By Babs Oyetoro
Nigerians everywhere will not forget in a hurry the excruciating pains brought upon them due to the removal of petrol subsidy by the ruling All Progressive Party (APC), led by President Bola Tinubu.
The spiral effects of the subsidy removal have profound negative impacts on the entire nation, which it is still contending with.
Although President Tinubu’s reforms were meant to rescue the nation from a total collapse binge, they were unmindful that they would bring untold hardship to the people. This is not deliberate, after all.
The current government has implemented so many economic interventions to mitigate the suffering of the masses, and we have yet to really feel the impacts.
*Background
For nearly three decades, the Nigerian economy has run on the wheel of a mono-economy, where its main income was solely from the sales of crude oil, which was used for survival at the expense of other mineral resources.
Successive administrations before now saw the money realised from crude oil sales as easy access to funds for running government expenditures, to the detriment of other resources left untapped and undeveloped.
It is ironic to mention that while the rest of the oil-producing nations were enjoying the economic boom of that era, in the international oil market, Nigeria also made fortunes from the sales of crude oil but without strategic planning for the future, in terms of saving for rainy days and investing in other sectors of the economy.
Sadly enough, four Nigerian refineries were comatose without genuine concerted efforts to turn them around for optimal operations. This is the pathetic situation before this dispensation of the removal of fuel subsidy. It must be mentioned here that Nigeria remains the only oil-producing country without functional refineries until recently when Port Harcourt Refinery and Warri Refinery started working again, including a privately owned refinery by the multi-billionaire businessman Aliko Dangote came on board.
*Corruption in the oil sector
It is not borne out of exaggeration to say that corruption in all our lives has been the bane of our development, including the oil sector. What we have witnessed over time in the oil sector is corruption at its apogee and endemic too.
How will you justify a situation in which N400bn was spent on subsidies on a monthly basis to refine Nigerian crude oil outside of Nigeria, leaving the country reeling under a heavy burden of debt while the economy was left bleeding to death?
For the record, fuel subsidies began in the 70s. They became institutionalised in 1977, following the promulgation of the Price Control Act, which made it illegal for some products (including petrol) to be sold above the regulated price.
From 2006 to 2018, Nigeria spent about N10trn on fuel subsidies; between 2019 and 2020, it spent about N3trn on fuel subsidies; in 2022, it spent N2trn on fuel subsidies, while in 2023, it spent N3.6trn on fuel subsidies alone.
While the oil subsidy regime was in full gear, crude oil theft had assumed a dangerous trend as the country was lagging far behind its OPEC production demand.
Noticeably, some other issues include fuel smuggling to neighbouring countries, which accounted for 51 percent of daily fuel consumption in Nigeria, and endemic corruption.
To further expose the rot in the sector, it is unbelievable that the NNPCL could not give an accurate figure for the country’s daily fuel consumption. This is outrageous, to say the least.
This analysis will be handy in shedding more light on what transpired in the oil sector during the subsidy regime.
As of H1-2023, the landing cost of fuel in Nigeria ranges between N500 and N600, and it sells at an average of N200 nationwide. The government is, therefore, responsible for the N300 – N400 excess.
In 2022, an estimated N2.74trn was paid as fuel subsidies, while just over N600bn was earned in oil revenue.
Meanwhile, in the 2023 budget, N3.36trn was provided for fuel subsidy up to June 2023, while N2.23trn was projected for oil revenue for the year. The situation has degenerated, and the government borrows to pay for subsidy, making it unsustainable for the country.
*Removal of subsidy, birth of Dangote refinery, and attendant politics
Subsequent administrations grappled with the dilemma of maintaining subsidies. A major issue was the unsustainable financial cost of subsidies. In 2016, Nigeria reportedly spent $30bn on the fuel subsidy.
With the economy in dire straits and engulfed in a financial quagmire, the Bola Tinubu-led government had no option but to consider the survival of the ailing economy he inherited from his predecessor, President Muhammadu Buhari.
It is evident that the only option is to eliminate subsidies and free Nigeria’s economy from the hand of the cabal holding the nation’s oil sector at the jugular.
