Organised Labour, made up of the Nigeria Labour Congress (NLC) and the Trade Union Congress of Nigeria (TUC) and their civil society allies has given the Federal Government till 12 midnight of Tuesday, 17th May, to revert to the old pump price of petrol or face a nationwide shut down if the economy.
In a joint communique signed by the President of NLC, Comrade Ayuba Wabba and his TUC counterpart, Bobboi Kaigama, they asked Nigerians to stockpile enough food item to last them a while for the prosecution of the current struggle against neo-liberal agenda in Nigeria.
They alleged that those they termed as neo-liberal forces have taken over the government and are determined to make the government collapse even before the four tenure.
If the government fails to accede to the demands of the unions, the NLC, TUC and their civil society allies resolve to commence the following actions with effect from Wednesday, May 18, 2016;
· Mobilize to the streets across the country, ordinary and helpless Nigerians to whom they owe the duty of protection;
· Shut down all Banks, Sea and Airports, Government and private offices as well as Markets.
· Commence indefinite nationwide strike action.
· Fight/resist the machinations and cruelties of the neo-liberal forces in the government as part of the process of saving the government from itself and the generality of Nigerians from slavery.
Nigerians were advised to stock sufficient food items that will last for a while for the prosecution of the ” current struggle against neo-liberal agenda in Nigeria”.
He said the singular act of “mindless pump price increase is a betrayal of trust on the part of the government.
He recalled that the Minister of State for Petroleum, Ibe Kachukwu had told the nation that subsidy has been removed for petrol through his ingenuity and that Nigeria was saving $1 billion from the process.
“Organized Labour wondered what has informed government’s sudden and dangerous policy summersault and its desperate attempt to convince the public that Labour was part of the decision that led to this price increase;
“In view of the fact that the board of the Petroleum Products Pricing Regulatory Agency (PPPRA), which is statutorily vested with powers to recommend prices, has not been reconstituted, the price variation announced by any officer of the agency or outside the agency is not only ultra vires and illegal, it is a criminal imposition on the citizenry;
“The price hike from N86:50 to N145, representing 67.63% increase, is the height of insensitivity and impunity as there was no previous consultation with stake holders, especially the organized labour, or any justification for this reckless decision other than the fact that government believes it is accountable to no one”.
The NLC President faulted the statement of the Minister that marketers will have to source their dollars from the secondary market, pointing out that the attendant pressure on the dollar will lead to unimaginable rise in the prices of commodities and other services thus creating further hardship for the people.
“In view of the fact that in the past five years, there has been no increase in salaries or wages or pensions in the face of devaluations, spiralling inflation and other vagaries of the economy, this product price increase is unrealistic, unaffordable, unacceptable and is thus rejected;
“Government is unable to justify this price increase other than the puerile explanation that marketers need to recover their costs, without a thought for the aggregate or larger national interest including the need for local refining and creation of jobs;
“The government has remained incalcitrant in spite of a subsisting court injunction on the issue of the criminal increase in electricity tariff even in the face of ever-worsening power supply situation;
“From the foregoing, it is evident that the neo-liberal forces in the government have taken over the government and we should expect more inhumane policies which will further degrade the living standard of the average Nigerian. The punitive electricity tariff and PMS product prices may just be teasers;
“The implications are costly and far-reaching, with the first and most significant being that we have become dependent on massive importation of refined products to meet our domestic needs in contra-distinction to other OPEC members.
“Whereas most OPEC members significantly meet their domestic needs through domestic refining by an average of 80 per cent, Nigeria on the contrary, at the pace it is going, will continue to rely on about 90 percent of imported refined products in the foreseeable future;
“And because we are dependent on importation, the end-user price will always be influenced or determined by external factors such as the cost of refining abroad, transportation and others denominated in the dollar.
“As the Naira continues to depreciate against the dollar, so will the woes of consumers in Nigeria continue to increase, a situation the Marketers in classic greed will exploit to their advantage;
“Taking into account the utilitarian value of petroleum products in Nigeria, all sectors are going to be negatively affected by this mindless price increase as virtually all the stakeholders are agreed that the most significant contributor to the astronomical cost of doing business in Nigeria is the cost of energy.
