The Petroleum Products Marketing Company, PPMC, had, Wednesday, announced a new ex-depot price of N151.56 for petrol, raising pump rice of the product to N161 per litre, a development some see as insensitive, in view of the prevailing Covid-19 induced economic hardship.
But the move is one economic experts would certainly describe as ‘long overdue’, largely because it signals Federal Government’s desire to stop the corruption-ridden fuel subsidy regime, which had benefitted only a few.
Subsidy payment had continued to increase over the years, hitting N1. 149,385 trillion in 2019—a year when only a mere $1 billion was provided in the budget—forcing a massive deficit government had to patch through borrowing.
This is the burden the government is shedding with the withdrawal of subsidy payments, which has inevitably led to the increase in pump price. “With landing cost of petrol currently at N207.98, government would have to pay N62.98 subsidy per litre of petrol and the NNPC has to defray an estimated N3.149 billion per day under what is tagged: ‘under-recovery’.
Experts agree that this cannot be sustainable in a country such as Nigeria, where the subsidy fund could do a lot to develop critical infrastructure to grow the economy.
The argument against subsidy payment is buttressed by the current lopsided situation, where Nigeria’s low fuel price has encouraged smuggling of the product to other West African countries where prices are far higher.
For instance, in Niger Republic, which borders Katsina State, petrol sells for N346 per litre, while in Cameroon it sells for N449. In Ghana it is N332, while in Benin Republic down south, it sells for N359 per litre.
According to data from www.globalpetrolprices.com, Nigeria is the only country in West Africa where petrol sells for less than N200 per litre, and this has allowed unscrupulous marketers promote smuggling of the product, to the detriment of the country.
The argument that Nigeria is an oil producing country and should provide petrol at cheaper cost does not hold water, since the country has relied largely on importation for local consumption.
Nigeria’s refineries have not worked at optimum capacity in the last two or three decades, due to lack of adequate maintenance and corruption in public expenditure.
Nigeria now has the opportunity to invest the huge sums that would have gone into subsidy payment into the four refineries to make petrol available locally, which is the only viable way the product can be cheaper.
Those who protested against removal of subsidy under the Goodluck Jonathan government did so because of lack of confidence in the ability of the administration to manage the surplus fund well, in view of the widespread perception of the administration as corrupt and unwilling to stop the squandering of public resources.
There’s no doubt the President Muhammadu Buhari administration has amply demonstrated that public resources would no longer be imprudently managed, and had shown a desire to invest in capital projects across the country.
Many would argue that some opposition political parties criticizing the Buhari administration, as a result of the withdrawal of fuel subsidy, are being hypocritical because they know it is the right thing to do.
In 2012, when Jonathan government’s attempt to withdraw fuel subsidy was protested by Nigerians, Ngozi Okonjo-Iweala was quoted in a TELL magazine interview as saying “Nigerians would have to decide whether they want to remove fuel subsidy or they want the country to collapse”.
Those words are even truer today, after emerging from a devastating Covid-19 pandemic economic lockdown. As noted by the Minister of State for Petroleum, Timipre Sylva, removal of subsidy and the deregulation of the oil sector is an economic imperative.
He said the government “is no longer in the business of fixing prices for petroleum products, we have stepped back. Our focus now is on protecting the interest of the consumers and making sure that marketers are not profiteering.”