Hiding the truth in plain sight
We thought fuel subsidy had become history. We thought that by its going about two years ago, one of the biggest avenues for corruption in the Nigeria system had been closed permanently. We thought the Buhari administration put an end to this system riddled with scandals. It turns out we jubilated too soon. The truth about the fuel subsidy remains deliciously opaque.
The fuel crisis during the Christmas season gave rise to the usual blame game between the NNPC and the independent oil marketers in the country. It opened our eyes to the possible truth about what is right and wrong in the industry that sustains our national economy. President Muhammadu Buhari was drawn into the controversy. In his 2018 new year broadcast, the president showed that he knew and felt the pain and the trauma that ordinary Nigerians were subjected to in that time of the year when villages across the country host their sons and daughters visiting home. He blamed it on, you got it, ‘saboteurs.’
Saboteurs, like the cabal have visible faces that we do not see with our naked eyes. But trust the president. He promised to do to them what they did to us. He said: “I am determined to get to the root of this collective blackmail of all Nigerians and ensure that whichever groups are behind this manipulated hardship will be prevented from doing so again. Such unpatriotism will not divert the administration from the course we have set ourselves. Our government’s watchword and policy thrust is change. We must change our way of doing things or we will stagnate and be left behind in the race to lift our people out of poverty ….”
Politically correct. The empathy is almost tangible. But whatever the president chooses to do with those who are giving his administration a bad name, he may wish to listen to the discordant tunes from his men who are, as it were, on the field. The group managing director of NNPC, Maikanti Baru, claimed that the corporation imported double the quantity of our daily petroleum needs. It was not available to the public, according to him, because ‘hoarders’ chose to hide the stuff and create artificial scarcity.
It turns out that that is not the whole story. Actually, fuel subsidy is at the root of the problem. Dr. Ibe Kachikwu, minister of state for petroleum, told a national assembly committee on petroleum resources that the current pump price of N145 per litre had become a burden on the NNPC. We are talking here of a cumulative loss of N85.5 billion to the corporation in only three months. In pure economic terms, it means that the current pump price of petrol is no longer sustainable. As he explained it, the N145 per litre pump price was fixed about two years ago when we sold crude oil for $49 a barrel in the world market. Crude oil is now selling for $67 per barrel. The implication of this is that the landing price of petrol went all the way up from N133.28 per litre in 2016 to N171 per litre in 2017.
I have tried to walk myself through this maze. I found the truth hiding in plain sight. Anxious to reduce the suffering of ordinary Nigerians over the ding dong of fuel scarcity, the federal government insists on the NNPC absorbing the N26 difference between the landing cost and the pump price. In lay man’s terms, it means the government is still subsiding petrol to the tune of N26 per litre. If you find that shocking, try not to be shocked. In the intricate management of economic and human resources, it is not strange to find that what is dead is alive.
The truth is that saboteurs and hoarders may muddle it but they are not the problems in this annual ritual of petroleum scarcity. It would be more correct to say that the government is clearly torn between the merciless demands of market forces and the need to protect, even if marginally, the people from being crushed by them. The high landing cost and the low selling price make fuel importation unattractive to the independent oil marketers. They abandoned NNPC as the sole fuel importer.
The chairman of the depot and petroleum marketers association of Nigeria, Dapo Abiodun, made that quite clear to the law-makers. He said that in the past the independent oil marketers imported 60 per cent of our fuel requirement and the NNPC brought in between 35 and 40 per cent to make it up. In October last year, the independent oil marketers stopped importing fuel and “so,” he said with some we-got-ya relish, “the burden of importing 100 per cent fell on the NNPC.”
We are in this mess because the corporation imports fuel and sells it to the independent oil marketers to sell to consumers at the official price N145 per litre. They do not. Being the major outlets for the sale of the petroleum products, we, the hapless consumers, are periodically crushed by their manipulation. If they induce scarcity, we pay more; the NNPC is helpless. The government takes the blame. Picture opposition parties dancing on the streets. Perhaps, this is where the charge of sabotage by the president comes in. What then can the government do?
We have two familiar options to choose from to resolve the problem. One is to increase the pump price of petroleum products to make it economically sensible for the importers to get back into the business. Indeed, in the heat of the fuel crisis last year – and by the way, we are still in the woods – there were rumours that the corporation had increased the pump prices of petrol, diesel and kerosene. Kachikwu promptly denied it. But it is an option that keeps intruding on the conscience of the federal government. In political terms, it would be unwise for the government to make us pay more for fuel. The government cannot be mindful of the fact that increasing the fuel prices at this time would put cudgels in the hands of the opposition parties that they would only be too glad to use them to bludgeon the government.
The second option is for the government to eat its words and bring back the subsidy regime full circle. The acting chairman of the Revenue Mobilisation Allocation and Fiscal Commission, RMAFC, Umar Gana, favours this option. His argument is that with the country coming out of recession, it would be wiser to restore the subsidy instead of increasing the pump prices because it would “negate the recovery from recession.”
There are, of course, political implications in this option too. We are quite used to the to-ing and fro-ing in our national policies but this would be one too many for a government that came into office waving the banner of change. I shudder to think of the political fall out.
There has to be a solution. Kachikwu has put forward the following three suggestions:
“One, is for the Central Bank of Nigeria to allow the marketers to access forex at the rate of N204 to the dollar as against the official rate of N305 to keep the pump price of fuel per litre at N145.
Two, to give room for modulated deregulation where NNPC would be allowed to continue selling at N145 per litre in all its mega stations across the country while the independent marketers should be allowed to sell at whatever price is profitable to them in all their outlets.
Three, to look at the direction of blanket subsidy for all the importers in bridging the gap which would be like going back to a problem that had earlier been solved.”
Tough choices before the president. Politically, each raises the ugly prospects of a funeral dirge. The real solution, really, is to make the oil refineries functional again – if we get shame.
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