Analysis:
By Yemie Adeoye
On Tuesday October 4, President Goodluck Jonathan forwarded to the National Assembly a 2012 Fiscal Strategy Paper, FSP, with plans to commence the withdrawal of fuel subsidy from next year and save the country well over N1.2 trillion annual spends on fuel subsidy.

This simply means that 4 months from now petrol will sell for between N165 and N200 taking into cognizance the projected devaluation of the naira which some finance experts have said would be witnessed through January 2012 when government intends to deregulate.

From the moment the paper was read on the floor of the Senate the entire nation has been thrown into a state of confusion with Nigerians begging to know if it is a right move or not. Hence public attention has concentrated on the issue of subsidy and deregulation of the downstream oil sector since then.

There has been diverse views on the legitimacy of such move at this point in our national life. While some reasoned that Government is right on the move others opined that it is not well thought out by Jonathan and his Advisers.

Fuel Scarcity,A physically challenged in search of fuel, at Obalende area of Lagos. Picture. PHOTO; Kehinde Gbadamosi

In 2010, subsidy payments alone gulped about N1.3 trillion, which represents about 24 percent of the entire budget and in a mono-dependent economy which begs for infrastructural development this can best be described as a misnomer. Previous governments have tried unsuccessfully to bring about the deregulation of the downstream sector which would see an end to fuel subsidy. However the move by the Jonathan-led federal government to bring this knotty issue to bear at this time in our national live has been welcomed in various quarters even as some sees it as long overdue.

A source at the Ministry of Petroleum who spoke to Vanguard on the condition of anonymity stated that nothing can be so right in the development of Nigeria than deregulation. According to him the scheme is designed to enrich only a few while the generality of Nigerians continue to beg for infrastructural development cutting across all sectors. This ranges from road rehabilitation and development, to improved health sector, the much needed steady power supply amidst a host of others.

“N1.3 trillion a year is huge! And it will shock you to know that this only find its way to the pockets of few Nigerians. Some even get allocation to bring in a particular quantity of product and end up bringing in less than that and they still go around and lay claim to subsidy, some would bring in products meant for a particular class of people and would divert it as we have seen in the issue of kerosene.”

According to him the country cannot progress whereby billionaires are emerging overnight in the name of subsidy while the masses continue to suffer.

However, as right as the move by government seems to be, there are still issues begging for answers and which any responsible government should react to with the urgency required.

What is the state of the four refineries initially constructed to refine about 450 thousand barrels of crude oil per day?

What move has government made to ameliorate the stress and cushion the multiplier effect of deregulation and subsidy removal?

Effective November, 2011, Government of Niger Republic would begin exportation of refined petroleum products to Nigeria by the end of this year, the country’s leader, President Mahamadou Issoufou, told reporters during a meeting with President Jonathan recently. If this is true why can’t Nigeria shore up its local refining ability to at least meet up its daily domestic demand nationwide?

Is Mr. President aware of the fact that with this singular act cost of transport from Lagos to Ibadan which cost about N500 in the early part of the year and now goes for N800 would go as high as almost N2000? This would of course affect the price of goods and services upwardly and the new minimum wage of N18,000 which almost took a nationwide strike would be rendered useless.

These are the issues labour should be raising with government and the issues government need to address with urgency or the subsidy removal as important as it may seem would be meaningless to the same masses government is intending provide for.

Nigeria as a nation has taken too many political than technical and sound economic decisions which is currently bringing about the situation we are faced with as a nation. Not a few industry experts have argued what a refinery is doing in Kaduna, when elementary economic sense teaches us that the source of a product should be close to the raw material. It is for this same reason that President Obasanjo would rather place a thermal power plant in Olorunsogo area of Ogun state hundreds of kilometers away from the raw material in Warri. Now such decision taken how does anybody convince an Atiku Abubakar if he had won or a Muhamadu Buhari not to site a refinery or power plant in Adamawa or Katsina as the case may be. So both labour and the organized private sector should take into cognizance the fact that the bulk of these decisions were only inherited by the present government and thus engage government from a position of knowledge. Modular refineries are in vogue all over the world but the Nigeria state has not thought of creating a conducive atmosphere to bring about investment in refineries. Government as a matter of urgency should give Nigerians a time frame for the subsidy removal to be in operation. Nigerians need to know for how long their suffering as a result of deregulation would be. They want to know when the daily consumption level of petrol would be refined in-country as that is the only sensible solution to the current issue.

Currently the landing cost for petrol is anything between N148.00 and N149.00, meaning that for every liter of petrol we buy government is paying between N84.00 and N83.00.

The monies spent annually on Turn Around Maintenance (TAM) of the four refineries if properly projected would commence the construction of a modular refinery.

The Petroleum Industry Bill, PIB, is stuck at the National Assembly for several years a development that have stalled billions of dollars in-country investment and this is the law that would govern the nation’s most essential sector. The country need private sector investment in refining as the four refineries have shown that government cannot run the business of oil refining. It only then that the nation can heave a sigh of relief on petroleum matters.

International lawyers

President Jonathan should therefore be telling the nation in clear specific terms what he intends to do with the N1.3 trillion deregulation would help him save in the short, medium and long term. Labour on its part should get international lawyers if need be and sit with government over the matter and reach a Grand Memorandum of Understanding signed by both parties with repercussions for failure of government to be clearely spelt out and duly signed. Hence it is binding.

Some other people have also argued that Government can deregulate in phases thereby making it easy on Nigerians, these are the issues labour should be discussing with the Government because in all fairness sN1.3 trillion annual spends on subsidy in a developing economy is insane.