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Subsidy Removal: Imperative for Job Creation in Nigeria

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As the controversy of the removal of oil subsidy heats up and labour unions in Nigeria threaten mass strikes; I stumbled on an email sent by a Nigerian in Diaspora on the issue of fuel subsidy. Part of the email reads 'President Jonathan is on the right path in

removing the fuel subsidy if the revenue accruing from the programme is properly managed. Consider this, citizens in developed countries don't enjoy fuel subsidy. Then, why are citizens in poor developing countries enjoying fuel subsidy? After all, the benefits of fuel subsidy are reaped by the Nigeria political class and the economic elites. How many Nigeria poor and low income earners own automobiles, use gas range and air condition, etc.?

In my view, the fuel subsidy program is nothing but a subsidy for the rich and the middle class Nigerians. In fact, it is not an economic necessity but a part of the luxurious life of the wealthy and the middle class. More importantly, the subsidy is a leakage in the Nigeria economy. As recently revealed, the costs of managing the subsidy program has ballooned.'

After going through the mail, I then paused and asked: Who is Nigeria really subsidizing? Is the government subsidizing for the rich to become richer or for the poor to become well to do? Why are jobs not created in spite of Nigeria's position as an influential member of the Organization of Petroleum Exporting Countries, OPEC? Can the removal of subsidy bring about job creation? These and some other issues have continued to harass my imagination.

As I pondered about these knotty issues, the analogy often given by the Federal Government in the communication subsector. In the communication sector, de-regulation has given Nigeria  an edge as multiple operators have come and invest, SIM prices has crashed from 30,000 Naira in 2001 to 100 Naira in 2012 and in some cases SIM Packs are free. Call rates have crashed from per minute billing to per second billing (from 60 Kobo to 10 Kobo).

Whereas private investors like MTN; ETISALAT, GLO, AIRTEL etc are charging less yet making fantastic profits to stay afloat the Nigerian Telecommunication NITEL have gone moribund because they are waiting for subsidies. Four attempts have been made to sell NITEL but all attempts failed woefully. The reason for government's inability to sell NITEL is because it is overpriced. This is the fate that has befallen most Government owned businesses all over the world .

In Nigeria, there are oval possibilities that when Organized Private Sector Operators start building refineries, the price of PMS and other petroleum products would crash. Today, Nigeria has only four refineries but some rich Nigerians have fifteen refineries overseas, several private jetties in Nigeria, hundreds of sea-going vessels and workers.

Assuming that a full-fledged refinery producing at full capacity employs 20,000 people, then the four refineries would employ 80,000 people. Similarly, if the 15 refineries owned by Nigerians abroad were located in Nigeria, they would have created at least 300,000 jobs. When this is added to those who operate the oil badges, the jetties and other related jobs, at least the jobs created would have risen up to 700,000. The existence of a subsidy regime denied Nigeria the opportunity of enjoying these massive job opportunities.

For a nation that operates a crude oil monoculture, Nigeria has wasted her resources on subsidy for 50 years. Billions of Nigerians taxpayers' money is spent to subsidize petroleum products for consumption of well-to-do Nigerians. The worst aspect of the subsidy regime is that unpatriotic oil racketeers smuggled these subsidized products over maritime and land borders of the coast of West African countries, Cameroun, Chad, Niger and Sudan. These are the wastes the removal of SUSIDIES is meant to curb and on the long run create job opportunities for unemployed graduates.

Only yesterday, Wednesday, PRESIDENT Goodluck Jonathan and cabinet members, rose from an emergency session of the Federal Executive Council, FEC, with an approval for the Federal Government to procure 1,600 mass transit buses on Monday 9 th of January to cushion the harsh effects of the removal of fuel subsidy. The 1,600 mass transit buses formed part of the N10 billion revolving loan set aside by the government to address transport infrastructure in the country. The revolving loan according to him is payable over a five years period and attracts a 5 per cent interest rate under the Urban Mass Transit Programme and would be made available to credible transporters, labour unions and other Nigerians involved in transport business.

Nigerian youths are more concerned about whether the removal of subsidy will bring about job creation. The answer is in the affirmative. The Federal Government declared her irrevocable commitment to creating job opportunity for the army of unemployed youth in the country. Under a new scheme: government has introduced the Youth Enterprise with Innovation in Nigeria nicknamed (YouWin!), and an estimated 110,000 jobs are being planned as part of government`s efforts to tackle unemployment in the next four years.

While President Jonathan and his economic team are making concerted efforts to appeal to the UNDP, and other development partners to contribute their quota the bad statistics seem to be unending. Added to these bad statistics is the disclosure by the National Directorate of Employment (NDE) which puts the number of Nigerian graduates who completed the compulsory National Youth Service Corps (NYSC) within the last five years but have remained unemployed at over 200,000. This is appalling. It should be noted that President Jonathan appealed to the UNDP to assist Nigeria in this programme which aims at providing jobs for the young.

The President disclosed that due to the age distribution of youths, 'which makes youths more in number', it was imperative for them to take the driver's seat of the country's development and therefore need all the support his administration could offer. Under the YouWin programme thriving enterprises would submit business plans for expansion which will take in other youths and build capacities through the financial assistance to 3,600 youths. Again, over 3,600 Nigerian youth is estimated to benefit from the programme.  It is expected that the new scheme would create between 80,000 and 110,000 sustainable jobs over the next four years. All these are policies that would encourage job creation.

Experts say the Nigerian government spends N1.4 Trillion in fuel subsidy and this huge sum of money is weighing down the economy of the nation. The subsidy regime is certainly unsustainable if government has to create jobs, provide much needed infrastructure and improve on service delivery in the economy. Government's long-term objective is that the revenue to be realized from the removal of subsidy would provide additional finances for the federal government to grow Nigeria economy particularly in the area of job creation. So the removal of subsidy is a stone that can kill two birds; it will cure the culture of corruption in the country associated with the downstream sector such as plugging the leaking economy as well as create jobs for Nigerians.

 
The removal of subsidy is indeed painful on the short-run but it is certainly the only strategy of creating a new economy to employ youths in the country. Beyond job creation, the removal of subsidy would no doubt improved social services delivery and physical infrastructure such as roads.  In the medium term, the policy will ensure the Turn Around Maintenance of our refineries and encourage Foreign Direct Investment in the industry.

When the cruel cabal feeding fat from subsidy is uprooted and the revenues accruing from subsidy are judiciously managed, the decay associated with the Nigerian economy would be a thing of the past. States administered by transparent leaders will also have more money to spend on service delivery. All these strategic moves are in line with President Jonathan's transformation agenda. Since there can be no gains without pains, no sacrifice can be too much for Nigerians to bear in our upward climb to economic stability, infrastructural sophistication, sustainable peace and social progress.

Even opponents of deregulation do not want the Nigerian economy to collapse. Greece has gone bankrupt - with hundreds of billions of Euros in debt. The removal of the fuel subsidy may save Nigeria from experiencing the Greek syndrome, resulting in the collapse of the country's economy. Nigeria must do all within our endurance limits to avoid the GREECE SYNDROME. Greece spent too much and did not have the income to pay off the debts. A huge chunk of the money Greece spent was on public services without putting in place measures to curb bankruptcy. Those pushing for policy reversal do not know the depth of the economic adversities that would arise from sustaining a laissez faire regime of wasting national resources on oil subsidy. With the removal of subsidy, there is no doubt that, in the foreseeable future, Nigeria's economy will be more dynamic, virile and competitive in Africa and the world.

 
Idumange John  Is a Fellow of the Institute of Chartered Economists of Nigeria, ICEN