Controversy is still trading the abolition of fuel subsidy regime in the country, Jude Idu writes.
Months after the announcement of the suspension of fuel subsidy, fears still dart as to whether the country can sustain the policy. The fears are rooted in the wider implications of the policy, especially its impact on lower-income earners. Like those in his economic cadre, Abdul Mayaki, an Abuja-based commercial taxi driver, envisages the fate of suffering millions of Nigerians who may not be able to afford the expected increase in cost per liter, of petroleum products because of subsidy removal.
Mayaki is a 72-year-old Muslim faithful with several wives and eight kids. He earns, on a daily basis, an average income of N8,000, after all, expenditure. He knows too well that many Nigerians like him might soon begin to experience the biting effects of a hike in fuel prices, and that could affect his daily income. He believes that the state-owned oil corporation, NNPC’s ‘double standing’ portends danger since there has not been total deregulation of the oil industry.
“NNPC is making things difficult for Nigerians and they put every consumer in trouble. How can they play this double standing? Why tell us that subsidy has been removed, yet they say the price is not regulated? Yet, the price is being controlled by the NNPC. ‘‘The marketers are never happy over it. You have seen since the pronouncement by NNPC, independent marketers have gone on strike about three times, because NNPC has refused to let go of the price. And how can you suddenly announce the removal of subsidy without letting go of the price? Is it not a way of stifling the masses, because where two elephants fight, it is the grass that suffers?”
Mayaki is worried that the reappearance of fuel queues in Abuja and other major cities in the country since the subsidy removal jeopardizes the flow of daily income. He said, “I depend on this daily income to feed the family and also pay school fees. I also depend on it for taking care of other family members, including my aged mother. Untimely, obstructions due to lack of fuel hit my business directly.
“Sometimes we wake up in Abuja to see queues at filling stations. The marketers now play with us, and when we spend hours at the fuel stations waiting for the products, the day’s income would have been denied. “That is the situation of the low-income earners as of today, and that is because the NNPC is still controlling the price after pronouncing deregulation. It could have been better if the price is fixed right at once so that Nigerians can make choices.’’ Ibrahim Maikani is a barber. He bemoans the non-availability of fuel products when it matters the most. He wonders whether the deregulation policy will ever work. “Okay, let’s take it this way; can you ask yourself a good question, why the NNPC has not prepared well before announcing the removal of subsidy? What we are hearing now is that the same NNPC is still importing fuel, with the proposition to spend over $14bn in six months before ending the importation? “Another question is, why was there no refinery on the ground before the announcement with all the promises and money budgeted for the turnaround maintenance?’’
For a veteran journalist, Mr. Chima Nwankwo, “I don’t get it anymore. We have four refineries. How can you say because the price of crude has increased globally, it is affecting you adversely, when this is the period we ought to make money as a country? This is the benefit petroleum-producing countries have. When crude prices rise, they sell and make money for their other needs. For us, when crude prices rise, we start crying. This is not how to run a country. “Unfortunately, several administrations had promised the country of total removal of petroleum products subsidy, but that never was seen to its fruition owing to no refinery on the ground to perform an alternative duty.”
As millions of Nigerians await days of increased pump price as scheduled by the NNPC, the deregulation policy may as well go the way of other failed projects. As the NNPC continues to import fuel products for the next six months to sustain the economy, there are indications that the country may not implement the policy, after all, there has been no adequate preparation on the ground to provide alternative petrol refining mechanisms. Mallam Olagoke Gbadebo drives one of the hundreds of green buses that weave through Abuja’s streets Nigeria’s capital city. Standing there among other buyers who lined up to buy fuel despite the coronavirus pandemic, he has a different problem: rising petrol prices.
“Fuel is the only thing the government keeps increasing,” the 50-year-old lamented on a busy Friday afternoon. While Gbadebo is feeling the heat, observers say the government’s coffers are at risk, too.
