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Monday, May 16, 2016

Good bye to oil subsidy regime, but …

With the hike in Premium Motor Spirit (PMS) also known as fuel in this part of the world, Nigerians may be saying good bye to oil subsidy regime, but the next path is beclouded, writes REMMY NWEKE.
From the gallery:
Historically in 1978 fuel pump price was 15kobo per litre and increased to 60k in 1990. Two years later in 1992, it added 10k to become 70k and barely a year it subsequently jumped to N3.25k per litre and later same year added N6.75k to become N11 per litre which remained for a while.
Since Nigeria was then under military it was mass anticipation that once there is democracy, it could scale down, but alas, it became the first casualty in the list of democracy dividend as in year 2000 pump price moved up to N20 and before December 2000 added N2k to become N22 per litre.
Also in 2001, the federal government under President Olusegun Obasanjo increased pump price to N26 and three years later in 2004 scaled it up to N40 with the rhetoric political promise that the subsidy removed hitherto would be ploughed into bettering the lots of Nigerians. Incidentally the supposed pump prices have never been used to sale fuel in the south east and some parts of Nigerian cities, except Lagos, Abuja and Port Harcourt.

Prediction come true:
Major fears among Nigerians on this subject is that the cost of pump price may go up to about N150 per litre, but as proponents of removal like former governor of Nigeria’s Central Bank, now Emir Mohammed Sanusi II and Dr. Ngozi Okonjo-Iweala, the erstwhile Finance Minister; it would curb corruption in the oil sector, especially within Nigerian National Petroleum Corporation (NNPC) and enable economic planning for all as Nigeria today does not fix oil prices.
“For instance, the Petroleum Trust Fund (PTF) as storehouse for all subsidy funds by then Head of State, General Sani Abachi was to enable government intervene promptly. Therefore to nail vices in oil sector, President Muhammadu Buhari must exhibit the political will to remove oil subsidy as the best gift APC-led government can give Nigerians at this time.”
The above was an extract of a piece conducted towards the end of 2015 and almost five months later and equally one year after the assumption of office by President Buhari, it came to pass that his administration through the Minister of State for Petroleum, Dr. Ibe Kachikwu penultimate Wednesday, May 11, 2016, adjusted the pump price of Premium Motor Spirit (PMS) also known as petrol from N86.50 to N145, with immediate effect.
Oil sector analysts, told NaijaAgroNet that with this development, marketers are now free to bring in cargoes and sell, subject to meeting standard quality control, stressing that a benchmark of N145 per litre, is a recommended pump price, at which any trader, irrespective of the source of foreign exchange used to import cargo is guaranteed adequate profit.

Fuel Price debate according to Osinbajo:
But barely 24 hours after, the chairman of the Economic Committee and Vice President, Prof. Yemi Osinbajo, conversely debunked the news making a round that the FG has removed oil subsidy from the Nigerian oil and gas system. According to Osinbajo, what the government did was to withdraw the monopoly hitherto enjoyed by NNPC to allow free market sales, insisting that “at $40 a barrel, there isn’t much of a subsidy to remove.”
A presidential press statement entitled “The Fuel Pricing Debate: Our story” and personally endorsed by the Vice President, said the decision to adopt a new measure was essentially informed by the non-availability of foreign exchange for the independent marketers to import fuel.
Part of which read: “Fellow citizens, I have read the various observations about the fuel pricing regime and the attendant issues generated. All certainly have strong points. The most important issue of course is how to shield the poor from the worst effects of the policy.  I will hopefully address that in another note.
“Permit me an explanation of the policy. First, the real issue is not a removal of subsidy. At $40 a barrel there isn’t much of a subsidy to remove. In any event, the President is probably one of the most convinced pro-subsidy advocates. What happened is as follows: our local consumption of fuel is almost entirely imported. The NNPC exchanges crude from its joint venture share to provide about 50 per cent of local fuel consumption. The remaining 50 per cent is imported by major and independent marketers.

Nigeria needs $225m to import fuel:
“These marketers up until three months ago sourced their foreign exchange from the Central Bank of Nigeria (CBN) at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to $550 million. The amount required for fuel importation alone is about $225million!).
“Meanwhile, NNPC tried to cover the 50 per cent shortfall by dedicating more export crude for domestic consumption. Besides the short term depletion of the Federation Account, which is where the FG and States are paid from, and further cash-call debts pilling up, NNPC also lacked the capacity to distribute 100 per cent of local consumption around the country. Previously, they were responsible for only about 50 per cent, which was partly the reason for the lingering scarcity according to experts. 

Labour rejects hike in pump price, says N145 is cruel, insensitive:
However, the Nigeria Labour Congress (NLC) soon after, described the hike in petrol pump price by the Federal Government from N86.50 to N145 as cruel, insisting they will resist the Wednesday proclamation, and summoned emergency NEC meeting for Friday, May 13.
In reaction, the General-Secretary, Dr Peter Ozo-Eson, described the hike as “unilateral increase in prices of petroleum products Wednesday by government represents the height of insensitivity and impunity that must be resisted,” asserting Labour would resist the hike alongside all the well-meaning civil society groups, decrying the imposition on the citizenry of criminal and unjustifiable electricity tariff and resultant darkness and other economic challenges brought on by the devaluation of the Naira and spiraling inflation, “the least one had expected at this point in time was another policy measure that would further make life more miserable for the ordinary Nigerian.”
As said by NLC, the latest increase is the most audacious and cruel in the history of product price increase as It represents not only about 80 per cent increase but it is tied to the black market exchange rate. Maintaining that the process through which government arrived at this is both illogical and illegal as the board of the PPPRA is not duly constituted.
“In our previous statements and communiques, we had stressed the need for reconstituting the boards of NNPC and PPPRA and prevent both away from the overbearing influence of the Minister of State for Petroleum Resources who has assumed the role of a sole administrator,” the Labour posited.

