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Buhari, Nigerians and the petrol between

By Sonny Atumah

Nigerians are having a spread of consequences in last week’s Federal Government increase in the pump price of Premium Motor Spirit (PMS) or petrol from N86 to N145, an increment of over 67 percent. Subsidy take back generated controversy among the government, the labour movement which called its members to strike and indeed Nigerians.

FUEL5The Nigeria Labour Congress had told the Federal Government that its members that live on a minimum wage packet of N18,000 monthly have been highly traumatized that any increment in the pump price of PMS would further impoverish the working class. They accused the government of not using the instrument of collective agreement before the unilateral fuel increase.

In these brouhahas are the Nigerian people the critical factor mobility? Would there be an ease of economic change? One’s guess may be as good as President Muhammadu Buhari’s whose sleepless nights pundits’ perceive as factitious. The President’s stance mid-year 2015 was: ‘’I have received many literature on the need to remove subsidies, but much of it has no depth.” He said that lack of security, sabotage, vandalism, corruption and mismanagement, not necessarily subsidies, are the most serious problems of Nigeria’s oil sector”.

According to Mr. President ‘’ When you touch the price of petroleum products, it may trigger price rises on transportation, food and rents. That is for those who earn salaries, but there are many who are jobless and would be affected by it”. So subsidy is good. Subsidy anywhere is a cushion to enhance the welfare and well-being of people all over the world. According to Oil Change International fuel subsidy is: ‘’any government action that lowers the cost of fuel energy production, raises the price received by energy producers or lowers the price paid by energy consumers.”

Considering the Nigerian people the President was right. But the modalities for achieving this patriotic and puritanical zeal may be lacking in his team of petroleum resources managers. Narrowing the solution to petroleum products supply to removal of subsidy or pump price increment makes them miss the point. It totally defeats the good intentions of President Buhari.

It baffles one when Ministers of the Federal Republic mount podiums and tell the world how disorganized and inefficient we are. They tell the world that reason for scarcity of products is that products are smuggled into Niger Republic, Chad, and Cameroun etc. And their solution is to inflict pains on their countrymen and women by price increases.

So why do we complain of Boko Haram, militias and indeed foreign herdsmen with sophisticated weapons, arms and ammunition invading, maiming and killing Nigerians with reckless abandon if our borders are so porous?

One equally hears them with lame arguments of products price increases because outside Lagos and Abuja one cannot get fuel at control prices; so prices must go up. The Petroleum Equalisation Fund (PEF) was established for equal products pricing and are duly paid for accordingly once products are moved 400 km from any point of loading. The ordinary Nigerian in the South east and elsewhere is made to pay extra for this lack of enforcement and corruption.

The Minister of State for Petroleum said the situation which had allegedly forced importers out of business imposed a 90 percent products supply on NNPC in 2015, far and above its supply strength of 48 percent. He told Nigerians that there were no resources for the supply needs of Nigerians; no foreign exchange and cannot open letters of credit to import products. Dr. Kachikwu gave assurances that price increase will open the space for more participants to sustain supply as well as reduce the suffering of Nigerians.

But let him be told that the NNPC was established on the 1st of April 1977 by the retired General Olusegun Obasanjo administration for refining, treating, processing and generally engaging in the handling of petroleum for the manufacture and production of petroleum products and its derivatives. President Buhari was then the Federal Commissioner (Minister) of Petroleum Resources. The NNPC has been reduced to a marketing company importing and distributing petroleum products.

The standoff was sequel to the Minister of State and Group Managing Director of the NNPC, Dr. Ibe Kachikwu’s summation that Nigeria was paying a subsidy of N13.7 per litre since the second quarter of 2016. The claim he said translated to N16.4 billion monthly so completely removed subsidies having worked with the price modulation introduced in January 2016.

From the PPPRA April 11 – May 11, 2016 template the landing cost (cost and freight) of PMS is N109 per litre (i.e one metric tonne is $741.97). Other charges of lightering expenses, NPA charges, NIMASA charges, Financing, Jetty thru’put charges, and storage charge translate to N119 per litre (i.e $ 810.04 one metric ton). We pay all these for importing.

If we were refining locally, all we pay would be cost of crude, refining cost and margin, local tax and margin for distribution of N18.37. All of these may not translate to more than N80 per litre (i.e. $544.57 per metric ton) for refining locally. Even as oil price rallies around $50 per barrel because of Niger Delta militias, the cost one metric ton will still be $350 (i.e. $50 x 7 barrels). From one product PMS (47 percent or refining chain) there is profit of almost $200.

The ordinary Nigerians are pained and saddened by Reuters London news agency’s report last Sunday those 75 ships with 2.5 million tons of petroleum products are waiting for importers in Nigeria who are mopping up dollars to pay for cargoes. These importers set sail from Western Europe and arrived about a month ago with tankers laden with petroleum products in the Nigerian waters speculating a federal government subsidy take back for cargoes bonanzas.

Nigeria embarrassingly imports petroleum products from net consumer producing nations. A net consumer producing nation produces 10 percent or less of their oil consumption. Japan, Germany, South Korea, France, Italy, Spain, Netherlands and Turkey are in this category; most of Nigeria’s products are imported from the Amsterdam-Rotterdam-Antwerp world leading trading hub.

China, India, Japan and South Korea, biggest users and importers of crude oil are benefitting from low crude oil prices. SK Innovation Company, South Korea’s largest refiner, says it is the best time they have ever had as a buyer enjoying an overflow of oil. South Korea has the 3rd, 4th and 5th largest refineries in the world. India with the largest refinery in the world is also enjoying from low prices of crude.

Problems compel countries to challenge their citizens to action. We run away like water that will always follow the line of weak resistance. Our thinking caps are urgently needed in this period of low crude oil prices. We have gone this whole hug of subsidy for about two decades.

Rather than confronting the problem of corruption, inefficiency and technical incompetence we dissipate energies on price differentials of petroleum products imported from Europe which we call subsidy. President Buhari should tackle these issues and rehabilitate, upgrade existing refineries and also build new ones. Therein lies his sleepless nights problems.

 

 


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