“NLC, TUC and other civil society allies are not unaware of the positions taken by the Unions in the oil and Gas Industry. A process of engagement will be put in place in order to ensure the success of the struggle to protect the overall interest of the Nigerian people.
“In consideration of all of the above, we urge government to revert to the old price regime in order to reduce the suffering of the people and to consider this singular act of mindless pump price increase as a betrayal of trust;
“Revert to the pre-45 percent electricity tariff increase, make meters available to consumers and stop estimated billing and reconstitute the boards of PPPRA and NNPC without further delay and give them their statutory right to function alongside DPR in order to deepen the process of consultation, checks and balances in the downstream sector of the petroleum industry;
“Government must Intensify the prosecution of all those involved in subsidy scams with a view to recovery and sanctioning of the culpable; put in place enhanced local refining capacity within a specified period in place of endless importation as an enduring solution to the perennial problem of scarcity;
“They must reverse the entire deregulation and privatization process which foists on the nation, private individuals as drivers of the economy in contravention of the constitutional provision that says government shall be the driver of the economy and engage the organised labour in the process of negotiation on key policy issues;
“Government must wean itself from the overbearing influence of the neo-liberal elements in its fold who have not only staged a coup but are determined to make this government collapse even before the end of its four-year tenure;
“The President must uphold its electioneering promises to Nigerians instead of subjecting them to the vagaries of slavish policies such as full devaluation of the naira and total removal of subsidy as enunciated by the IMF and its agents in the system.”
Tag: fuel
-
Labour to FG: Revert to old pump price or face shut down
-
Fuel price hike not subsidy removal —Osinbajo
•Says new price regime was caused by scarcity of foreign exchange
ice President Yemi Osinbajo yesterday alleged “many misconceptions” about the new petrol price of N145 per litre, stressing that the new regime has nothing to do with subsidy removal.
The new price came into effect on Wednesday from the former N86.50
Osinbajo, is a statement titled ‘The Fuel Pricing Debate: Our Story’ and personally signed by him, said the price was caused essentially by foreign exchange problem in the face of dwindling earnings.
He said: “I have read the various observations about the fuel pricing regime and the attendant issues generated. All certainly have strong points.
“The most important issue of course is how to shield the poor from the worst effects of the policy. I will hopefully address that in another note.
“Permit me an explanation of the policy. First, the real issue is not a removal of subsidy. At $40 a barrel there isn’t much of a subsidy to remove.
“In any event, the President is probably one of the most convinced pro-subsidy advocates.
“What happened is as follows: our local consumption of fuel is almost entirely imported. The NNPC exchanges crude from its joint venture share to provide about 50% of local fuel consumption. The remaining 50% is imported by major and independent marketers.
“These marketers, up until three months ago, sourced their foreign exchange from the Central Bank of Nigeria at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to $550 million. The amount required for fuel importation alone is about $225million!) .
“Meanwhile, NNPC tried to cover the 50% shortfall by dedicating more export crude for domestic consumption. Besides the short term depletion of the Federation Account, which is where the FG and States are paid from, and further cash-call debts pilling up, NNPC also lacked the capacity to distribute 100% of local consumption around the country. Previously, they were responsible for only about 50%. (Partly the reason for the lingering scarcity).”
He said that the government realised that it was left with only one option: to allow independent marketers and any Nigerian entity to source their own foreign exchange and import fuel.
Accordingly, government expected the marketers to source foreign exchange at an average of about N285 to the dollar, (current interbank rate).
“They would then be restricted to selling at a price between N135 and N145 per litre,” he said.
“We expect that with competition, more private refineries, and NNPC refineries working at full capacity, prices will drop considerably. Our target is that by Q4 2018 we should be producing 70% of our fuel needs locally. At the moment, even if all the refineries are working optimally, they will produce just about 40% of our domestic fuel needs.
