Why FG is still paying subsidy – Osifo, PENGASSAN President

The President of the Trade Union Congress (TUC), and Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr Festus Osifo, gives reasons why the Federal Government will continue to pay subsidies on petroleum products, amongst other issues, in this interview on Channels TV ‘Hard Copy’, monitored by Linus Aleke

This issue of subsidy payment is back again, are we approaching this issue with the sensitivity, courage, and decisiveness it deserves?

Yes, if you remember sometime in 2020, the conversation of subsidies came to the front burner and we had a lot of discussions and meetings with the government. Then I was not the President of the Trade Union Congress (TUC), but I was present at all the meetings that were held then. When it got to 2021, after the passage of the Petroleum Industry Act, the government on its own decision to step back and we all knew that they did that because of the forthcoming elections, the 2023 general elections. So, now it is back to the front burner again because the election is over and we are moving into a new administration. I think that it is a conversation that we must have, it is a conversation that all the stakeholders must sit down together to look at its impact on the Nigerian economy. Also, when you remove the subsidy, what is going to be the impact on the people as well? So, it is a conversation that must be held, otherwise, we would keep shifting it from one point to the other.

This conversation extends beyond 2020, but in 2012, the government removed the oil subsidy and put it back following the protest that greeted its removal, do you think that there is sufficient will to be able to take more decisive action from the conversation that we are currently having?

You know why I said 2020 was because I was talking about the recent conversation we are having with this government. You know that subsidy had been there and the discussion had also been there since the 80s, 90s and so on, so, it is been there. Currently, I think that the new government, just as you said that the three leading presidential candidates said is the direction to go. But, on their part, they may be serious about getting it out, but on the part of labour and civil society, we also need to analyse it to be very sure that what they are about doing will have a positive impact on the people. Let me quickly state that I double as TUC and PENGASSAN president. So, I want to quickly do a distinction between the two positions. PENGASSAN as of 2016, in one NEC meeting that was held in Calabar, I was the branch chairman of Total Energy E&P, at the time, and I was not the president. So, we concluded that it is good for that sector to be deregulated. The reason that was reached was that when we looked at it, the downstream sector of the oil and gas industry was not developing at the same pace as the upstream. And again, I could remember some of the arguments that were held at that time. Part of this argument was encapsulated in the following scenario painted by one of the branch chairmen then. He likened subsidy to a man who loves his child so well and will lock him in a room to prevent him from the scorching sun. But at the end of the day, you are stopping your son from going to school. You are stopping him from being exposed to the outside world. Therefore, you are protecting your son from physical weather like the sun, but there are other things that your son is missing. The argument ended then, that if we continue with the subsidy, it will get to a time that the debt owed by the Nigerian government is going to increase because the earnings from crude oil sales are what support our foreign exchange earnings as a country. So, it will get to a time when CBN will no longer be able to defend the currency that was in 2016. So, when I look back at the position of PENGASSAN in 2016, how has it affected our economy today? From 2016 till date, we all know how the dollar has moved. We know that we have had runaway inflation of more than 20 percent, and we have also seen the level of debt that the government is owing. Internal and external, as well as debt to the CBN. I just read this morning that the current debt stood at N46.25trn, so all this is affecting the economy. What PENGASSAN did then, was to say ok, let us look at it. In costing, we have both the explicit, and implicit cost, and we have the opportunity cost. So, the fact that we are holding onto subsidies will also impact other areas of our economy. For instance, if you spend your salary on 10 items and petrol is one of them, so you are holding that down, you holding down that petrol affecting the other nine items. Because we all know that is what is leading to our inflation today. The reason is that if you go to the market, virtually everything had gone up. It could be tied to devaluation, so the discussion then was that the government had more money. If our exchange rate was quite ok, would we be in this same hardship that we are today, so that was in 2016. But if you now join it to where we are today, you see that the PENGASSAN position then was correct because the fear then was actually where we have found ourselves today. So, take it to TUC, PENGASSAN is one of the 35 affiliates of TUC, PENGASSAN came to TUC then to explain their position. When we meet at the TUC level, we are also going to look at the PENGASSAN position viz-a-viz all other affiliates, we will debate them. But as TUC, we will come up with a particular position. However, the point, in general, is that in anything we are doing, we must ensure that the Nigerian masses, the Nigerian workers are better for it. The Nigerian workers will not be exposed. So, if holding one item, we expose the Nigerian workers in other areas we will debate it and agree. For example, we could say, the government in the past said a lot of things like they are going to bring palliative but they are never sincere. That is also the difficulty and one of the reasons that it has also been difficult for the Trade Union over the years to key to some government policies is because they will say one thing today and do other things tomorrow. And the trust deficit that we have had in successive governments is terrible. So, it is difficult for you to believe the government.

