How Obasanjo, Gowon Started Fuel Subsidy – IMPI Reveals

 

....Say $10bn spent on subsidy payment in 2022

 

INDEPENDENT Media and Policy Initiative, IMPI, has traced the genesis of subsidy regime to the administrations of the former military Heads of State, Gen Yakubu Gowon, and Olusegun Obasanjo, alleging that they institutionalised petrol subsidy at a time Nigeria’s economy was bouyant.

IMPI explained that the two former military heads of state introduced subsidy as a short-term measure to cushion the rising international oil price.

Speaking to journalists in Abuja, yesterday, the Chairman of IMPI, Chief Niyi Akinsiju, stated that subsidy was intended as a temporary fiscal response to an oil price spike instigated by the actions of the Organization of Petroleum Exporting Countries, OPEC.

He said ordinarily, when the economy was experiencing a downturn, the tendency was to halt their implementation because of the distortion inherent in their continued application.

Akinsiju expressed dismay over the position of labour unions who, he accused of being too critical of the present government over the removal of subsidy, even though, according to him, most Nigerians were of the opinion that it should be exited prior to 2023.

He said:  “General Olusegun Obasanjo, then military head of state, formalised the petroleum subsidy regime into law when he numbered it among products for which the government would be responsible for fixing their prices and for which they should not be sold above the fixed prices.

“This was a short-term measure to cushion the rising international oil price. It was intended as a temporary fiscal response to an oil price spike instigated by the actions of the Organization of Petroleum Exporting Countries, OPEC.

“It is, however, instructive to note that under the two principal protagonists of subsidy, the price of petrol recorded increments in response to emerging economic realities. Under Gowon, the price increased by 40 per cent from six kobo a litre to nine kobo a litre, while under Obasanjo, it skyrocketed by 70 per cent from nine kobo a litre to 15.3 kobo a litre.

“Our argument is that subsidies were introduced into the Nigerian economic ecosystem as a consequence of the availability of fiscal resources. They were then a mechanism for a fairer redistribution of the country’s wealth among the populace in times of huge revenue earnings.

”When there is a downturn, the tendency is to halt their implementation because of the distortion inherent in their continued application.

“But, as it were, the subsidy and we as a people have become economic Siamese twins. Every move by the government to stop its application since 1988 has been received with uproar and outrage, despite the material changes in the economic dynamics that informed the policy in the first place.

“This latest furore over fuel price increase is typical of other times. The Nigeria Labour Congress, NLC, has taken its traditional front role and, as always, pointing fingers at the federal government for being responsible for the price increase.

“However, as a body of analysts, we submit that all this trouble-mongering should stop.”