It is no more news that the Federal Government of Nigeria has fully deregulated the downstream petroleum sector of the Nigerian economy thus totally removing the prevailing subsidy on Premium Motor Spirit, PMS. We have seen protests across the country and the current confusion that has trailed the development.

The policy, one could argue is ill timed. However; it is a bitter pill that we must all swallow in order to move our great Nation forward. Nigeria has been severally described as the giant of Africa; however, we have seen countries like South Africa and of late Ghana making nonsense of our giant claims. It is high time we faced realities and come up with reforms that would enable us unleash our great potentials.

The initial effect of the subsidy removal on PMS would be a sharp increase in transportation costs and by extension, costs of foodstuff and a push in inflation. This would be largely felt in the informal sector. The formal sector would absorb most of this adjustment by leveraging on their economic of scale and high level of organization as was witnessed after the removal of subsidy in diesel. We would equally witness an increasing formalization of the informal sector. Thus, by this policy, the Federal government has created a super business magnet, a great investment attractor that is capable of turning our ailing economy around if properly harnessed. We are likely to witness unprecedented Foreign Direct Investment, FDI, in different sectors of our economy.

The Federal government equally created a board headed by Dr. Kolade to oversee the management of the savings that would accrue to the Federal government coffers as a result of the subsidy removal. However, going by previous experiences with government promises and pronouncements, the saved subsidy fund could be embezzled and thus rubbishing the purported gains of the policy. Let’s be a little bit pessimistic and assume that the board would embezzle the money and thus develop a plan B which is focused on how the private sector could harness the opportunities inherent in the policy. Let’s deliberately explore how the investment attractor that has thus been created could lead to the repatriation of our stolen monies stashed in different bank accounts overseas by greedy politicians and civil servants by way of FDI and equally the redirection of money laundering overseas to within the economy.

Our bane of development has been corruption as is the case in most other developing countries. We seem incapable of riding ourselves of this menace. However, there could be a practical way out of this quagmire which the current subsidy removal policy has presented. Let’s take the case of Indonesia for example; in the eighties, Indonesia was extremely poor and plagued by corruption with a huge population base. The moment the corrupt politicians and their overseas collaborators started reinvesting the stolen monies in their economy, the economy started picking up. How could they have achieved this? The government deliberately created a policy that made it “conducive” for the economic looters to invest the looted funds in their economy rather than the usual practice of laundering them overseas. President Goodluck Ebele Jonathan and the coordinating minister of the economy, Dr Ngozi Okonjo Iweala must have considered the helpless corrupt tendencies of the Nigerian society and thus consciously tried to replicate the Indonesian experience in our country. The present economic team has just created a super investment climate that has the capacity to attract to our economy most of the looted funds over the years. We are likely to witness massive inflow of Foreign Direct Investments (FDI) into Nigeria.

This position is not in any way pointing that we drop the current efforts by the EFCC and ICPC in recovering looted funds, it is however, an indirect way of recovering ill gotten wealth while the EFCC and ICPC efforts continue. At least let’s put the monies to work pending when the tracing of the illegal source of the fund are concluded, which as usually the case takes many years, by the anti-corruption watchdogs.

As we all know, efficiency sets in when there is sense of ownership in a venture. The Nigerian economy has suffered inefficiency and lack of ownership. The government has been the major economic player and thus, process ownership has largely been lacking among the civil servants spread across the MDAs. Therefore, lack of process ownership could be considered as the main factor driving corruption in our economic system. With deregulation and the consequent subsidy removal in the downstream petroleum sector, private players would be encouraged to play more active roles in this sector and thus efficiency and job ownership would gradually be restored. Similar efficiency restoration could be witnessed directly in associated sectors like transportation and power generation/distribution, and indirectly in the other sectors of the economy. The beauty of this is that jobs would be created and foreign exchange saved and since corruption would not stop overnight, ill gotten funds would be largely laundered within our economy instead of overseas, thereby reducing the exacerbating effect of corruption.

Orji Chima Egbuta
Corporate Banking Unit
Union Bank of Nigeria PLC, Trans Amadi Branch, Portharcourt