Last week, Stephen Haykin, the United States Agency for International Development (USAID) country director for Nigeria reignited the thorny issue of fuel subsidy at a function in Abuja.
Haykin argued that Nigeria’s scarce resources that could be used to improve education and healthcare were wasted on fuel and electricity subsidies.
Nigeria operates the cheapest petrol pump price in West Africa.
With the Nigerian National Petroleum Corporation (NNPC) as the sole importer of petrol, the volume of petrol consumed daily, the quantity imported and the open market price of the product have become trade secret known only to a cabal in the corporation.
No one knows how much is spent on petrol subsidy.
Under current circumstances, one can only hazard an informed estimate of the cost of fuel subsidy.
In December 2017 NNPC data put daily petrol consumption in Nigeria at 28 million litres.
With the price of crude oil at $78 per barrel, it is estimated that the landing cost of petrol hovers around N195 per litre.
When the cost of logistics and retailers margin estimated at a total of N15 is added to that, the open market pump price of petrol hovers around N210.
With official pump price at N145, the federal government pays about N65 as subsidy per litre of petrol.
With daily consumption at 28 million litres, petrol subsidy stands at N1.82 billion daily or N664.3 billion annually.
That calculation is based on the figure released by NNPC in December 2017.
However, NNPC later flaunted new consumption figure influencing petrol subsidy (under-recovery) calculation.
The new figure announced in February 2018 put daily petrol consumption at 60 million litres.
Even as it has not bothered to explain the basis for the jump in consumption by 32 million litres in less than two months, petrol subsidy is now calculated on that basis.
With the new figures from NNPC, daily petrol subsidy hovers around N3.9 billion.
That amounts to N1.4 trillion per annum.
That is more than three times the N340.456 billion budgeted for healthcare in 2018.
Electricity tariff has been reviewed three times since the federal government sold the generation and distribution arms of the defunct Power Holding Company of Nigeria (PHCN) to the private sector.
However, at an average of N22.5 per kilowatt hour for residential consumers, electricity in Nigeria remains heavily subsidized.
The power distribution companies (DisCos) claim that they buy power at N87 per kilowatt hour from the generation companies (GenCos) and sell to consumers at an average of N37 per kilowatt hour.
That leaves about N50 as under-recovery or subsidy if that claim is credible.
Except for the cost of running the transmission lines, the federal government does not directly subsidise electricity.
The subsidy is funded partially by DisCos.
That probably explains the debt contagion inhibiting investments in the industry.
The DisCos owe the GenCos a staggering N1.3 trillion in unpaid power bills.
The underrecovery is so huge that in the month of January 2018, the GenCos sold electricity worth N43.2 billion to the DisCos.
The DisCos only paid N2.7 billion to the GenCos.
For that month alone, the DisCos chalked up a debt of more than N40 billion.
Electricity is inexplicably cheap when compared to the cost of domestic cooking gas which has been de-regulated.
At the current price of N4, 000 per 12.5 kg cylinder, cooking gas retails for N190.4 per litre.
Five litres or 3kg of cooking gas can only be used by a middle income family of six for five days.
However, N1, 000 worth of electricity which is 43.7 kilowatt hours can power every equipment for the same family along with an electric cooker for the same five days that N1, 000 worth of cooking gas was spent to fire the gas cooker alone.
Unlike Haykin claimed, the subsidy in electricity cannot be invested in education or health because it is inadvertently paid by the DisCos.
The consequence of cheap electricity is that Nigeria may never have regular power supply until the market value of electricity is paid by consumers.
Haykin’s claim about petrol subsidy is the gospel truth.
Nigeria’s healthcare and education systems are in shambles because of the peanuts budgeted for them yearly as petrol subsidy gulps colossal sums.
In some rural communities, the sick travel for 40 kilometres to the nearest poorly equipped government hospital.
Last week at the Ilorin General Hospital, one could see highly committed doctors and nurses working practically with bare hands even as their salaries are not paid.
The hospital’s pharmacy is empty.
In Lagos, the sick hardly find beds in government hospitals.
Last year a rich man died in his home at Ogudu GRA after his doctors laboured in vain for days to locate a bed for him in government hospitals.
About 10 million children of school age roam the streets because they cannot find seats in government schools.
Petrol subsidy is the product of 30 years of corruption, incompetence, irrelevant meddlesomeness and irksome indecision on the part of successive governments.
Nigeria’s population has grown by about 100 million in 30 years while its petroleum refining capacity deteriorates by 95 per cent.
If Nigeria produces its petroleum products, petrol pump price would drop below N110 per litre.