Nigeria said in March that it had ended costly fuel subsidies, and announced that it was no longer fixing pump prices. Since then, all the states of the federation, including Lagos and Abuja, have pump prices that have risen to just over N160 per liter from N145.
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It is, however, obvious that the country has made the NNPC the country’s sole gasoline importer, just as the company’s Group Managing Director (GMD), Mele Kyari, noted that, if prices floated with no control, that could hurt consumers. “Government is very keen on making sure that people are not exploited,” he said in an interview. A former NNPC executive and a source close to ThisNigeria said that the NNPC was still setting gasoline prices, but at ex-depots, rather than at the pump. “Those prices set using an unpublished template block private companies from importing, leaving the government as the sole gasoline seller and opening it to continued losses.” The NNPC GMD, however, insisted there was no allocation for fuel subsidies, elimination of which was among conditions for a $1.5bn World Bank budget support loan.
Tunji Oyebanji, chairman of the Major Oil Marketers Association, said NNPC lost at least N30($0.08) per litre on gasoline as of early February, based on the international fuel price and the publicly available dollar exchange rate. He noted that with daily consumption of roughly 40 million liters, which amounts to N1.2bn ($3.15 million) per day, at a time when low oil prices have left Nigeria’s budget N5.60 trillion in deficit, “the reality of it is that whether it is a subsidy, (whatever) you want to call it, it is still happening.” Sustainability: The economic report Nigeria, Africa’s largest oil exporter, imports all its fuel, a sore point for the government. About 200 million citizens view cheap petrol as one of the few consistent benefits from a system where graft and inefficiency are ingrained. Unions threatened strikes after price increases last year, and rumors of pump price rises of just a few nairas sparked fuel queues and shortages across the country, particularly in Abuja and Lagos.
A situation, which the NNPC said the current system was temporary, and the government was working on a permanent mechanism to enable market-based prices, and private sector imports, while protecting consumers. In the meantime, observers say the lack of transparency means consumers can’t know if they are getting a fair price – or budget watchdogs if the government is losing money. “It has become more confusing,” said Bello Rabiu, a former NNPC chief operating officer and group executive director. “Any time there is no transparency, definitely there will be corruption.”
A copy of the unpublished template made available to the media does not outline what dollar exchange rate or international fuel price NNPC is using to set ex-depot prices.
A shortage of dollars at the Central Bank’s rate of N381 means it would take private importers six months to get enough official dollars for just one cargo of gasoline, Oyebanji said. Meanwhile, Oyebanji and others said, using government oil cargoes to exchange for fuel effectively provides subsidised currency, which is ($1=N381.0000)
Nigeria to spend $14m for fuel importation till June
Ridiculously, the NNPC has yet recorded an N5.34 billion ($14 million) cost for fuel in June, months after it changed its pricing method in an effort to eliminate subsidies.
NNPC outlined the “under-recovery” bill in its June monthly statement, a term used to reference money lost through fuel sales.
NNPC spokesman, Kennie Obateru, said the costs represented temporary payments to marketers, who buy imported fuel and then sell it on, for stocks they held when the subsidy was removed and would be spread over six months. “Since the subsidy removal started with a reduction in pump price, marketers have to be paid the differential of the (government) verified stock they held,”
In March, amid a global oil price crash, Nigeria cut its gasoline pump price and said it had eliminated subsidies through a new price cap that maintained government control but allowed prices to move with the market.
Nigeria’s gasoline prices had been kept artificially low at N145 naira ($0.48) per litre.
A study supported by the British government estimated Nigeria spent N10 trillion on subsidies from 2006 to 2018, more than the individual budgets for health, education, or defense. The body tasked with setting pump prices, Petroleum Products Pricing and Regulatory Agency (PPPRA), has not published retail prices since March 31. According to fuel importers, there is a set monthly depot price, but it is not widely distributed. The lack of transparency around the new gasoline pricing mechanism has been a point of contention for those monitoring whether the subsidy cost has been permanently eliminated, and is one of the sticking points over a much-needed World Bank loan.
