Oil & Gas
Unfortunately, millions of Nigerians have over the decades regarded cheap and affordable petrol as the only tangible benefits they can easily identify with as the billions of dollars of oil revenues are systematically stolen and squandered by some people in authority and their collaborators. Perhaps, it is one of the reasons Nigeria ranks among the most misruled countries in the world.
By Goddy Ikeh
AS Nigerians were still groaning and counting their losses in the eight years of the APC-led administration and discussing in low tunes if the new government may turnaround their fortunes, President Bola Tinubu on Monday, May 29, 2023 announced the removal of the sensitive and controversial subsidy on petrol, which was institutionalised in 1977, following the promulgation of the Price Control Act.
The law made it illegal for some products, including petrol to be sold above the regulated price. This piece of legislation was introduced by the regime of General Olusegun Obasanjo to cushion the effects of the surging inflation across the world, caused by increases in energy prices.
This announcement that fuel subsidy “is gone” by President Tinubu immediately triggered the unintended reactions from oil marketers and petrol buyers as long queues returned, while some marketers hiked their prices and others hoarded the commodity in anticipation of higher prices. Unfortunately, the reaction to the plight of Nigerians, following the removal of the subsidy by the new administration was muted.
And as Nigerians were still waiting for the intervention of the federal government and the NNPCL to restore normalcy to the market, the NNPCL announced the highest ever hike in petrol prices in the country from N195 per litre to N511 per litre.
Despite the promises made in the last eight years of the APC administration to turnaround the country’s ailing refineries, what the nation experienced was that oil revenues were systematically stolen and squandered, while crude oil theft assumed a disturbing proportion as millions of dollars are lost daily through crude oil theft and diversion of petrol across the country’s boarders by big oil marketers and their collaborators.
In its reaction to the crisis in the downstream sector of the Nigerian oil sector, following the removal of the subsidy, the Nigeria Labour Congess, NLC, declared a nationwide strike from Wednesday, June 7, 2023 to protest the removal of petrol subsidy by the government. The President of the NLC, Joe Ajaero, who announced the planned strike after an emergency meeting of the union’s National Executive Council in Abuja, said that the union took the decision due to fuel shortages across the country. Ajaero stated that the NNPCL has up until Wednesday, June 7, 2023 to revert to the old price of petrol and that failure of the government to meet the ultimatum would attract an indefinite protest across the country. However, the meeting between the new administration and the Organised Labour led by the NLC to resolve the impasse was deadlocked.
But the NLC President had in a statement on Wednesday, June 2, in Abuja urged the federal government to immediately instruct the NNPCL to withdraw the pricing template it released to allow for free flow of discussions by the parties. Ajaero said that the new pricing template was vexatious, an ambush and might scuttle its ongoing dialogue with the government.
According to Ajaero, government cannot in one breathe be talking about deregulation and at the same time fixing the prices of petroleum products. “We are worried that the government through the NNPC despite the ongoing meeting of stakeholders in the Oil and Gas sector to manage the unilateral. “But unfortunate announcement by the President to withdraw subsidy on petroleum products, went ahead this morning to announce a new regime of prices under a new pricing template.
“This is an ambush and runs against the spirit and principles of social dialogue, which remains the best platform available for the resolution of all the issues arising out of the petroleum downstream sector. This negates the spirit of allowing the operation of free market unless the government as, as usual, usurped, captured or become market forces. “It is therefore unacceptable and we seriously condemn it. Good faith negotiation is key to reaching agreement,” he said, adding that Nigerians would not accept any manipulation of any kind from any of the parties, especially from the representatives of the government. However, the NLC and the TUC have on Monday announced the suspension of the planned strike action after their meeting with the federal government team.
Meanwhile, the plight of Nigerians, following the removal of subsidy by the new administration has been trailed by reactions from concerned groups and patriots. For instance, the Centre for Social Justice, CSJ, has expressed concern over the recent decision by the federal government to remove subsidy of petrol without engagement and consultation with stakeholders.
