End the obnoxious fuel subsidy, unending scarcity

That Nigeria, one of the leading producers of crude oil and a member of, the Organization of Petroleum Exporting Countries, OPEC, budgeted a huge N3.36 trillion to subsidize petrol in the first half of this year in order to make the product readily available to consumers at a regulated price, has become totally unjustifiable considering the unending scarcity of fuel and the different high costs citizens now pay for it nationwide.

 

Currently, depending on the location, consumers are at the mercy of oil marketers who charge between N185 and N600 per liter of premium motor spirit, PMS at filling stations or in the black market, a situation that has made life very difficult and completely defeated the basis of the obnoxious and fraudulent subsidy regime that reportedly cost the tax payers a scandalous N4.39 trillion in 2022 alone, which was why the Nigerian National Petroleum Company Limited, NNPCL, did not to remit funds to the Federation Account last year thereby leaving a deep hole in public finances at a time when the government expressed concern that low revenues and large deficits left it unable to stimulate the economy.

 

Therefore, the such price differential has made it very imperative and inevitable for the President Muhammadu Buhari administration to brace the odds, summon the courage and political will to immediately terminate the payment of fuel subsidy, not only to save the citizenry from further hardship but break the current monopoly enjoyed by the NNPC Ltd as the sole importer of fuel into the country more so when it has become clear that the multi-billion dollars Dangote Refinery in Lagos with an installed capacity to refine 650,000 barrels of crude oil daily expected to meet the nation’s demand for petroleum products will come on stream before May 29.

 

We are strongly oppose to the proposed June, 2023 terminal date of the subsidy regime for several reasons which include further inflicting additional pains on the already overburdened Nigerians while its continued sustenance will rob the country of the needed revenue for the funding of people-oriented development projects aimed at making life more meaningful as well as aggravate the endemic corruption in the oil downstream sector of the economy.

 

Furthermore, as revealed recently, during a stakeholders’ meeting convened by the Chief of Defence Staff, General Lucky Irabor, the lingering fuel scarcity may persists for months to come since there is a major distribution challenge for imported PMS coupled with the continued closure of the Kaduna Refinery, Warri Refinery and the Port Harcourt Refinery, inadequate storage facilities due to shut down of the Atlascove, Lagos and most government depots, the vehement insistence that all marketers should dispense the product at regulated cost even when they buy fuel at different prices which completely negate the provisions of the Petroleum Industry Act already in force.

 

Specifically, the major challenge bedeviling the sector according to the Group Executive Officer of the NNPC, Mele Kyari, we further note is product distribution even though Nigeria reportedly has enough stock in-country, adding that “we do not have a supply problem because as we speak now, we have over 28 days of supply even if we evacuate up to 60 million litres of PMS every day, but we have a distribution problem that comes up as a result of the shift in the cost of logistics in our business taking fuel from the mother vessels to the terminals into trucks to the fuel stations”.

 

But the Executive Secretary and Chief Executive Officer of Major Oil Marketers Association of Nigeria MOMAN, Mr. Clement Isong, clearly hit the nail on the head when he declared that, “the truth of the matter is that NNPC by itself cannot supply fuel to the entire Nigerian market” even after importing all the product the country needs, on the ground that its distributionremains a heavy burden  such that NNPC cannot bring all of it onshore by itself, use its own facilities and supply to the Nigeria public alone.

 

In his view therefore,  the implication of this is that business men are required to buy the product, hire daughter vessels to convey fuel from the mother vessels on shore, maintaining that such operators in the market should ordinarily own depot facilities given the fact that many of the NNPC depot facilities which were connected to supply pipelines nationwide before now, are either non-functional or insufficient.

 

And apparently reacting to threats of military sanctions on marketers who are not playing by the rules by the Defence Chief and the Department of State Security (DSS), he dismissed such on the ground that, “these are not things you can force people to do. People will only do them if the incentive is right; if the business environment is right and if the return on investment is right”, adding that it is not something “you do by force.”

