the infrastructure and create jobs that were beyond the ability and rationale of our private sector to do. The social programs will bring succor to those the dynamics of the free market would have otherwise left behind.
Yet, as progressives we must be pragmatic and not allow ourselves to become blinded by or render ourselves subservient to ideological bias. Ideology is meant to serve us, not us to serve it. As such, we must recognize that there are certain things the workings of the market perform better over the longer arc of time than government may perform. Establishing the most efficient price for what is essentially an economic commodity is one such thing better left to the interplay of supply and demand. While short-term exigencies may at times call for government action to stabilize markets and prices, government’s long-term determination of such economic prices, although initiated with the finest intentions, often contorts into something ugly and callous. It tends to transmute into corruption, waste and distorted pricing signals that cost the economy more than they benefit the people.
Against this background, we must assess the recent decision to allow the workings of supply and demand to determine the price of fuel. Most of us have called this process one of deregulation. This is an inaccuracy that should be promptly corrected. This decision should end arbitrary government price fixing. By ending this price fixing, government regulation of this market will not be eliminated. It will simply change from its emphasis on maintaining a subsidized price to ensuring that the market remains free and devoid of collusion so that sufficient supply is available at a defensible and affordable albeit higher than subsidy price. Government must still monitor this market to ensure against unjust enrichment that comes from attempts at price fixing.
Understandably the new pricing decision elicited mixed reactions from a cross section of Nigerians. This is understandable in view of the fact that the fuel subsidy had been with us for such a long period that it seemed integral to our political and economic life. However, we should not lament the departure of something just because of its longevity particularly when that very policy had ceased to serve us long ago.
The decision to end the subsidy was hard but it was also inevitable. It had distorted into a system where wrongdoers benefited at the expense of the innocent. The bogus supplier was paid for supplying nothing while you sweated in long lines for fuel that was never there. The smuggler secreted fuel across the border while our economy crossed the border into fuel scarcity. As the price stayed fixed at a low level, investors were apprehensive about fixing existing or building new refineries. Our petrochemical industry remained unfertilized because potential investors could not decipher how they could make a decent return under such a pricing regime. Because of these imbalances, we were forced to export hard currency and many jobs to purchase fuel and other products abroad.
While the price of fuel was cheap in paper, these were the hidden costs that made the subsidy regime an expensive and heavy yoke the nation could ill continue. With dwindling revenue from oil due to the slump in global oil prices and a dwindling forex reserve, the country could no longer live in denial.
President Buhari after carefully weighing the options decided to do what is right. In an act of courage he removed the oil subsidy thereby freeing the downstream component of this strategic sector of the economy from the distortions of price fixing.
However, this decision was not to be a step toward conservative austerity as practiced by the former government. That government simply wanted to end the program that they may prove obedient to neoliberal economic doctrines. They offered no programs of valid compensation to the people. Instead, they instigated a policy of monumental fraud known as Sure-P. However, the only thing sure about it was that its architects would siphon the public’s funds to fatten their own wallets. They wanted to save money (for themselves) yet expend the people for no good reason at all.
The Buhari government took a vastly different approach. Given the inefficiencies inherent in the pricing regime, this administration asked the fundamental question: could this money be better spent to help the most vulnerable of our people. For it was also recognized that the pricing regime was a regressive feature. Its benefit went disproportionately to the well off who needed no such help. Better to use the sums to more directly and exclusively assist poor and working class Nigerians.
Thus, President Buhari followed through with a 500 billon fund to support a social safety program and empower the poor and needy. Five million School children will be fed for 200 days. Other plans of funding social infrastructure, education, transportation, health and other critical areas needing attention. What the President did is about the future of our country and that of the next generation.
With regard to our petroleum sector, The President’s decision constitutes a major step toward removing the nightmare of fuel importation and its attendant hardships especially to our foreign reserve condition. It was the right choice to make. The club of fuel importers had become a parasite and a drain on our economy. With this decision the exploitation by marketers, the unchecked smuggling, mismanagement, lost of productive man hours with people waiting in fuel queues, traffic congestion and health hazards associated with black market and other desperate practices will steadily pass away.
For almost 3 decades we have entertained distortions in the downstream sector by operating an opaque system susceptible to manipulation and structured in a way that allowed a few people to gain mightily from the system and feed fat on the misery and frustration of millions of Nigerians.
The oil sector became unattractive to both local and foreign investors. Government price pricing was a disincentive. Our oil refineries became epileptic and later comatose. But now investment in the sector will open to all. Instead of fighting this measure, opposing segments of organized labor should consider collective investment in refineries. Such investment will enrich membership and give them a direct interest in the success of refineries crucial to our national growth.
As it now stands, while we were paying on the front end a low price for fuel when it could be gotten, we were being asked to pay too high a price in hidden and indirect costs for such malpractice to continue. Not every cost is defined by what comes out of your pocket. There are times when the greatest cost is the failure to receive a benefit otherwise due.
It is time to come to grips with the hard facts of the price fixing. It cuts and bleeds the economy in ways more numerous and deeper than those it heals.
Moreover, there are vastly better ways to spend the same money and materially improve the wellbeing of millions of our people. This government did not withdraw the subsidy in order to save them but spend the people. It is transferring the funds to better spend them and better save the people.
Nothing in this world is perfect but this decision is a just and correct one aimed at bolstering the economy while better caring for those the system has unfairly treated. I can find little fault in the new policy taken and the reasons for it. When all is placed in the balance, the scales now better tip in favor of better economy and future because of the decision so wisely made.
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