Tuesday, October 11, 2011

Oil Subsidy Still a Myth

11 October 201


Last week, President Goodluck Jonathan presented what appears to be a blueprint for his economic policy. The thrust of it, he said, is to withdraw the subsidy from next year. Doing an extrapolation of the 'real' value of oil, the president figured that it was between N120 and N180 per litre. His conclusion: Nigeria will need to pay N144. 60 per litre for premium motor spirit (PMS) by January 2012.

Much as we sympathise with the president, who claimed he was embarking on this removal to be able to fix decaying infrastructure and rebuild the economy, we are sorry to say that the logic of subsidy itself is dubious. He was singing a song first mooted by the head of his economic team, Dr Ngozi Okonjo-Iweala, and which was also chorused by the governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi.

It is not an unusual motion. President Barack Obama of the United States had also in September asked the American Congress to end subsidies for all oil and gas companies...unlike in the US where things work and refineries operate to maximum capacity, Nigeria still imports fuel to feed the corruption at the seats of power and the oil companies. We believe that if corruption is tamed Nigerians need no subsidy and we can produce at less than N65 per litre that is the pump price now.

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