“You will notice that I have not mentioned other details of the PPPRA cost template. I wanted to focus on the cost component largely responsible for the substantial rise, namely foreign exchange. This is therefore not a subsidy removal issue but a foreign exchange problem, in the face of dwindling earnings.”
-
ICAN commends FG over fuel subsidy removal
The Institute of Chartered Accountants of Nigeria (ICAN), Ikeja District Society, has commended the Federal Government over the deregulation of the downstream sector of the petroleum industry.
Mr Gbenga Adewole, the Chairman of the society, speaking in Lagos, said the deregulation would ensure product availability across the country.
He added that this would also enable investors in the downstream sector to come in and do business, adding that this would encourage job creation.
He, however, said that the government should have allowed the forces of demand and supply to determine the price instead of fixing the price for the product.
Speaking, Adewole said, “I support deregulation of the petroleum sector, but what government did is partial deregulation and not total because you don’t deregulate and still dictate the price.
“After deregulation, it is the forces of demand and supply that will determine the market prices.
“By fixing the price, you are telling marketers to sell petrol for N145 per litre.
“All marketers will be working within that fixed price instead of allowing the forces of demand and supply to dictate the price.”
He urged the government to do all within its power to ensure stability of foreign exchange, adding that only stabilised foreign exchange would encourage marketers.
He appealed to Nigerians to support the government in its effort to ensure total deregulation of the downstream sector.
-
Osinbajo explains N145 fuel price increase
Vice President Yemi Osinbajo on Friday gave more insight into the reasons behind increase of the price of Premium Motor Spirit (PMS) also known as petrol.
The government on Wednesday had increased the price from N86.50 per litre to maximum of N145 per litre.
In a statement he signed by himself, Osinbajo noted that there are many misconceptions that followed the announcement of new pump price.
According to him, the increase has nothing to do with subsidy removal but was a result of foreign exchange problem in the face of dwindling earnings.
In the statement titled ‘The Fuel Pricing Debate: Our Story’, Osinbajo said: “I have read the various observations about the fuel pricing regime and the attendant issues generated. All certainly have strong points.“The most important issue of course is how to shield the poor from the worst effects of the policy. I will hopefully address that in another note.
“Permit me an explanation of the policy. First, the real issue is not a removal of subsidy. At $40 a barrel there isn’t much of a subsidy to remove.
“In any event, the President is probably one of the most convinced pro-subsidy advocates.
“What happened is as follows: our local consumption of fuel is almost entirely imported. The NNPC exchanges crude from its joint venture share to provide about 50% of local fuel consumption. The remaining 50% is imported by major and independent marketers.
“These marketers up until three months ago sourced their foreign exchange from the Central Bank of Nigeria at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to $550 million. The amount required for fuel importation alone is about $225million!) .
“Meanwhile, NNPC tried to cover the 50% shortfall by dedicating more export crude for domestic consumption. Besides the short term depletion of the Federation Account, which is where the FG and States are paid from, and further cash-call debts pilling up, NNPC also lacked the capacity to distribute 100% of local consumption around the country. Previously, they were responsible for only about 50%. (Partly the reason for the lingering scarcity).” He said
He said that the government realised that it was left with only one option, which was to allow independent marketers and any Nigerian entity to source their own foreign exchange and import fuel.
According to him, the government expected the marketers to source foreign exchange at an average of about N285 to the dollar, (current interbank rate).
He added: “They would then be restricted to selling at a price between N135 and N145 per litre.
“We expect that with competition, more private refineries, and NNPC refineries working at full capacity, prices will drop considerably. Our target is that by Q4 2018 we should be producing 70% of our fuel needs locally. At the moment even if all the refineries are working optimally they will produce just about 40% of our domestic fuel needs.
“You will notice that I have not mentioned other details of the PPPRA cost template. I wanted to focus on the cost component largely responsible for the substantial rise, namely foreign exchange. This is therefore not a subsidy removal issue but a foreign exchange problem, in the face of dwindling earnings.” He stated
-
Fuel pains easing as new price sparks huge debate
ADVOCATES of fuel subsidy removal yesterday got some major backers.