Expectedly, the cabal that had been profiting from this illicit business fought back brutally, as they would not let go easily. They threw so many darts at Dangote’s refinery project to frustrate the Multi-billionaire business mogul.
Initially, the Chief Executive Officer (CEO) of the Nigerian Midstream and Downstream Petrol Regulatory Authority, Farouk Ahmed, fired the first salvo when he alleged that the diesel produced by the Dangote refinery was inferior to the ones imported into the country. He said that it had a higher sulphur content, put at between 650 and 1,200pm.
The NMDPRA helmsman was not done yet, as he also announced that the Nigerian government would not stop the importation of Premium Motor Spirit (PMS), also known as Petrol, Automotive Gas Oil (AGO), or diesel, into the country.
He was emphatic that Nigeria cannot depend on the Dangote refinery to meet the country’s product demand. This is nothing but high-wire politics at play to weaken the Dangote Refinery at its inception.
Business Hallmark newspaper reported that the forces against Dangote were massive.
“They cut across all spheres of influence, including the nation’s security services, financial institutions, the three arms of government, the business community, fuel importers, tank owners and marketers, and foreign refiners threatened by Dangote refinery’s emergence.
“Dangote himself said some ago that another investor without his clout and perseverance would have capitulated and closed up shop and that he wouldn’t have ventured into the refinery business if he had known the challenges ahead of him”, a reliable source in the oil industry informed BH.
In August, Nigerian investigative journalist David Hundeyin, based in the U.S., accused an international Non-Governmental Organisation, Dialogue Earth, of offering him N800,000 bribe to smear the petrochemical plant.
According to Hundeyin, the NGO contacted him with a brief that required him to write a negative review about the Dangote Refinery, using climate change and environmental concerns as justifications.
Hundeyin claimed the NGO, formerly China Dialogue Trust, is based in the United Kingdom and headed by an Oxford professor, Sam Geall.
He further alleged that several American intelligence fronts, such as the Ford Foundation and ClimateWorks—which is blocked in India for funding organisations working against the country’s national interest—are financiers of the NGO.
Speaking on the development, a professor of African Studies at the Hunter College, The City University of New York, Ehiedu Iweriebor, said that the Dangote Refinery is likely to be seen as a threat to some European refineries and other economic sectors for various reasons
“First, the foreign refineries that have held Nigeria captive by supplying refined products of uncertain quality for over 20 years would lose this enormous market. Second, they may have to close down if Nigeria is their primary market.
“Third, jobs are likely to be lost in these refineries. In general, it is expected to affect the economic well-being of the parts of Europe that create jobs by exporting poor-quality oil and poverty to Nigeria.
Aside from these upheavals pervading the industry with the coming of the Dangote refinery, there was also the problem of the uniformity of the price of these products. This, however, generated fierce battles among the industry players.
It took the Federal Government to mediate in the ranging price war and brought sanity to some extent. President Tinubu also directed that the crude oil transaction be in local currency.
*Positive results from the sector
Today, the oil sector is witnessing a renaissance, with the resuscitation of the Warri refinery to complement the existing Port Harcourt and Dangote refineries.
The Nigerian National Petroleum Company Limited announced two days ago that the Warri refinery will be producing 125,000 barrels per day. This development comes barely a month after the commencement of operations at the 60,000 barrels-per-day Port Harcourt refinery in Rivers State.
It is also reported that Nigeria is producing almost two million barrels per day to meet OPEC demand.
The good news today is that the price of PMS may be forced to go down due to the stiff competition in the sector now.
Oil marketers and the Nigerian Midstream and Downstream Petroleum Regulatory Authority have corroborated this speculation, too.
According to the NNPCL Group Chief Executive Officer, Mele Kyari, ‘ The Warri refinery will help the nation become a net exporter of petroleum products, as some of these products will be sent to the international market’.
“The Kaduna refinery is also on stream. We are not going to give you a date, but we would surprise Nigerians as we did the other day, and Kaduna will start operations”, he assured.
This positive development is reassuring and hope-lifting if it is sustained as promised.
This recent development has elicited hope in Nigerians that the better days are here again.