NLC strike imminent:
NLC further said, the allusion to the fact that this increase was arrived at after due consultation with stakeholders is not only ridiculous and fallacious, because it goes to show that the brief meeting held penultimate Wednesday, during which government was advised to shelve the idea until at least it meets with the appropriate organs of the Congress was in bad faith.
Accordingly, NLC said, they urged the government to revert the prices to what they were. “We would want to put everybody on notice that we shall resist this criminal increase with every means legitimate.” Just as an emergency NEC meeting was promptly scheduled for Friday, May 13, 2016 to decide on the next line of action. Meanwhile, NLC affiliates, state councils and civil society allies are requested to commence mobilization immediately.
The following day, being Thursday, May 12, the Nigeria Labour Congress (NLC) issued a four-working day ultimatum to the Federal Government to reverse itself or face industry action nationwide at the expiration of the ultimatum on Tuesday midnight; undoubtedly putting Nigerians into panic buying and stockpiling of food stuffs and daily needs.
NLC and its affiliates in a letter addressed to all the state presidents, secretaries of labour unions, directed members to sensitise all their colleagues towards embarking on indefinite strike cum mass protest action slated to commence on Wednesday 18, May 2016 across the country till further notice.
Therefore, NLC, advised member unions including the Nigeria Union of Local Government Employees, to liaise with the leadership of Nigeria Labour Congress in their states for further arrangements concerning the protest and give this directive a widest publicity it deserves.

FG ‘Nicodemusly’ turning against Nigerians:
Reacting to the imminent strike by NLC, a social crusader and human rights activist, Emeka Ononamadu, said the Federal Government is coming through the back door like Biblical Nicodemus; to impoverish Nigerians, in what he described as “… Nicodemusly turning against the people.’ His position was however, premised on the electioneering campaigns of the president, Muhammadu Buhari during 2015 elections.
He posited that the people, who posed as supporters of fuel price increase in 2012, did not deny that it will have a genocidal effect on poor Nigerians. Alleging this government and their cohorts, may have instigated the recent fuel scarcity as an alibi to force the price up and the standard of living lower. This attitude that whatever this government does is correct should be jettisoned by the accomplices parading themselves as human right advocates or civil society jobbers.
Ononamadu insisted that people who are on well-paid jobs to protect defenseless citizens “should not ‘nicodemously’ turn back to haunt those they are supposed to protect,” stressing that he looks forward to actions and measures NLC would pilot to tell this government that power is still with the people.
This, he alleged, is the same government that is harbouring thieving former PDP members who looted this country and thier respective states. Just as he hope those who support this fuel price increase will not in the future deny thier positions like many who voted in this regime have all denied ever supporting President Buhar, when there were other alternatives after APC and PDP. Some CSOs, have forgotten also work for any government in power, but was consoled that time will tell.

On way forward:
Ononamadu’s submission proffered some solutions including “if 5 licenses are given to people to set up modular refineries in each zone of the country, fuel will become available at less than N50 by the current exchange rate of about N300 per Dollar. Stressing that again, government, like this regime initially promised to make direct purchases without middlemen or women at zero profit. Thus, he advised Nigeria to use letters of credit from reputable financial firms without worrying about immediate sourcing of dollars, until modular refineries become operational.
Government, he said, could even use the crude swap measures with high level transparency and monitoring to overcome the problems associated with it, arguing there are too many options available but the government must decide on the best path to protect citizens than a furnace of adversity in the name of undefined deregulation.
Industry observers also find it disturbing that FG invariably may not have a clue to what its policy on oil and gas at this time is or should be, thereby giving rise to lots of condemnation of the supposed removal of subsidy or partial deregulation, given that nowadays, fixing price for product which is not in her pool, let alone availability is inimical.
At the time of this report, Nigerians are largely confused and even every individual becoming ‘pocket economists’ while asking why it took NLC this long after over two months of fuel scarcity without any pronouncement, but all of sudden find its footing because it felt shortchanged in the scheme as its rank has been divided with a faction emerging.
Also, industry analysts are asking some salient questions including “Why must we be in more danger than the period the country’s leadership was seen as very corrupt? Why is the pump price increase not called deregulation, end of subsidy, if it ever existed, or any name? They attributed these to the era of free oil money which may have beclouded the knowledge of all Nigerian leaders in recent past from ideas that could make Nigeria great.
Like earlier enunciated, to nail vices in oil sector, President Buhari must demonstrate the political will to remove oil subsidy holistically as the best gift APC-led government can give Nigerians at this time and allow the market forces to determine the path to stability of petroleum products in this country, as was done in telecommunications sector and also pave the way to stablising the economy rather than the confusion therein.

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