Fuel price went up to N145 per litre on Wednesday – a decision which the government said will make petrol available, and free more cash for key projects which will add value to living. But opponents of the action insist that it will send prices rising and toughen life for the poor.
All Progressives Congress (APC) National Leader Asiwaju Bola Ahmed Tinubu yesterday described the removal of petrol subsidy as a tough but necessary decision which was taken “in the interest of the present and future generation of Nigerians”.
Tinubu urged Nigerians to accept the increased price of petrol, raised from N86 to a cap of N145 on Wednesday, as the best option available to make fuel available and to channel the cash hitherto used as subsidy “for the nobler purpose of putting those same funds to fairer, more equitable use in order that the government might better serve those of us who are truly in utmost need”.
Tinubu, in a statement from his Media Office, praised President Muhammadu Buhari for his “courage” to “put an abrupt and just end to this assault against our economy and political system”.
On the way forward, Tinubu said “as the subsidy is being phased out, we should simultaneously phase in social payment benefitting the poorest, most vulnerable among us”.
The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) also yesterday praised the Federal Government for finally taking the bold step to remove subsidy on Petrol.
In a statement signed by its President, Dr. Bassey Edem, NACCIMA described the subsidy removal as an attestation of the political will of the administration to stop the incessant fuel scarcity experienced in the country.
The organisation observed that the action will reduce the pressure on our foreign reserves as a result of huge demand for petrol import.
He, however, frowned at what he called the influence of the government in pricing, noting that it is not good for the economy.
Edem advised the government on the need to allow market forces to determine price instead of fixing a ceiling of N145 per litre. The NACCIMA boss canvassed the restructuring and merging of the Department of Petroleum Resources (DPR) and the Petroleum Product Pricing Regulatory Agency (PPPRA) into one regulatory body for better monitoring and efficient service.
He reiterated the need for the government to ensure quick budget implementation to alleviate the negative impact of this policy on the purchasing power of the average Nigerian.
“In view of the expected reduced pressure on our foreign reserve which this policy will bring about, it is also important that the resultant benefit on our foreign exchange allocation be directed more towards the real sector to hasten the development of our economy,” Edem said.
He called on Nigerians to support the policy, to block all the loopholes that have been hampering the rejuvenation of the economy.
The Manufacturers Association of Nigeria (MAN) and the Lagos Chamber of Commerce and Industries (LCCI) supported the subsidy removal.
Also yesterday, a former Special Adviser to Second Republic President Shehu Shagari backed the government’s action, saying it would eliminate massive corruption.
Alhaji Tanko Yakassai said the rot in the subsidy regime was exposed by the National Assembly investigation.
Yakasai, who spoke yesterday in Kano, noted that enquiries showed that a few individuals siphoned billions of Nigeria’s money and converted it to their personal use
“I have been a strong supporter of the withdrawal of fuel subsidy for the last 20 years or thereabout. I have many reasons that informed my position.
He said: “First is that ordinary Nigerians were not the actual beneficiaries of the subsidy regime. The marketers and smugglers were the main beneficiaries of the policy.
“Besides, as long as the petroleum products price would be cheaper in Nigeria than in our immediate neighbouring countries, nobody can stop smuggling of the products from our country to our neighbours, which informed the ineffectiveness of the control of pump price in our country.
Yakassai added: “If the government removes the subsidy, the money that would be saved as a result can be put to a better use in dealing with more pressing problems bedeviling the country, such as endemic unemployment, dilapidated infrastructure, modernisation of agriculture, addressing the need for robust education and healthcare programme that can better the lot of the teeming masses of the country.”
-
Mixed reactions as Fed Govt increases fuel price to N145 per litre
It has been a long standing argument by critical assessors of the economy that deregulation remains the tonic to turn around the fortunes of the downstream sector of the oil and gas industry. Those who canvass this position argue that it will provide enduring solution to the recurring scarcity of petroleum products and halt the corruption in the subsidy regime.
