The fuel queues that suddenly re-emerged in the dying days of last year have hurt in many ways. The obvious ones we are now familiar with. Yet, the feeling of despair that follows the spectacle of another empty filling station, even as one’s fuel indicator is beeping away; the time spent on the endlessly snaking queues; and the obsequious solicitousness of pump attendants pale in comparison with a newer difficulty.
The debate between defendants of the (public policy-making) status quo and those whose understanding of the path out of the current stasis is to advocate more reliance on market forces, would have been worth paying attention to, were it not increasingly ugly. Markets are impersonal. Indeed, given the new phrases sneaking their ways into our registers (“those left behind”, “children of nowhere”, etc.) you could even argue that the markets do not care about those concerns that strengthen our claim to being human. Besides, markets don’t work as fluently as their proponents would have us believe. “Market failures” do not just hurt the “poor and the vulnerable”. They often result in egregious resource misallocations in the sectors where they occur.
Ordinarily, then, you’d expect markets to be proffered as solutions to resource allocation problems with a considerable helping of salt. Not so, at all! Invariably, advocates of the balance between demand and supply as a solution to the tension between scarce resources and plentiful demand rarely are a humble type. They nearly always have the zealot’s proselytising instinct. Which is one reason why debates around policy choices that has them in play, tend to degenerate into mutual abuse. Even then, the opposing side to this debate isn’t without its downside. Possibly the most telling argument against those who would keep the content and direction of public policy unchanged in our country today (despite the clear and growing signs of system failure) is the one allegedly made by Albert Einstein in presumably different circumstances: “The definition of insanity is doing the same thing over and over again, but expecting different results”.
How to square this circle?
The most persuasive point that could be made here, is that provided by the relatively short history of the market for mobile telephony. As with the domestic film industry (another important success story) government touches this sub-sector only tangentially — as regulator. Neither entrance, nor exit is as easy as advocates of the market would argue. In appearance and in practice, the industry is an oligopoly — with the possibility of stitching up arrangements that support prices way above costs, a real and ever-present threat. Thus, on its introduction, the sub-sector came in with prices for its products and services that were way beyond the reach of the “poor and vulnerable” — SIM cards retailed for N25,000, and handsets were no cheaper. Today, the same products are on offer for free — handsets may not be cheaper, but compared with the bricks that were on offer then, I’m not sure there’s much basis for comparison.
Thus, the argument that a market solution to our perennial fuel problem could push prices up isn’t exactly without a basis. But with a competent regulatory framework, and a fairly efficient market (both of which we seemed to have achieved in the mobile telephony sub-sector) we should see prices trend downwards over the medium term. In support of this position, it is almost a given that the current processes by which fuel is imported into the country are not guaranteed to seek least-cost options. Whether, it was the manipulation of the subsidy scheme under the Jonathan arrangement, the movement by the Buhari government of the subsidy scheme off-balance sheet, or the putative agreement to conceal the subsidy, again, by offering scarce foreign exchange to fuel importers well below the market clearing rates, we confront a most inefficient system.
Focus on the pump-gate price of petrol, and one could sustain the delusion that to prevent an increase in the price is the same thing as guaranteeing the poor their share of the national cake. Think though of the gains to be had from accessing foreign exchange at less than the market clearing rate (ostensibly for importing fuel), and being able to offload some (if not all) of this onto the black market (for foreign exchange)! The gains from round-tripping are, technically, in this sense, a transfer of resources to those who could do without them. Insofar as such transfers lead to leaner public purses, they are also a huge tax on the very folks that the current system purports to be designed to help.
I would argue, although much of the available evidence is anecdotal, that the net welfare losses that the poor bear on account of the current subsidy scheme is a bigger burden than are whatever benefits we all currently enjoying from having an official recommended retail price for fuel, which, now and again falls below the cost of supplying the product. Add the other costs that we bear each time the current arrangement succumbs to its own contradictions, and it is not simply insupportable. It might also qualify as the greatest rip-off of any people, anywhere, by their government, and the domestic version of the “deep state”.