If I understood you correctly, you are saying that PENGASSAN has a position it took since 2016 but TUC is yet to take a position, is that correct?

TUC’s position over the years has been that the government has to fix the refineries. So, there are conditions precedent before you go ahead to implement subsidy.

PENGASSAN does not have any of these conditions, does it?

PENGASSAN in the past had also advocated that the refineries should be fixed. It was because of the intervention of PENGASSAN and NUPENG that we have enormous work going on today in the Port Harcourt and Warri refineries. I can tell you that enormous work is going on. So, what we have said is that these things can go side by side. If we push for the refineries to be fixed, we know how it is going to create jobs. We know how the value chain of that sector or the sub-sector is going to be deepened. We know that if refineries are working, we are going to have fertiliser and petrochemical companies which is a lot of jobs. Primary and secondary jobs will be created, so we understand that. We are pushing the government in that regard but what we also said then was, let us be careful, as we are holding on to this, what are the opportunity costs. How is it going to affect the larger economy because there are things that as labour we also need to deepen our conversation, we need to look at it more broadly and not look at it from a narrow perspective.

The NLC president has in the past argued that fuel subsidy removal does not equate to an increase in price, do you share this opinion?

You are correct, part of the conversation may be because we are from the oil and gas we have done a lot of petroleum engineering, petroleum economics, and all that, maybe the understanding be a bit different. So, we would be patient with everybody, I am speaking as PENGASSAN president, so, we will be patient with everybody but we will also make them see the bigger picture. As I had said, the greatest constraint and the greatest problem is government. The government is still living as if there is no problem in the country, they are still spending, they vote money for security, and in the end, we don’t know how they spend it. So, that is why the conversation is difficult, like I had said in this studio at a particular time that it is just like a man that is telling his children that there is no money at home and that they need to tighten their belts but the man is spending money in things that do not matter. The kids will challenge their dad that what he is telling them is not true. Coming home to your question, I think that the position as canvassed is also correct depending on the data that we are looking at. Fuel subsidy removal is not exactly equal to an increment in pricing, it depends on the price of crude oil. If crude oil today at the international market is selling at about $40/barrel, then we would not be paying any subsidy today. But because of the price of crude oil, that is why we are paying a subsidy today because if you look at it, you will discover that the landing cost of PMS is around N300 litre.

Is the government supposed to be pegging price of petroleum products in a deregulated market?

Before I answer your question, let me quickly state the position of NLC president because we have had conversations on this. As of today, the government is not engaging Labour on this specific subject. There is no engagement whatsoever, and that is actually why the President of NLC said that it is not yet time for us to have that conversation because the government as of now is not fourth coming on any discussion whatsoever. Having said that let me go straight to the pricing. In PENGASSAN we had our National Executive Council meeting on Tuesday 28 March in Abuja. On the side-lines of the NEC meeting, some journalists asked me why IPMAN said that the price of PMS should be N750, they now asked what my opinion on that. I told them that IPMAN had done their calculation and they are basing their calculation on N750 to a dollar and if you use that calculation, the landing cost today will come up to that. But as of today, the sole importer of PMS is NNPC. So, NNPC is using the CBN rate of about N430 per USD and if we use that in computing, then the landing cost today is about N300, so, when we now build in the other logistics cost and profit margin, it could take it up to around N380 or N400. It was not that PENGASSAN was recommending N400, no, or that PENGASSAN is fixing the price for N400, no but what PENGASSAN was just saying was that given the circumstances today that the landing cost is about N300, so, if we add the other logistics cost and profit margin it is going to take It up to N400. So, that was to create a distinction between what the IPMAN president said and what we think is the reality today. Now, coming to pegging and pricing, the greatest difficulty we would have in moving into deregulation today is our foreign exchange regime. If we want to remove subsidies and deregulate, and we ask marketers to go to parallel markets and source foreign exchange, what will happen is that the exchange rate of about N750 will jump to over N1000. Because there is going to be pressure on the parallel market and if that happens this pricing that IPMAN talked about is even going to go up much more than that. That was why I said that there were a lot of variables that must be considered and that is the reason why the government must sit down with all the stakeholders for us to look at the data and agree on the best way forward. Because we cannot subject our energy security to the vagrancy of the parallel market. What if the parallel market tomorrow moves to N1500, then we are going to be buying PMS over N1500 per litre. Can citizens afford that?