The payment of subsidy has been digging a hole in Federal Government’s purse to the tune of about N1trillion annually. Apart from halting the payment, which not a few Nigerians describe as a scam, deregulation will also encourage investors to build refineries and sell products at market prices, boost investments and create jobs.
More importantly perhaps, those clamoring for deregulation say that it will end the paradox of a nation dependent on importation of petroleum products despite being world’s sixth largest oil producer.
However, the Federal Government’s announcement yesterday of an increase in the pump price of Premium Motor Spirit (PMS), otherwise called petrol to N145 per liter did not go down well with many.
Labour union leaders are literarily up in arms over the decision. Some of them, who spoke with The Nation, could barely hide their anger and frustration over what they termed as “wrong timing and ill-conceived” manner the Federal Government deregulated the sector.
The Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Sir Emeka Okereke, said:“We have always said let subsidy go; deregulate so that market forces will determine the price of petroleum products and the dollar.” . He recalled that because of political exigency, the administration of former President Goodluck Jonathan failed to take the bull by the horns and deregulate the sector.
He said this was why the administration buckled under the pressure by labour unionists and civil society in 2012 when there was a nationwide protest against the removal of fuel subsidy.
“Subsidy doesn’t make economic sense anymore. It has become unsustainable. We will never come out of the woods as long as we continue to subsidize the price of petroleum products,” Okereke told The Nation.
The ECCIMA DG lamented that the new increase in fuel price of N140 per litre was ill-timed, considering the fact that the economy is in a recession. Describing the new price increase as “insensitivity”, he said it would further push the economy into recession and aggravate the sufferings of Nigerians whose purchasing power had ebbed in recent time.
Okereke said with the new fuel price, inflation rate would rise.
“It’s a worrisome development. Government should do a rethink. Let’s do it (deregulation) totally. Don’t rob Peter to pay Paul,” he said, pointing out, for instance, that the refineries ought to have come on stream before deregulation.
While noting that deregulation will open up the oil and gas industry for more players to come in, he said there is need to first stabilise the system, build capacity by encouraging local refining since over 60 per cent of Nigeria’s fuel needs are imported before full deregulation.
The Petroleum Products Pricing and Regulatory Agency (PPPRA), which statutorily moderates pricing for the industry said Nigerian National Petroleum Corporation (NNPC) Retail stations on the outskirts of major cities are advised to sell at price lower than N145/litre.
The agency explained that in performing its role enshrined in the PPPRA Act No 8, 2003, it commenced a petroleum products price modulation framework on the 1st of January, 2016, with the aim of ensuring a ‘fit-for-all’ approach that seeks to serve the interest of the Nigerian consumers, marketers and the economy.
The release signed by PPRA’s Acting Executive Secretary Mr. Sotonye E. Iyoyo said: “This review became imperative in the face of extreme difficulties faced by petroleum product importers in sourcing foreign exchange. To meet the consumption demand of the nation, importers will henceforth be permitted to source for their foreign exchange requirements from the secondary sources.”
Iyoyo added that PPPRA was conscious of the difficulties that Nigerians have been going through in the last few months and to ameliorate this situation, “we shall continue to modulate pricing in accordance with prevailing market dynamics thereby ensuring fair value to all citizens.”
But it is doubtful if Nigerians were swayed by the reasons advanced by Iyoyo for increasing fuel price to N145. Already, the new fuel price, couched in what PPRA called ‘price modulation’ has pushed Nigerians to the panic mode apparently because of its spill over effects.
For instance, the President, Nigerian Association of Energy Economists (NAEC), Prof. Wunmi Iledare, said with the increase, a shock in the economy is expected. Hear him: “Anytime there is hike in the price of fuel in the country, it affects the disposable income of workers,” he told The Nation.
Iledare said: “Without doubt, Nigeria cannot continue to sell fuel at N86.50 per litre, in view of the huge amount of money paid as subsidies. The way out of the fuel crisis is deregulation of the downstream sub-sector of the petroleum industry, which the Federal Government is trying to do.