 

However, pointing the way forward, the MOMAN CEO disclosed that whereas, the current legal structure in operation in the downstream sector of the oil and gas industry was the Petroleum Industry Act (PIA), the downstream market was not operating under that legal framework as petrol prices were still being fixed by government in clear breach of the law contending that if marketers bring the product and were not recovering their costs and discovered that their money would served them better elsewhere, they would not be encouraged to participate in the business.

 

We further totally agree with the submissions of foremost economist and the Chief Executive Officer, the Centre for Promotion of Private Enterprise, Dr. Muda Yusuf that the proposed fuel subsidy removal apart from reducing high demand for foreign exchange, would boost Federal Government’s revenue by at least N6trillion annually and ultimately end the current scarcity if other right complementary policies including a single foreign exchange market capable of accelerating domestic refining of petroleum products, creation of a level playing field for private sector players to be able to import and sell fuel at a price that will enable them recover their cost, are also put in place by the government.

 

Similarly, the investment effects of such removal are unquantifiable considering that a deregulated price regime according to the expert, has the potential of attracting additional private foreign and domestic investors in the oil and gas sector of the economy since it is common knowledge that the sector currently lacks sufficient investment while the government alone can’t do it. This, will in addition generate more jobs and boost the Gross Domestic Product, GDP.

 

In our view also, such major gains will be better appreciated by Nigerians based on the fact the 2023 federal budget of N21.82trillion approved by the National Assembly and signed into law by the President has a whopping deficit of N10.78trn that will fully  be funded through additional borrowing, a move that will further increase the national debt stock which stood at N44.06 trillion as of September 2022.

 

Continuing Yusuf, also a former Director-General, Lagos Chamber of Commerce and Industry, LCCI noted that, “there are many loose ends as far as this fuel subsidy regime is concerned” and include accountability, knowing the quantity of fuel actually imported, monitoring, leakages through the borders, equalization fund”, adding that  if you have a system that is “bleeding from so many points, the best option is to shut the system down completely”.

 

But we are mindful of the likely negative consequences of such subsidy removal on the people which may not be worst than the current situation confronting consumers. It is not out of place to predict that if the complementary policies suggested by the economist are genuinely implemented, progressively the situation will be better since the NNPC monopoly would have been broken and greater efficiency brought into the system through market forces and fair competition by the new investors.

 

Unlike diesel and kerosene which have been fully deregulated by government some years back, though  the pump prices of fuel may increase astronomically initially, such hike may turn out to be temporary as was experienced in the telecommunications sector during its teething period since experience has shown that if pricing is not right in any system, there won’t be adequate supply of the product.

 

Significantly too, the fact that the three leading presidential candidates in the February 25 election, Atiku Abubakar of the Peoples Democratic Party, PDP; Bola Tinubu of the All Progressives Congress, APC and Peter Obi of the Labour Party, LP have publicly expressed their readiness to terminate the dubious subsidy payment from day one in office if elected, we believe that an immediate removal by Buhari despite its possible political repercussions, will be embraced by his successor in office to pave the way for continuity in policy, considering that the decision is not only in the national interest but at the heart of the nation’s continued economic recovery and survival.

 

We further challenge the next President to ensure that the savings to be made from it should be spent judiciously on projects that will positively impact on all Nigerians especially laying the necessary infrastructure and enabling environment capable of transforming the power sector and ending decades-long epileptic electricity supply, more investment in the health sector to discourage medical tourism as well as increased budgetary allocations to education in order to address the lingering funding gaps identified in public universities.

 

More importantly, there is no gain saying that the country, more than ever before since attaining her independence from Britain in October 1960 requires a trust worthy, honest, patriotic set of leaders most especially the President with integrity and the fear of God, who will walk the talk, provide good governance for the greater good and welfare of the majority since the primary responsibility of government is the security and welfare of its citizens.

 

 

For a better society

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