Let's talk subsidy this morning.

According to Murray Rothbard, "government subsidy systems promote inefficiency in production and efficiency in coercion and subservience while penalizing efficiency in production and inefficiency in predation”.
https://www.vanguardngr.com/2020/08/fuel-subsidy-returns-as-nnpc-pays-n5-4bn-as-under-recovery/amp/?__twitter_impression=true

#WeNeedPIB

As ludicrous as it sounds, with subsidies of approximately N625 Billion annually, Nigeria is probably the only oil producing country on God's green earth that imports petroleum products, despite having THREE refineries.

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Nigeria also has the unenviable distinction of having the largest congregation of poor people in the world. Ordinarily, these people ought to be beneficiaries of the subsidy on fuel.

News flash: they are NOT!

Question then is why are the profiteers of fuel subsidy?
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The wealthy and well connected, that's who!

These fat cats who are able to float oil servicing and haulage companies leverage this opportunity; gaming the system in the process, to smuggle petroleum products across Nigeria's porous borders to maximize profits.
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The former NNPC Managing Director; the late Maikanti Baru, once asserted that because of the obvious differential in petrol prices between Nigeria and its neighbors, it is more lucrative for these obnoxious characters to smuggle out these products.

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As a consequence of this unprecedented and unbridled cross-border smuggling, there is an inherent impediment in sanitizing the fuel supply and distribution matrix in the Nigeria. And therein lies the fuel subsidy conundrum.

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It is incontrovertible that Nigeria's subsidy regime has to be abolished. This reality has finally dawned on Nigerians. An earlier attempt to do so in 2012 was met with stiff opposition. The current govt has however been crafty about it. Gone today, back tomorrow.

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However, the most ingenious way to achieve putting a final nail in the subsidy regime coffin is by dismantling institutions created to implement it in the first place. These institutional changes that will drive the process are enshrined in the PIB.

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The PIB proposes the establishment of the Petroleum Equalisation Fund (PEF); which will ensure “economic balance of petroleum prices across all regions”. 

One word: UNIFORMITY!

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With this uniformity catalyzed by the deregulation of the petroleum sector, the PPPRA believes strongly that the price of fuel will go below N100 per liter. The economic ripple effects of this development cannot be overemphasized.

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A situation where the NNPC acts as both operator & regulator is untenable and impugns the tenets of corporate governance. The PIB in fixing that, proposes a merger of the PPPRA and DPR for a more formidable NPRC; a development that ought to be endorsed by the FG.

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Until the PIB is signed into law therefore, the end to the promotion of inefficiency in subsidy regimes which Murray Rothbard alluded to, may be very far for Nigeria and its multitude of poor people.

#WeNeedPIB