Fuel subsidies create no jobs, only help the rich!.

For a country like Cameroon that produces crude oil to hike prices of the commodity at the time citizens are grappling with punitive high cost of living is both economically and politically questionable.

According to the National Hydrocarbon Corporation, SNH, the Cameroon treasury received 205 billion FCFA at the end of April 2022 from fuel sales, which represents an increase of 68.66%, compared to the previous period last year.

SNH explained that the amount came "after deduction of expenses" from the sales of 13.68 million barrels of oil equivalent (gas and oil), including 8.19 million barrels for crude oil production and 876.33 million m3 for natural gas.

Business in Cameroon reported that "the higher oil revenue over the period was driven by a slight increase in production and a rise in crude oil prices. According to SNH data, production rose from 13.25 million barrels of oil equivalent in April 2021 to 13.68 million barrels in April 2022, up 3.24%. The price of a barrel of oil exceeded $100 in 2022".

Despite that rosy picture of the country's oil production, the government, on Tuesday, kicked up prices, blaming it on external shocks.

On Tuesday the CPDM government increased the price of petrol and diesel at pumps sales by 15.4%. Ironically the rich industries with their tycoons will pay only 560.19 FCFA per litre against 720 FCFA per litre for individual consumers, up from 575 FCFA.

The prices of cooking gas remains unchanged at 6,500 FCFA although scarcity and perhaps hoarding has taken the prices up at 10,000FCFA in some towns when available.

In what The Guardian Post has aptly described as "blindfolding", the government, in adjusting fuel prices, raised civil servants’ salaries by 5.2 percent, while a "proposal" was made to increase minimum wage from 36,270FCFA to 41,875 FCFA.

The statement, endorsed by the Head of State at this hard times, surely does not go well with the man on the street, and the government was aware. That is why in making the announcement through the Secretary General at the Prime Minister's Office, Prof Seraphin Magloire, the government pleaded for the understanding of citizens and economic operators for the smooth implementation of the new pump prices.

He also talked of government going to dialogue with other stakeholders in the country’s economy such as trade unions and consumer rights groups.

The dialogue, the Secretary General at the Prime Minister’s Office noted, will help in forming a synergy to best handle the external shocks at the root of the fuel price increase.

But why were such dialogues not held before the price increase? Why should prices of fuel be raised based on the vagaries of the international market when the country produces petrol, whose prices rose astronomically at the world market as a result of the Russian invasion of Ukraine?

The bitter truth is that governance in the country, which is so much endowed with abundant natural resources, is the problem. It should not be attributed to "exogenous shocks" which the government very often tries to use as a glib excuse, if not the blame game.

At this daily, we agree with the Bretton Woods institutions that fuel subsidies hinder economic growth and is of beneficiary more to the rich than the downtrodden.

According to a 2018 IMF study, 50% of households representing the wealthiest segments of society benefited from 96% of fuel subsidies.

The institution noted “that a gradual abolition of the said subsidies would contribute to a substantial strengthening of the mechanism for transferring funds intended for public investment”. It indicated that the State of Cameroon could not count on its increase in local oil revenues.

“The impact of the current rise in international oil prices on Cameroon's budget remains mixed, as the increase in oil revenues is more than offset by a substantial increase in fuel subsidies at the pump estimated at 2.9% of the gross domestic product (GDP), compared to 0.5% in 2021,” IMF noted.

One, if not the main reason, Cameroon cannot rely on oil revenue, is corruption. In one of its report published last December, the World Bank pointed to the lack of consistency in Cameroon's fiscal policies.

It called on the government to revise its business taxation, the institution said: “fiscal measures should be applied with better transparency and consistency. Fiscal pressure and how firms manage it through tax holidays create important distortions that seem to favour well-established companies while preventing fair competition. The lack of coherence behind tax policies is also suboptimal from a fiscal point of view.”

An analysis conducted by the Directorate General of Taxation of the Ministry of Finance, for example, shows that the cost of the many tax-derogatory measures contained in the 2013 law on incentives for private investment outweighs the benefit accruing in terms of fiscal revenue, the World Bank noted.

To address the inconsistency, the Bank recommended that tax authorities take into account the impact of taxes on the most productive companies and evaluate the cost of incentives and the benefits generated. For, so far, the incentives granted to a hundred or so beneficiaries have not generated a significant number of jobs.

In terms of immediate measures, the Bank suggested that a cost-benefit analysis of the exemptions be done and a strategy to optimise taxation and eliminate the 2.2% levy on turnover be set up. In the mid-term, the tax code should be reviewed to gradually reduce and consolidate taxes, reduce and then eliminate distortionary incentives.

Even if all the recommendations are made, fuel subsidies withdrawn yearly to further squeeze Cameroonians, a feel good effect in the economy and alleviation of poverty through job creation would not be achieved as long as corruption continues to be fought with kid gloves, without the implementation of Article 66 of the constitution.