Date: 2016-05-19

Some public intellectuals became unnecessarily emotional on the PMS price hike without first looking at the facts on the ground. Some of them were misleading others within their social circle about what really happened while others were downright condescending and called fellow Nigerians unprintable names. And then there were a category of those who may be experts in some areas within the academy but are clueless in this particular matter. Rather than accept that they haven't spent years studying and coming to an understanding of this matter, they continue to pontificate and stand logic on its head. Of particular interest is a fellow that compared Nigeria's circumstances to that of Saudi Arabia, I thought it was obvious that there is no degree of comparison between the two states. While one is an emerging democracy, the other is a hodgepodge mix of theocracy/monarchy. One cannot govern with absolute powers, the other can. Besides, Venezuela is the only oil economy whose situation closely resembles ours. Presently, Venezuela is unraveling due to a plunge in oil prices coupled with the side effects of a regulated economy during an economic downturn.

First, everyone should endeavor to watch Ibe Kachikwu's newly released video where the government finally came clean about the price hike. In essence according to Kachikwu there was no subsidy on PMS anyway, however, what Kachikwu failed to tell us in the video is that while the Buhari administration stopped making subsidy payments in the new year, they refused to allow private marketers to sell at a profitable price above the state regulated 86 Naira. This was counterproductive and obviously months later unable to meet up with the demand for PMS through the state owned NNPC coupled with a significant drop in crude oil extraction, the government had no choice but to face the reality of the situation. As Eleanor Roosevelt once said "we gain strength, courage, and confidence by each experience in which we really stop to look fear in the face. We must do that which we think we cannot."

Don't get me wrong, I am not in any way a dyed in the wool capitalist; as I stated in my detailed paper on this issue, the biggest problem facing successive Nigerian government is the lack of a recognizable economic model. Personally, I favour a mixed economic model where private businesses flourish unencumbered by government bureaucracy while elected government serves as an enabler of private innovation, provides the infrastructure that individuals cannot meaningfully provide for themselves, make provisions for the indigent, uphold workers rights, and enforce the rule of law.

In 2012, I opposed the removal of subsidy when we actually had subsidy in place because of the following reasons:

1. Crude oil was selling above $100 a barrel and hence the Nigerian government can afford it

2. The government had not prepared the citizens for such a removal in a timely manner through sensitization

3. In the aftermath of the removal in January of 2012, the government did not have any palliative in place to cushion the effect of the removal

4. From my findings, the government was more concerned about the billions of naira spent on subsidy and least concerned about doing the right thing.

Now, it's important to point out that I had every reason to support the decision of the Jonathan administration because this decision came barely seven months after I served as one of the most senior research officials next to Mike Omeri at the national campaign headquarters and as of January of 2012, I was in office as the most senior Special Assistant to a sitting National Chairman of the ruling party when this decision was made. This context is important and it undergirds my support for a complete deregulation of the downstream sector of our petroleum industry today.

The four main reasons why I couldn't support a government that I was a part of four years ago are not in existence today. Today, as many of you are aware, the price of crude just recovered to around $50 a barrel, Nigeria's crude oil exports has also dropped to an all time low of 1.4 million barrels compared to an all time high of 2.5 million barrels in 2012. Besides these two reasons, paying cash to independent marketers as a way of bridging the gap between the state controlled price and the actual market price is not sustainable in the long term. Since 2015, the long term isn't so long term after all, the crash in crude oil prices came with an increase in Niger Delta militant attacks on oil installations which reduced Nigeria's crude oil exports and thus its earnings.

Did the Buhari government go about the price hike with finesse necessary to assuage the citizens? No. But did the Buhari administration did the right thing given the prevailing circumstances? Yes. Some have suggested that eliminating corruption in the subsidy regime is the best way to go about this and still keep the 86 Naira pump price of PMS in place because of the effect of a high PMS price on the working poor in Nigeria. This is an idealistic position and does not conform to the existing realities of the Nigerian state.

In 2016, the Nigerian state is close to bankruptcy and even if there is zero corruption in the subsidy payments, the Nigerian government does not have the funds to pay. As Kachikwu said and I believe him, Nigeria was faced with several stark choices. One, continue to insist on 86 Naira a litre and a persistent long queues at the petrol stations. Second, continue to use meager state foreign exchange to defend the Naira against the dollar exacerbated as a result of this artificial price ceiling. Third, deplete existing reserves while carrying out one and two above and end up unable to pay public sector workers' salaries. These were the grim choices that the Buhari administration was faced with.

Though I commend the administration for finally doing what is right in this matter and ending the long queues, lost manpower and the hemorrhaging of Nigeria's foreign exchange reserve, I encourage the government to go the long haul as this is where we stand to benefit the most both as citizens and as a government.

In the long term, the government must end the two tier currency exchange system and remove the price ceiling on PMS. If the government can muster the political will to do this, from all indications, PMS will stabilize to around N107 a litre and the dollar will hover between N300 to N320 in the short term and N200 to N240 as the demand for Nigeria's goods and services increases in the long term.

By His grace, tomorrow, we shall be discussing the things that the Nigerian government should be doing to bring not only respite but an increase in the standard of living to the millions of Nigeria's working poor.