He, however, said deregulation needs to be done in phases to lessen its impacts on the economy. He said government should have done the deregulation on a partial basis by creating what he described as a ‘double market’. The former President of International Association of Energy Economists (IAEE) said by so doing so, government would create a competitive environment for players in the industry.
Iledare explained the double market thus: “There is one market for the NNPC to sell fuel and another one for the private operators. Once this happens, competition would drive down the price of petroleum products. It is at this point that we can say that government has deregulated the downstream sector.”
The Secretary, Major Oil Marketers Association of Nigeria (MOMAN), Mr. Olufemi Olawore, also said the government has taken the right step by increasing the price of fuel to N145 per litre. “We have been clamoring for deregulation of the sector, and the government has taken a bold step to deregulate the sector in order to make it competitive,” he said.
The former Group Managing Director (GMD) of NNPC, Chief Chambers Oyibo, also said he believes in deregulation.
“We have talked about it for a long time, but Nigerians said they wanted subsidy. Smuggling and diversion of fuel is a result of subsidy.
“When we deregulate, somebody in Lagos does not necessarily have to pay the same price for a litre of petrol. Deregulation will make fuel available; we don’t have to pay the same rate across the country, but we will get fuel for use,” he said.
Oyibo however, said after deregulation, the Federal Government would need to ensure that marketers don’t gang up and increase prices. “So, the government would have to strengthen existing agencies to monitor this.
“Again, after deregulation, there will be an incentive for private investors to build refineries because in the past, licences were given for refineries but nobody built any. They did not because they did not want government to tell them how much to sell the finished product. They do not want to sell at a price that will not be profitable,” he said
The former NNPC GMD said with deregulation, prices will initially go up, but after that, the prices will come down like what happened in the telecoms industry. “Initially we were paying N30,000 or more for SIM cards, now they are begging you to take SIM cards because there is volume usage and the companies are making money; so they can invest money to expand the business”, he said.
Labour kick, says increase
is unacceptable
The Nigeria Labour Congress (NLC) President Ayuba Wabba said any increase in the pump price of petroleum products would impoverish Nigerians and distabilise the country.
“Any increase in the price of petroleum products is unacceptable to labour and we are going to fight it,” he threatened.
Wabba said considering the current economic challenges, which have reduced workers to beggars, this is not the right time to increase fuel price. “As we are talking now, only about 12 states have paid their workers, the remaining states owe. Where do we go from here?” he asked.
-
We lost N697.9m to fuel supply, by marketers
About N697.9 million has been lost by marketers because the Pipelines Products and Marketing Company (PPMC) has not supplied them fuel in the past three months.
The marketers, under the aegis of the Independent Marketers Association of Nigeria (IPMAN), said the loss was the difference between the price they bought products and the recommended price.
The marketers, at the peak of the fuel scarcity, said they bought fuel at N120 per litre, against the pump price of N86.50 per litre.
They said they incurred a loss of N33.50 on a litre amounting to N697.9 million.
On behalf of the marketers, the Managing Director, Ogbos Petroleum Limited, Mr Chigozie Nwozuzu, said marketers have paid N2.5 billion into the Single Treasury Account(TSA) for the purchase of 20.8 million litres between February and April 2016, adding that they were yet to be supplied fuel by the PPMC.
The marketers who have not been supplied fuel, he said, are about 300, adding that many of them have sacked their workers to survive.
He said: “Independent marketers, though not all, have not been able to get fuel, after making payments for the product. Marketers have lost N33.50 each on a litre of fuel and N697.9 million on the aggregate. The loss came from the disparity between N120 marketers paid per litre and the pump price of N86.50 per litre. Marketers have paid N2.5 billion into the Treasury Single Account, in line with the Federal Government’s directive that marketers must pay into that account to buy petroleum products.‘’
According to Ogbos, the failure of the PPMC to supply them fuel made his outlets in Mbala Isuochi in Abia State and many others in the state, not to have fuel.
He said about 7,000 tickets were given to marketers as evidence of payment for fuel by the PPMC, adding that they were yet to get fuel.
