Fuel subsidy: How to Retain Subsidy Without Corruption [Opinion]

By Ayo Abiola

  • That subsidy is a result of acute leadership failure is not in doubt. 
  • That subsidy helps keep imported petrol prices low is not in question. 
  • That subsidy payment is an avenue for the blood-sucking cabals to steal the nation’s wealth is not a secret. Central Bank of Nigeria’s Governor, Lamido Sanusi has recently described how they do this.
  • That the government and the nation loses enormous amount to subsidy, taking away crucial fund from development is well known. 

The question however is how much of the subsidy fund is channelled to corruption rather than petrol consumed by the Nigerian people. In 2011, just N240 billion was budgeted for petrol subsidy, N1.5 trillion was paid for the same purpose! To solve this problem, the Nigerian government has dramatically removed subsidy from petrol. This triggered an instant rise in prices of goods and services across Nigeria.

But do we solve the problem by running away from it? Subsidy in itself was a means to solve a problem of high and unaffordable cost of petrol. The problem arose from government’s failure with managing local refineries. Before the removal, subsidy ensured that the Nigerian people who largely earn super-low wages can afford to buy petrol which we highly depend on. If the subsidy system is failing, what we need is to design a workable solution rather than torture 99% of the population for a problem caused by the greedy 1% occasioned by failed leaders and government agencies while the perpetrators, the cabals roam free unpunished. This tactic being employed by the government is defeatist, and smacks of connivance with the cabals. I will leave out the issue of punishing the thieves for now. This piece is about finding a solution.

How do we innovate to solve such a cancerous problem? Here, I have proposed a possible solution. Technical experts, economic and finance gurus can still go back to their strategy den or labs to refine it or work out better innovative-based alternatives.   Postgraduate and undergraduate research students in Nigerian universities may also be tasked to investigate possible innovative solutions. But as a start, the subsidy must be restored – this is for the best interest of the Nigerian people living on paltry income.  I have thought of this solution on the fly without any refinement and should it make any iota of sense, I invite those experts I previously mentioned, including government strategists to explore its possibilities.

Since petrol is dispensed at filling stations which are now equipped with computerized machines (pumps), I see the possibility of innovation. Rather than making subsidy payments to fuel importers at the port, they can be made at the point of purchase, directly to the consumers. This involves the deployment of elaborate, but simple technology which we shouldn’t be afraid to explore. Shortly, we will see how this solution can benefit other sectors of the society besides the petroleum sector.

It will start with Nigerian citizens (consumers) obtaining a special plastic card, probably called a petrol purchase card (PPC). This card should be obtainable for free and every card holder will have a personal responsibility to keep safe his/her own card. Should you lose your card; the liability is all yours, not to the marketer or public treasury. The card may also be designed to link to your personal bank account, this way, it will be an incentive for more Nigerians to embrace banking, as well as support Sanusi’s CBN cashless banking drive. Now this is how it could work.

How the Subsidy card should work

The pump price of petrol will remain at the deregulated price in any station you intend to make petrol purchase. Let’s say you are buying at a station that sells at N140, and you purchase a certain liters of petrol. If for each liter you buy, government subsidizes either a fixed amount of N75 or a percentage of purchase prices at the pump. In this case, for each liter you purchase, you will earn N75/liter subsidy which should be converted to points on your card. So your PPC is actually a points card, similar to what is common at groceries stores in Europe and North America. You can choose to use the subsidy points you earn to purchase more liters of petrol instantly or accumulate them for future petrol purchases.

This way, the fuel marketers who we presently blame for diverting fuel and cheating  the treasury through subsidy payments will only be able to obtain payments for what is actually sold to consumers, within Nigeria rather than what they falsely declare, or what they smuggle out of the country. Also, amount of petrol sold to Nigerians can be monitored clearly. There is not an alien technology since the points-earning card technology is already well known. The innovation we have here will be its use to creating an effective subsidy payment system for Nigerians. So, each time petrol buyers purchase petrol using subsidy points, the money payments will be made to the filling station by the government from the subsidy payment. It also eliminates bureaucracy in the subsidy system.  If we successfully eliminate corruption in the subsidy payment this way, we can reduce the obscene amounts in the subsidy payments.