Do you think the NNPC should be the sole importer of petroleum products in that case?

No, NNPC might not be the sole importer but they should be able to get foreign exchange at the CBN rate and again as labour, we also need to look at the multiple exchange rate that exists today. Even if we deregulate today for instance, and PMS is been sold from our analysis at about N400, if the exchange rate moves from where it is today to about N700, citizens are going to pay 60 percent more. Government cannot completely remove their hands.

All these things are based on the importation of refined products, what happened to the local refineries that are been turned around?

It is not based on importation alone, from the analysis, we understand that Dangote refineries are coming on stream. If Dangote refineries come on stream how is it going to source for crude, it is going to buy crude from the government, Chevron, Total, etc, that crude that he is going to buy will be bought at the international market rate because Chevron will not sell crude to Dangote at a subsided rate. They are going to sell at international market price and crude contributes up to 80 percent of the cost of PMS. So, because crude is priced in the international market, we are still going to have that exchange rate variation. If the government subsidizes the crude price, they could buy it cheaper but if that crude cost is still at the same international market rate because IOC will not sell to you at a cheaper price.

You talked about the trust deficit, what do you think the government can do to increase the level of trust?

When I was vying for this position, I went around all the refineries to discuss with them and understand what the problems are as at that time. I was shocked when a particular employee who was then the branch chairman of the Port Harcourt refinery told me that he was employed in 2007, and from 2007 till that time, there was no single turnaround maintenance in the Port Harcourt refinery. I was shocked to my bone, but if you go to the Port Harcourt refinery today, you will see the enormous work that is going on there so, that is the trust. Unlike before when they approve turnaround maintenance, it will be on paper and nothing happens thereafter. You don’t see anything happening there, no single thing is being removed or changed but today, turnaround is ongoing and the same thing is going on in Warri. So, the point is actually that when the government says they are going to do something, let them do it because when the populace sees the governors gallivanting with private jets and they turn around to tell us that there is austerity. Even when I know that there is austerity may be because of my level of exposure it would be difficult for me to tell my constituents that there is austerity and we have to understand with the government. The government must lead by example, when they do that, it is easier for us to have this conversation.

I will not let you go without asking for your opinion on the just concluded 2023 general elections, especially now that the battle has shifted to the tribunal and your constituency the Labour Party is a major actor.

First of all, I wish to congratulate labour party and all also the presidential candidate for having a very wonderful race. Before now, nobody thought that a third force would be able to gather over six million votes when they don’t have a governor, federal and state lawmakers, and not even a single local government chairman, what they call structure. But, we have proven to them that the people are the structure. We have shown them that Nigerians are angry, we have let them understand the fact that we have had bad governance for a very long time and people are angry and are yearning for genuine change, not the type that happened in 2015. Having said that, I think that INEC promised a lot but they boggled it in the end. The BVAS was phenomenal, also the IReV. This could have added to some level of transparency in the system, whereby from your polling units, you go to your ward and you see the results uploaded. When you see that, it gives you some level of confidence in the system but at the end of the day after so many promises IReV could not work. So, that has dented the entire process that had brought about a lot of speculation and a lot of doubt in the entire system. Now, I am happy that Labour Party as the worker’s party has also decided to toe the part of the law by going to court. But I also want to use this opportunity to call on our judiciary to do the needful to stand and be courageous, when they see the truth, let them stand by the truth. When you see some of the decisions of the judiciary in the recent past, it is quite worrisome. A situation where someone did not participate in an election, like the case of the Senate President, Ahmed Lawan, did not participate in the primary but the Supreme Court said he is the candidate of APC. It is worrisome but we still have faith that the judiciary will do needful Nigerians must be vigilant and follow them one step after the other.

Will the needful be seen to have been done when the Labour Party candidate is declared the winner of the election by the court?

Not at all, but when we read this case, we know we are human. When we read the judgement at the end of the day we will sieve through. So, the point is that if they discover that the president-elect is not the winner of the election, they should have the courage by coming up with what the true situation is. If they also discover that he is the true winner and we also read the judgement and we look at all the polling units and all the results that are currently uploaded in IReV, we would be able to reach that conclusion but the major point is that they should stand up for justice no matter whose horse is gored.