"We are accounted poor citizens, the patricians good ... but they think we are too dear: the leanness that afflicts us, the object of our misery, is as an inventory to particularise their abundance; our sufferance is a gain to themfor the gods know I speak this in hunger for bread, not in thirst for revenge" Coriolanus, William Shakespeare.This scene in Shakespeares play, Coriolanus, depicts his English audience some 500 years ago, when an incident in Rome looked exactly like what is playing out in Nigeria over the removal of fuel subsidy. Then, Roman citizens had expressed concern over their misery as a result of scarcity of corn, which was probably due to the withdrawal of subsidy and taxes by Roman authorities. Citizens lamented that there was intentional hatred from the rulers to inflict pain on them because, " the leanness that afflicts us, the object of our misery, is an inventory to particularise their abundance; our suffering is a gain to them"Shakespeare had also demonstrated to us that struggle over subsidy is as old as governance. In the olden times, rulers put subsidies on food, corn and wheat. Today, they are put on energy, fossil fuel, education, transport and health. The level of subsidy depends on the ideological bent of the people in government and the size of the treasury. Subsidies are also for a purpose and are usually put in place to stimulate demand if they are consumption subsidy. When that objective has been achieved, government begins to think of a review of subsidy regimes. In other words, subsidy is not forever. Today, because the debate has generated so much heat and emotion, substantial misconceptions about application and uses of subsidy have been made, with some bordering on outright falsehood. For example, the interpretation of what constitutes a subsidy differs from one person to the other, depending on the concept being used to interpret data. Some have argued that subsidy on fuel did not exist in Nigeria. Consequently, government officials who use a particular concept to define what subsidy is and make calculation were blackmailed and branded liars. If this conceptual problem is not resolved, we cannot understand one another. Ex-Petroleum Minister, Prof. Tam David-West, based on his understanding of what constitutes subsidy, believes there is no subsidy on fuel in Nigeria. Also, a former Head of Department in Petroleum Engineering Department, University of Ibadan, Dr. Izielen Agbon, in an article published in Sahara Reporters of December 15, titled, The real cost of Nigerian petrol, supported David-West, quoting figures, local and international prices to buttress his point. The summary of Agbons position is that the cost of production of a litre of fuel in Nigeria is N33.36 and it is below the pump price of N65.00. Therefore, he said, consumers of petrol in Nigeria are being taxed by the Nigerian government. "No subsidy exists on petrol," he concluded. Here, government will be seen to be subsidising if only the pump price of fuel is below N33.36/litre. That, to me, is an error. I do not know why it is lost to these writers that if subsidy is a loss of revenue by government fixing prices below the market price, determining subsidy using production cost alone will not be proper. Consumer subsidy involves the regulation of any sector through price controls, which maintain prices below international market prices. For example, the market price of oil today is about N145/litre. Therefore, any sale below that market price will be a revenue loss to the government of Nigeria, and it is only fit and proper to consider it a subsidy by government. The economic possibility is that if the prices were not fixed at N65/litre, the forces of the market would have ensured that the price finds its level. Price would have hovered around, and probably settled at that N145/litre, which is the international market price. And this would have amounted to revenue gain. The only reason one may agree otherwise with Agbon is if it can be substantially proved that petrol has got no international market value. In a report released by Global Subsidy Initiative in September 2011, titled, Subsidy to liquid transport fuels: A comparative review of estimates, it was noted that, "A common form of consumer subsidy involves the regulation of energy sector through price controls, which maintain prices below international market prices." The report then gave example of the Indonesian government that regulates the sale of certain petroleum products to the public through its own oil company, PERTAMINA. This is not different from the role being played by the NNPC in Nigeria when fixing petrol prices below the international market price in Nigeria and which later resulted in revenue loss to government. The opportunity cost of selling Nigerian fuel locally at a fixed price is the profitable alternative forgone, which exists at the international level. The emphasis here by GSI is the maintenance of local price (N65/litre) below the international market price of N145/litre of fuel. In that same GSI report, subsidy was defined as "any form of preferred treatment granted to consumers or producers by government." And it says further that "the definition is based on WTOs Agreement on Subsidies and Countervailing Measures, agreed to by 153 member states and tried and tested through a rigorous negotiating process and legal analysis and jurisprudence by the Dispute Settlement Body and Appellate Body."Again, the price of petrol cannot be treated like the price of tomato that is not subject to international pressure or demand. Every litre of petrol sold by Nigeria below the international market price is a loss of revenue. The same litre of fuel, at the production cost of N33/litre and pump price of N65/litre, when it finds its way to Benin Republic through the Idi-Iroko border, it will command international price of N145/litre. The international nature of petrol as a product explains why there is so much pressure on Nigerias oil from our neighbours. Unfortunately, this pressure will continue as long as we fix artificial prices at home and fail to allow price mechanism to determine the price. Our labour leaders have been advised to be objective in analysing data and facts while negotiating with government over the subsidy issue. A part of the fact they will examine is whether subsidy exists on fuel in Nigeria or not. Laniyan, policy analyst, wrote from 16, Thames Street, Abuja.
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