In the banking sector for instance, this system will encourage many petrol buyers who are hitherto unbanked to open bank accounts. This will be of direct benefit to the banks, while also promoting and fostering the cashless banking policy. The educational sector will not be left out as it will help a vast number of uneducated citizens to understand basic calculations as they monitor points on their PPC. This will also be a boost to our technological capacity since even when the subsidy regime is over, assuming our refineries are eventually fixed, and we can sell as low as N35/liter, and then we can transfer the technology for other use in commerce. Most of the technological advancements in developed western nations are direct results of challenges and problems they encountered at some point. Their problems were confronted with innovations rather than accept defeat as our government now tells us we have to do. This subsidy-induced corruption is a problem we should innovative to combat.

I challenge Nigerian thinkers to propose further innovative solutions to our problems. Interestingly, I like this one, even if sarcastic. I challenge the Nigerian government and her strategists to explore such innovative solutions and finally, I challenge the government to fix the system, fix the refineries, genuinely combat corruption and end this madness. Until then, Occupy Nigeria please.

Solidarity forever.
Ayo Abiola is a Doctoral Candidate in Engineering and Team Strategist for I AM NIGERIAN

Post Author: Ayo Abiola

Ayo is a doctoral candidate and educator. He is also a social strategist and coordinator of the "I am Nigerian" platform. He writes on CP-Africa on behalf of "I am Nigerian" and other social issues. To contact Ayo, send an email to great[dot]arc[at]gmail[dot]com

4 thoughts on “Fuel subsidy: How to Retain Subsidy Without Corruption [Opinion]

  • Samuel

    (January 10, 2012 - 1:07 pm)

    No bi small matter,fuel subsidy should be removed,may God help us!

  • Akin Allen

    (January 10, 2012 - 11:41 pm)

    Great Idea by Ayo Abiola.

    I will suggest that subsidy reimbursement should be tied to a cell phone because everyone has a cell phone. Registering a cellphone with a bank account can be accomplished by sending a text message from the cell phone to a special number Or via the web.

    Sample sms is 08047898988#DiamondBank#0020039009#

    To combat fraud, customers will get an alert on their phone after buying gasoline. This will let them know if a gas station is honest or cheating them. The subsidy is their money.

    To initiate the process of pumping gas, a Cellphone # will be requested.

    The pump will prompt the operator for a cell #.

    After the transaction is completed the pump will send a sms message to a special # for Subsidy reimbursement. The message will be forwarded to the customer’s number upon receipt.

    Only numbers associated with fuel pump devices will be allowed to send such a message.(Fraud Prevention)

    The message will contain transaction date and time, cell phone , amount of gas dispensed, and pump #. To the customers cell # as well as the Govt’s agency for subsidy reimbursement.

    Eg #01/11/2012#03:30PM#08047898988#23.45#00392-918-500002-85869#

    The last set of numbers will be used to identify the gas pump.

    Every week the data will be collated, and analyzed. Fraudulent activities will be flagged for investigation.

    Certified transactions will be processed and the Bank accounts associated with each cell phone will be credited with the weekly subsidy.

    Banks will alert customers when Subsidy reimbursement is deposited.

    Employment will be created for Fraud Prevention Unit. They will be in the thousands.

    All Gas stations will be required to upgrade their pumping units to the new devices.

    This will also be part of the subsidy investigation units

    It is also important that Subsidy reimbursement happens every week for people to have faith in the system.

  • St Paul to the Niger

    (January 11, 2012 - 8:01 am)

    http://thewillnigeria.com/politics/11757-Governme

    Otedola Made a point. just have deals with the bloody refineries

  • Kola Adegoke

    (January 11, 2012 - 10:41 am)

    Thank you very much Dr. But I honestly think we need to first ascertain whether there is subsidy in the first place. People have come up with analysis that the word subsidy as regards petrol price in Nigeria is a fraud. I think, given the secrecy/mystery that has enshrouded the real cost price of refined petrol in Nigeria together with the corruption and distrust endemic in the whole regime, there is a compelling reason and need to have an exhaustive debate about this all important issue by all stake holders ( not government handpicked personalities) before we can start talking about Petrol Purchase Card. It's a good innovation, no doubt, but we need to really answer the question honestly and realistically, is there subsidy on our petrol price of N65?

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