NIGERIANS have been lamenting and groaning over the recent increase in the price of Premium Motor Spirit (PMS), popularly known as petrol. To the ordinary man on the street, it is a plan towards compounding the hardship he is going through. The Buhari government however, looks at it beyond the surface and in the context of subsidy removal, of which the Nigerian ‘masses’ are not comfortable with. VICTOR GAI looks at the politics, interests and motives behind the new policy.

THE Pipelines and Products Marketing Company (PPMC), had in a memo recently, announced the increase of the price of petrol to N151.56 and N162, sparking criticisms and protests from the opposition, labour, civil society organizations, and the Nigerian people. The memo signed by one D.O Abalaka, read: “please be informed that a new product price adjustment has been effected on our payment platform. To this end, the price of Premium Motor Spirit (PMS) is now one hundred and fifty one naira, fifty six kobo (N151.56K) per litre. This takes effect from September 2, 2020”.

Apart from the ‘genuine’ complaints by poor Nigerians over the increase and its implication on their living conditions, not a few Nigerians are questioning the moral justification for fuel price hike and motive behind subsidy removal by the Buhari government, having once kicked against an attempt to do same by the Jonathan government in 2012.

A former presidential spokesman under President Jonathan, Rueben Abati, in his article on Sahara Reporters said: “they have not done anything new. It is the timing that is bad. In 2012, the Jonathan administration did exactly the same thing, offered the same explanations. But you people went and set up camp in Ojota to ask for freedom from high fuel prices. And yet it was an increase from N67 per litre to N97 per litre. When the price of crude oil dropped internationally, the government at that time announced a downward review from N97 to N87, and yet you people went on to the streets, ‘occupy Nigeria’! The Buhari government raised petrol price in 2016 from N87 to N148, nobody protested. Today, we have jumped from N148 per litre to N161 per litre. If care is not taken by December we may hit N200 per litre, and yet nobody is in Ojota”.

Interestingly, under the present government, there has been several fuel price hikes in only three months. Petrol prices rose from N121.50-N123.50 per litre in June to N140.80-N143.80 in July, N148-N150 in August and N158-N162 in September.

Meanwhile, according to the official website of the NNPC, Nigeria produces about 2.4million barrels of crude oil but the majority of it is being exported abroad. The country imports 70% of the petrol used in the country. It further says that, Nigeria ranks as Africa’s largest producer of oil and sixth largest oil producing country in the world.

The Buhari government must however, be commended for the modest achievements in revamping the petroleum industry and its efforts in increasing local refining capacity which would go a long way in the recovery of the ailing industry.

A report has it that presently, “Nigeria exports crude oil but imports the refined products as the existing Nigerian refineries have been poorly managed with little or no output…In a bid to increase the local refining capacity, the Buhari administration awarded 65 licenses for the construction of modular refineries in 2015. It has since given additional permits.

“The presidency is expecting that six of these mini refineries, with a combined capacity of 30,000 barrels per day, would be in operation in 2021. This is in addition to Dangote’s 650,000 barrel per day refinery and another 100,000 barrel per day refinery by British Petroleum that is being constructed”.

But it looks like President Buhari would in the coming days be faced with the task of justifying the fuel price increase and subsidy removal, after he had opposed it in 2012 and promised upon his election in 2015 to sanitize the petroleum industry and clean up the corruption inherent in the industry. President Buhari, one time Minister of Petroleum, Dr Tamuno David West, Bola Tinubu and current Minister of Information, Lai Mohammed, had publicly opposed the removal of fuel subsidy in 2012.

In fact, reports have it that those Civil Society Organizations (CSOs) that demonstrated in 2012, are ready to return to the streets. They expressed their grievances on the social media with hashtags like #EnoughisEnough, #occupyNigeria2.

“People are suffering the brunt of the government’s policies. If they decide to protest, I will join…It appears that the government of the day doesn’t have respect for the citizens…Government must be inclusive; Government must be seen to carry its citizens along. It appears they do not have any medium of consulting before making certain decisions. It is wrong for them to make any tariff increase that will compound the problem of Nigerians. Nigerians are suffering at this time,” says President of the Arewa Youth Consultative Forum, Yerima Shettima.

But on assumption of power in 2015, and perhaps when the realities of governance began to dawn on the new administration, especially on the teething issue of fuel subsidy, the Buhari government began to do a reality check.

Speaking in May 2016 on the fuel price hike, Spokesman of the South-East caucus of the APC, Osita Okechukwu, defended the government this way: “The fuel price hike is a painful and difficult decision. The pain is that there is no official dollars to sustain the huge bill… President Muhammadu Buhari took pains to accept the proposal he had opposed as far back as his first stint as Head of State – 1984 – 1985.

