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Petrol subsidy claims and Senate’s oversight – Sonny Atumah

Nigeria’s petrol subsidy is akin to the symbolic poetry in the spirit child Abiku that is a wanderer who dies and returns again and again to plague the people. The groundswell of public opinion has again started in Nigeria on subsidy for imported petroleum products. It has a steady drumbeat of accusations that would never go away because it appears to be resident in a realm that may not be understood. Judging from the trade blames and tirades among the Nigerian National Petroleum Corporation, NNPC as operators, DAPPMAN and MOMAN as marketers it was obvious something was again amiss which Nigerians could not fathom.


Is it for the love of nation the Senate President, Bukola Saraki called short the Christmas vacation of the Senate Committee on Petroleum in charge of downstream sector of the petroleum industry to resume duties on issues of the recent fuel scarcity as well as the NNPC claim of gasoline (petrol) subsidy. Although it was belated; the third week into the artificial scarcity and excruciating pains inflicted on Nigerians, it was better late than never.

Many have tried to understudy the subsidy concept without a clear-cut understanding in the pricing content.  Many that seemed confused advanced the subsidy removal policy to mimic deregulation in an extremely and rustic manner. The group believes that as long as fuel is available it can be purchased by the gullible Nigerian. They create momentary impulses of artificial scarcity to pull the wool over people’s eyes to withdraw subsidy. And this worked in 2016 for imported petroleum products instead of propounding policies for local refining.

Interpretations are given to the existence or disappearance of subsidy by as many as would think up a story that is imaginative. Call it the subsidy circus you are good to go as the beat goes on ad infinitum. The dummy sold in December 2015 was petrol price oscillation like frequency modulated while another was subsidy done away with on May 11, 2016 when Dr. Ibe Kachikwu who then singly occupied the quadruplexes of NNPC Towers as Minister of State, Petroleum Resources, GMD of NNPC, Board and Chairman of NNPC decreed increment from N86.50 to N145 even when the oil market was glutted globally.  The Vice President Prof. Yemi Osinbajo last year said that the Federal Government saved N184.8 billion in 2016 for withdrawing subsidies.

Now that subsidy is back can it be explained? Subsidy is good and it is a global phenomenon. But the subsidy we need should be production based which is money paid by the Nigerian government to reduce the cost of services of producing petroleum so that their prices can be kept low. The first US subsidies is of government foregoing significant tax revenues, put in place about a century ago to meet the energy needs of the nation and they are still in place today. The IMF estimated that the US under-taxed energy use by US$699 billion in 2015. While consumers benefit from low fuel taxes, oil production and exploration is subsidised by government.

Two days ago Senate downstream committee conducted a public hearing to find lasting solutions. The subsidy matter it was learnt took the Kabir Marafa led Committee by surprise. Off course there were allegations that the NNPC is subsidizing a litre of petrol by N26 per litre to the Nigerian petroleum consumer with over N20 billion so far allegedly expended on subsidies. It is unfortunate that it took the happenstance of the NNPC GMD pronouncement of subsidy for the Senate to know. It is statutory for the Senate to have oversight functions on the activities of the national oil company.

Is it an oversight or failure by omission, that the Senate committee could not know that the NNPC has been subsidizing petrol in Nigeria?  Much as the committee never had crystal balls on the day to day activities of the corporation, price modulation as introduced in December 2015 needed a projective instinct; meaning that when the landing cost goes up we pay more locally. The OPEC achieved an output cut which shored up crude oil prices in the last one year.  That gain equally translated to higher prices of refined products which we massively import as there were no way we could have our cake and eat it.

The tantrum between the Senate and the Chief of Staff to the President, Abba Kyari, over alleged non approval of loan request is absolutely unnecessary. What are needed are guarded utterances with a robust interface between the executive and the legislature on the realities on ground. Nigerians swallowed the bitter pill from government on increments in fuel price in 2016. The short term solution is to accept subsidy because Nigerians paying more would not fly. The long term solution is to rehabilitate and upgrade our refineries to meet future needs of Nigerians and stop importation of petroleum products. A major take away is that Nigerians now know what quantity we consume and realistic amount paid for subsidy today. It is a smacking transparency.


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