The Managing Director, FAGON Oil and Gas Limited, Mr Adubuola Victor, said the marketers had suffered social and economic losses to fuel scarcity, stressing that some died while waiting for fuel at Apapa, Lagos.
His outlets in Akure, Ondo State and others in the Southwest region, he said, do not have fuel. He urged the Federal Government to wade into the matter, with a view to helping marketers get the product.
An official of PPMC, who wished not to be mentioned, said the agency was investigating the matter.
‘’We cannot speak on the issue of non-supply of fuel to marketers by the PPMC. We are investigating the matter; and, at the appropriate time, we would make our findings known to the public.’’ he said.
IPMAN National President Mr Chinedu Okoronkwo said the body was working to find solutions to the issue.
He said IPMAN would, by the end of the week, have resolved the problem between its members and the PPMC.
-
Return of fuel subsidy?
•It is unsustainable; but then, we must expedite local refining of petrol
Although it underlies the dilemma of a leading oil producer which nonetheless imports fuel for its domestic needs, it is perhaps not the kind of news that Nigerians expected to hear – at least not at this time. We refer to the latest fuel price template released by the Petroleum Products and Prices Regulatory Agency (PPPRA) showing a subsidy of between N12.62 and N12.88 on a litre of petrol.
As released by the PPPRA, the expected open market price for petrol for independent and major oil marketers is now N99.38 per litre; whereas for the Nigerian National Petroleum Corporation (NNPC) retail outlets, it is N98.62. Officially, petrol price remains N86.50 and N86, respectively, for the two categories of marketers.
In the context of the modest recovery in global oil prices, the latest being the $46 price per barrel announced last week, the situation should not be hard to understand. Of course, the development comes as a two-edged sword – on the one hand, it means more accruals into the federation account; on the other it translates to potentially higher domestic fuel prices for the import-dependent Nigerian economy.
Although the Minister of State for Petroleum, Ibe Kachikwu, has stated that the current prices would remain, albeit temporarily, the prognosis is as grim as it is difficult to gloss over. At an estimated average daily consumption level of 40 million litres per day, the differential –subsidy – comes to a daily average of N500 million or a whopping N1.8 trillion in a year ; that is assuming that oil prices remain at the current level – a most unlikely proposition. Should oil prices go up – as Nigerians pray it does– the figure will certainly go higher. Even if we grant that a quarter of this figure will be refined locally, it comes to a mere slice off the hefty sum that may have to be paid to the club of marketers should the Federal Government insist on the current retail price.
The choice we face in the circumstance is one between tapping on the already shrunk treasury to finance the outlay, not minding that a substantial part of the current federal budget is debt-financed; or, allowing a cost reflective pricing regime to rule – in effect, making the fuel consumer pay the real cost price. Whereas the former comes with the prospect of further solidifying the current practice of making the NNPC sole importer of fuel and with it the attendant cycle of shortages, smuggling and associated sharp practices; a market reflective price on the other hand not only raises the prospects of getting other players on board, but ensures that this is done without recourse to the treasury.
By now, the choice ought to be clear. Even if the Federal Government wanted the subsidy to continue, it is doubtful that we can afford to continue to shell out nearly a trillion naira annually on it. Equally pertinent is whether it makes any further sense to continue to burden the treasury with the corruption-infested subsidy regime.
We understand that at a time of shrinking consumers’ real incomes; when factories are drawing shutters on their operations, a time when the economy is contracting rather than expanding, and when power supply has been on the dip, the call to pay potentially higher prices for fuel – even in the interim – will be unpopular. Yet, the choice is one that the nation will have to make at this time if only to correct the bad choices of the past and if it is truly desirous of getting more funds for development.
Quite fortuitously, petrol currently sells far above the recommended retail price in most parts of the federation – with perhaps the exception of Lagos and Abuja. Even with noticeable improvement in supply across the federation, there are yet no signs that the marketers will adhere to the regulated price.
