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Fuel Subsidy Removal: An Approach beyond Partisan Politics
By John Baimba Sesay in China
Nov 3, 2016, 17:10
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By 2012, the cost of subsidies in Ghana reached one billion cedis ($500 million). It was expected to rise to 2.4 billion cedis in 2013 this year, before the country's National Petroleum Authority could raise prices. The decision to scrap the subsidies, according to Reuters, was "to help restore fiscal stability…"

Nigeria, writes A. Majekodunmi in 'The Political Economy of Fuel Subsidy Removal in Nigeria', is the largest in Africa and the sixth largest oil producing country in the world. Her economic muscle comes from its oil and gas affluence, contributing "99 percent of government revenues and 38.8 percent of GDP (2010, National budget)."


The country was spending billions of dollars on subsidy alone. It should be noted that the drop in global crude oil prices to unprecedented levels has an all telling effect on those countries that depend on oil production for growth. Nigerian government had to remove the subsidy.


Sierra Leone has an economy that had been doing well, prior to the ebola outbreak in 2014. Her mining industry had become a beacon for economic growth. In 2013, the mining sector helped propel growth in the country to 20% and ignited a stretch of investor interest, writes the Guardian newspaper.


However, the decline in international market prices of raw materials like iron ore negatively impacted on our mining sector, literally leading to a virtual closure of the country's mining sector. What then became clear was the need to diversify from what the Guardian called "a mining-heavy economic base." The country's finance minister has emphasized the need to move the national budget from "one of consumption to that of production", according to Awoko newspaper.


Production, in his view, should first be modernized in the agriculture, amongst other sectors, ensure the Small and Medium Enterprises are ongoing, all of which are key to economic growth.  Agriculture is a major part of our economy, accounting for over half of our national GDP, with two-thirds of the population involved in subsistence agriculture. In a bid to addressing existing economic challenges brought about as a result of the ebola outbreak and drop in price of raw materials globally, the country on 3rd October, 2016, introduced a number of expenditure rationalization measures. Amongst them were "a 30% cut in recurrent expenditures across the board" and a hold on "all new domestically financed capital projects and suppliers contracts until further notice."

Another area of concern is subsidizing fuel.


Government spends tens of billions of Leones on fuel subsidies alone. Sierra Leone has the cheapest fuel price in the sub region. In Guinea, fuel goes for about 7,000 Guinean Franc a liter (about Le.9, 000), costing Le.3, 750 in Sierra Leone. This encourages smuggling of the product to neighboring countries. Also, government is losing billions of Leones on subsidies, monies that could be channeled to other social needs. It also eventually would help in curtailing ongoing smuggling activities of the product, thus curtailing excessive profiteering through smuggling activities. Not only will it help in the elimination of price buckle, I do hold the view that it would eventually help in repositioning the economy by generating additional funds. Removing fuel subsidy on all petroleum products therefore should be seen as a good decision. Effective public engagements are critical for building a public case for the removal of the subsidies in the country. The Ministry of Information and Communications has embarked on a multi-faceted media campaign through nationwide consultations.

This has so far been impressive!


Consultation is crucial in dealing with policies that would eventually affect the people. And this is one success of the government for years-public engagement!

The need for a bipartisan approach to the issue cannot also be overstated. When there is an economic boom, it becomes a national success, not just one limited to the party in power. The main opposition should have a rethink on its recently issued press statement. It should not only be about opposing the decision. What better alternatives did the party give? Time to move beyond the reach of an armchair critique!

The gains achieved by the country under the leadership of President Ernest Koroma are as a result of the national collective efforts. Same should be the case with the prevailing issues. Crucially so, the opposition should think beyond realm of partisan benefits and look at the national good.

© Copyright by Awareness Times Newspaper in Freetown, Sierra Leone.

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