‘Petrol Subsidy Benefits Elite More Than Poor’ – NAEE

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By Obas Esiedesa , Abuja

With over N6 trillion spent on petroleum subsidy since 2006, the National Association Energy Economists (NAEE) have advocated  the removal of the subsidy because it benefits the rich more rather than the income redistribution it was intended to achieve.

The group posited that though there was nothing wrong with government’s intervention in economic system, such intervention must be significantly more beneficial to the society than the economic losses it brings.

NAEE President Professor Wumi Iledare told reporters in Abuja at the weekend that the current subsidy regime has shown that the economic losses far out weighs it’s benefits to the nation.

Iledare stressed that the policy is elitist and has no positive effect in the redistribution of income to the poor.

According to him, “There is nothing wrong in government intervention, however government must make sure that when they intervene economic losses must be minimised if not removed completely”.

He stated that “every energy regulations have their costs and benefits. So if there is going to be energy regulation then the benefits of the regulation must be significantly higher than the losses of the regulation.[pro_ad_display_adzone id=”70560″]

“The purpose of petroleum subsidy is to correct inequity in income distribution. Government must be aware that when you peg the price of economic good like petrol, you can expect three things to happen:

“One, there will be shortages of that economic good and that is why from time to time you always have shortages of petroleum products.

“Two, you are going to have series of illegal activities like you saw people selling petrol in cans during the last crisis. You have black markets which happens when you to a pump and rather than the N87/litre, you had displayed N110/litre. These are illegal activities because they are breaking the law.

“Three, because you do petroleum subsidy, you are going to have significantly welfare loss. This is because there are unintended consequences because the subsidy regime is an elite capture phenomenon”.

(Daily independent)

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