The way forward, in our view, is to throw the sector open to competition; as it is, Nigerians will certainly loathe a throwback to the era of paying marketers who have shown complete disdain for fair play. We see the current phase as offering the best chance to prepare Nigerians for the imminent transition to the long-expected liberalisation of the sector, with the government however paying serious attention to local refining of fuel because that should be the ultimate goal. Continued importation of petrol by Nigeria, a leading crude producer, is in itself not sustainable. It is injurious to our economy.
-
Fuel subsidy: How to kill a country
Hardball wants to wager today that never had life been so viciously subsidise in any corner of the world than the Nigeria of today. But first, we must not mix up our words, their meaning and context.
Subsidy in its true sense means to grant assistance especially in form of financial support. But Nigeria’s context of subsidy seems to connote the exact opposite. It means to take billions of naira from Nigeria’s treasury, hand it to some people known as independent marketers for purportedly importing fuel for the use of the people at moderated price.
But in reality, it is either there is indeed no accurate check of the quantity of fuel imported or there is collusion between the so-called marketers and government regulators. So we are never sure what we pay for is what we got.
But shortchanging or short-supplying us would have been palatable if it stopped at that but no, since it seems they do not want Nigeria to live and they don’t want Nigerians alive, they do worse things.
Because they over-invoice and under-supply, there is always a shortfall and the attendant scarcity. For instance, for more than two months, there has been acute scarcity of premium motor spirit (PMS) in Nigeria. For most of this period, Nigerians have suffered untold hardship. Many man hours are devoted to queuing up to buy petrol daily; many companies have either shut down or downsized as a result of drastically reduced production capacity considering that public power supply has been at near zero during this period as well.
For most of the last two months, Nigerians have purchased fuel even right from the nozzle at between N120 to N250 per litre. In a season of dwindling income and high inflation, people are expending nearly half of their income on fuel and half of their time at the filling station. Who talks about manipulated pumps anymore? Triple jeopardy: marketers sell at inflated price, manipulate pumps and collect subsidy.
Yet again, we would live with these excruciating pains if they had stopped at that. But they don’t stop. Now wait for this dear reader: for all this period of damaging scarcity, the Federal Government will be paying subsidy at N12.88 per litre to the marketers. Let’s do a simple arithmetic: they say we consume an average of 44 million litres of petrol per day. If you multiply 44 million by 12.88 by 31 days, you will have an idea how much blood the government and their fuel marketer cohorts are draining from our system.
After the January 2012 fuel subsidy protests, it came out that many fake marketers were in the system who easily collected billions of naira from government’s coffers. Not one of them has been convicted till today. Not one refinery has been built as promised since then. To think that the cost of this so-called subsidy would build us many refineries. But we prefer to import fuel from even non-oil producing countries.
Since Nigerians have been buying fuel for average of N150 per litre, there has been a clamour to scrap the so-called subsidy obdurate.
Hardball says: if this subsidy does not kill Nigeria…
-
‘We ‘ve paid N2.5b to PPMC without fuel’
About 30 million litres of fuel are yet to be supplied to marketers by the Pipelines and Product Marketing Company (PPMC) three months after the payment of N2.5billion, the Independent Petroleum Marketers Association of Nigeria (IPMAN), has said.
Speaking yesterday in Lagos during a protest organised to press home their demand for the release of the product the marketers, who operate under the aegis of Concerned IPMAN Members Capital Oil Depot Lagos, lamented that they paid and received tickets to load fuel from PPMC since three months ago.
Its spokesman, Chigozie Nwozuzu, said the marketers have 7,000 tickets to load fuel from Capital Oil Limited, Apapa.
He said: ‘’A truck contains 40,000, 45,000, 60,000 litres of fuel, depending on its capacity. We have brought hundred of trucks from different parts of the country in order to load fuel at Capital Oil office. Unfortunately, we (marketers) have not been load to fuel.
”The marketer’s have 7,000 tickets with them, and if it multiplied by 45 litres of fuel and 76.5 per cent money that is accrued to the Federal Government, the money, which the marketers have paid for unrecovered fuel is about N2.5 billion.”