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FUEL SUBSIDY REMOVAL: FG charges on against all odds

*Labour threatens showdown

By Jide Ajani

At a time when the Federal Government of Nigeria and its component states are just agreeing to pay the new minimum wage of N18,000, the planned removal of subsidy on petroleum products would no doubt throw another spanner in the works.  This report would show that at best, the ritual of a massive industrial action would again be performed, while at the same time the real benefits of the subsidy may suffer undue discount in the face of an insincere approach to subsidy removal – for the umpteenth time.

It did not come as a surprise!
However, what organized labour found surprising was the brazen confidence displayed by the President Goodluck Jonathan administration in pronouncing that it would remove the subsidy of petroleum products. This has led to a furore of sorts. But the federal government is determined to march on.

Yet, the real essence of the removal of the subsidy the government insists it is paying is being lost in the mélange of insincerity, dearth of information and a lack of will by President Jonathan to deal decisively with those government has consistently fingered as being responsible for the siphoning of billions of naira meant as subsidy.

In the 2010 fiscal year alone, about 25 per cent of the entire budget expenditure for the year under review was said to have been spent on subsidy equating N1.3 trillion (about $8.38 billion).  Within the same fiscal year, the approved amended and supplementary budget amounted to N5.159 trillion (about $33.2 billion)

According to the PPPRA pricing template, even though petrol is sold at N55.90k and N65 per litre, ex-depot and pump price respectively, if deregulated, consumers would have to pay N138.20k per litre. Essentially, the subsidy element on current petrol price is N82.30k per litre.

Similarly, although ex-depot and pump prices of House Hold Kerosene, HHK is N40.90k and N50 per litre respectively, if deregulated. consumers would have to pay N151.15k per litre. Essentially, the subsidy element on current kerosene price is N110.25k per litre.

No responsible government is expected to continue along this path of expenditure in the name of subsidy.

But the argument is immediately deflated in the face of the content and context of the subsidy.

Well, in plain simple language, it is made up of costs borne out of pure inefficiency and an inability to be creative in managing governance.  Nigeria’s refineries are working in a manner of speaking.  But the capacity at which they are operating only amounts to less than 30% of national needs.  No new refineries have been built since 1999 when the civilians came in – not that any has been built since the Kaduna refinery was commissioned in the early part of the last quarter of the last century – some three decades ago.

With massive importation of petrol into the country and the inefficiency at the ports, what constitutes the subsidy is a mish-mash of demurrages, transportation, shipping, banking costs, bridging costs, laziness, inefficiency, greed and ineptitude – all these come together to make for the cost of subsidy.

Indeed, NLC’s position is that there was an agreement which subsists and which states that the N65 per litre cost of petrol should not be tampered with.

A source in the NLC told Sunday Vanguard that “we said the issue goes beyond just deregulation or removal of subsidy.  It should be the whole value chain that should be looked into reinvest, bring back the refineries and all such”.

The NLC is also insisting that Nigeria must move from import reception destination to direct local production.

“We talked about the need to punish sharp practices and reward or acknowledge those who comply with the law”, the source told Sunday Vanguard.

Sunday Vanguard also discovered something potentially dangerous in the current debate and which relates to the just agreed minimum wage of N18,000.

The N18000, as at the time it was agreed to was based on an inflation rate that was in single digit.  By the time the agreement was reached and the Minimum Wage Act signed into law, inflation had hit the double digit.  So, the parameters have changed.

But the government is not looking at that.

In addition, how would it add up for the Nigerian worker whose N18000 minimum wage was based on a pricing regime of N65 per litre of petrol but who is now being told that he would have to pay between N120 and N150 per litre? He would simply, also, ask for more money as the governors are doing now.

According to Hon (Dr.) Joseph Akinlaja, Labour Party, Ondo East/West federal constituency, who was a past Deputy President of the Nigeria Labour Congress, NLC, and also former secretary General of NUPENG, ‘‘Government should explore the public private partnership in building of more refineries this is the only panacea to the incessant challenges in the country’s energy sector.

Deregulation will only put the future of millions of Nigerians in the hands of cabal that derive pleasure in importing fuel. This cabal will make life difficult for Nigerians by fixing prices of petroleum products at levels that would be of great benefit to them, their cronies and proxies at the detriment of ordinary Nigerians.”

General Secretary of the NLC, Owei Lakemfa last week in Abuja made it clear that organized labour would resist the subsidy removal

The NLC scribe queried why the government had been unable to utilize revenue that has been at its disposal to provide security and other basic needs of Nigerians before asking for more revenue.

He lambasted the Government for borrowing the same arguments that had been used by past administrations to justify the need for withdrawal of subsidy from petroleum products.

Said he: “The template of the Petroleum Products Regulatory Agency (PPPRA) is that it includes charges for freight, insurance and the ports into that of imported fuel which raises the price of the product and then turn around to say they are subsidizing the price of fuel”

He pointed out that all these charges wouldn’t have arisen if petroleum products were locally refined adding that the Government ought to ensure that petroleum products were locally refined before first implementing the deregulation policy in the downstream sector of the oil industry.

According to him: “The  argument advanced by Government for the withdrawal of fuel subsidy is the same worn-out position that have failed Nigeria in the past”


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.