“It is also common knowledge that in 2012, members and leadership of our great party, the APC, opposed the fuel price hike or removal of subsidy…In the same vein, Mr. President opposed it even in his second coming as President and campaigned repeatedly against it. True, we rejected fuel price hike then, basically because of the profligacy of the ex-regime. Hold us responsible if we squander money saved,” he promised.

“My dear compatriots, you must agree with me that what made Mr. President to accept fuel price hike in the midst of abject poverty in the land, despair and despondency; is nothing but the crunchy and dire financial situation – where it is difficult for local, state and federal governments to pay salaries.

.”Nigeria is at a cross-road. Coupled with what the former Minister of Finance and Coordinator of the Economy, Dr Ngozi Okonjo-Iweala dubbed lack of political will to save for the rainy day by the (Goodluck) Jonathan regime, which in simplicit a means that we are paying for the sins of crass failure to plan and squander mania of the regime she coordinated,” he added.

Okechukwu also accused the Jonathan government for its inability to execute the three Greenfield Refineries which contract it awarded to the Chinese in 2010, as well as build modern rail lines, despite the unprecedented revenue it got from oil.

But the debate on subsidy has always favoured the removal of subsidy and even IMF has put pressure on countries including Nigeria to do away with the policy. Perhaps, were Nigerians to have accepted the policy long before now, the country could have averted this needless controversy.

According to Brookings.com, “in 2011 alone, Nigeria’s fuel subsidy cost the country an estimated $8billion. The fuel subsidy accounted for 30% of Nigeria’s government’s expenditure and it was about 4% of GDP and 118% of the capital budget”.

It added that, “contrary to popular belief, it is the rich, not the poor who disproportionately benefit from Nigeria’s fuel subsidy. With the government subsidizing the market to keep domestic fuel prices artificially low, it is those who consume the most that have a greater benefit from the subsidy. Nigeria’s poor rely primarily on public transportation as such their per capita fuel consumption is significantly lower than the country’s rich, who generally use private vehicles. Neighbouring countries also benefit significantly from Nigeria’s fuel subsidy through smuggling.

“But even if Nigeria becomes a net exporter of petrol by 2021 as one of the presidential spokespersons, Tolu Ogunlesi, predicted, the price might not be as low as Nigerians expect, except the federal government sells crude oil to the refineries at a subsidized price”.

Meanwhile, the Federal government has given an explanation as to why it took the decision and how the decision would be in the public interest. President Muhammadu Buhari, speaking during the First Year Ministerial Performance Review Retreat at State House Conference Centre, Abuja, said: “The COVID-19 pandemic, which has affected economies globally, has compelled us to make some far-reaching adjustments that may cause some initial pain, but which is necessary for long-term gains. “As you all know, when oil prices collapsed at the height of the global lock-down, we deregulated the price of Premium Motor Spirit, PMS, such that the benefit of lower prices was passed to consumers. “This was welcome by all and sundry. The effect of regulation though is that PMS prices will change with changes in global oil prices. This means, quite regrettably, that as oil prices recover, we would see some increases in PMS prices.

“There are several negative consequences, if government should resume the business of fixing or subsidizing PMS prices. First of all, it would mean a return to the costly subsidy regime. “Today we have 60% less revenue, we just cannot afford the cost. The second danger is the potential return of fuel queues – which has, thankfully, become a thing of the past under this administration. “Nigerians no longer have to endure long queues just to buy petrol, often at highly-inflated prices. Also, as I hinted earlier, there is no provision for fuel subsidy in the revised 2020 budget, simply because we are not able to afford it, if reasonable provisions must be made for health, education and other social services. We now have no choice. “Nevertheless, I want to assure our compatriots that government will remain alert to its responsibilities. The role of government now is to prevent marketers from raising prices arbitrarily or exploiting citizens. “This was why the Petroleum Product Pricing Regulatory Agency, PPPRA, made the announcement a few days ago, setting the range of price that must not be exceeded by marketers. “The advantage we now have is that anyone can bring in petroleum products and compete with marketers, that way the price of petrol will keep coming down,” he stated.

Ultimately, Nigerians would have to swallow the bitter pill that is about to be forced down their throat by the current government with the hope that they would get well in the “long run” as the federal government promised.

However, if the full deregulation of the downstream oil industry or subsidy removal is the inevitable path that Nigeria must follow towards economic recovery, then unnecessary politicking has not helped matters. The political bickering between the PDP and the opposition in 2012 on the one hand and between the APC-backed government and the opposition today, is a reflection of the fact that politics still influences the economic direction of every government.

Categories: Economics Magazine

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