It also held that the amount of fuel supplied and what leaves the depot has remained unknown to Nigerian citizens. The Lead Director, CSJ, Eze Onyekpere, stated in a statement that while the group has long advocated for the removal of petrol subsidy, the abruptness and lack of transparency surrounding the recent announcement raised several critical questions and potential consequences for the citizens of Nigeria.
The Centre recognized the need for sustainable economic policies and efforts at addressing issues relating to petrol subsidy and maintained that the current manner in which the removal of subsidy was carried out raises significant concerns that demand urgent attention.
“Lack of public consultation and agreements that should accompany the reform package, including palliatives for the poor, cutting down the cost of governance, the fate of the public refineries prior to the removal of the subsidy is troubling. It is very important that decisions of this magnitude, which directly affect the lives of citizens, are made through inclusive and participatory processes, ensuring that diverse perspectives are taken into account. Additionally, the lack of transparency and clarity in the computation of the new fuel prices circulated by NNPCL is disturbing.”
The CSJ, therefore, urged the government to provide a comprehensive breakdown of the cost components and the basis for the calculation of the new fuel price.
In the same vein, the Trade Union Congress, TUC, has urged the federal government to revert to status quo ante its decision to remove fuel subsidy Festus Osifo, TUC President, told newsmen at the end of an emergency meeting of the National Executive Council meeting on Friday, June 2, in Abuja.
According to Osifo, the TUC is unhappy with the unilateral decision of the federal government to remove the subsidy. He said that the TUC’s expectation was that the government should have engaged the organised labour.
“Having noted this, we wish to state that the NEC-in- session resolved that discussions with federal government should continue while demanding that the government should revert to status quo ante. The status quo ante should be maintained while discussion continues as we had a meeting with the government on Wednesday. During that discuss, they gave us a list of all the things they would do and they also demanded to know our thinking and what we are putting up.
“We told them the lists of the things we want to put forward, we will not submit them now but put them forward to our organs, to discuss and seek mandate from them of the things we can put forward,’’ he added.
For the Human Rights lawyer, Femi Falana, SAN, the ultimatum of the NLC over the hike in petrol prices is an invitation for the government to review its position on the matter. Falana told Channels Television that the “Government has begun discussions with the Nigeria Labour Congress which perhaps should have preceded the announcement. But it is a new government and I expect as a new government, they should take advantage of the opportunity. The government this time around will have to look at the totality of the economy. What you call fuel subsidy is an infinitesimal aspect of subsidies in the country,” he said.
According to him, fuel subsidy is only a small portion of what government spends in subsidising the country’s bourgeoisie and the government has other forms of subsidies benefiting some persons in the country.
For Falana, the removal of the subsidy means the government cannot tackle smuggling and has now “punished the people”.
Speaking on the crisis caused by the subsidy removal, Dumebi Kachikwu, presidential candidate of the African Democratic Congress, ADC, blamed the former administration for its failure to tackle the massive fraudulent practices in the oil sector. According to him, the big marketers collude with government agencies like the customs, security operatives and officials of the NNPCL to divert petrol across the borders with impunity. Kachikwu told Arise in a television interview that these big oil traders are known to the authorities and that if they are not arrested and prosecuted, they can scuttle whatever efforts that are being made to tackle the challenges in the oil sector in the country.
In its reaction, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, said that it would not engage in the release of templates for the sale of petrol in the country since the market has been liberalized.
The Chief Executive officer of the NMDPRA, Farouk Ahmed, told a news conference in Abuja on Friday, June 2, that market forces would henceforth dictate the prices under the liberalised market.
“As far as we are concerned in the NMDPRA, this is not like before when the PPPRA fixes the price; in a deregulated market, it is the market forces that dictate the price,” he said. Ahmed, however, said the market was now open for any company that would want to import petrol as far as they meet all the requirements.
So, it is not about the Nigerian National Petroleum Company Limited (NNPC Ltd) alone. We put the regulation in place, we make sure quality control is complied with, we make sure the product is there and we give licence to prospective importer.
“We make sure we guide the operations of everyone in the sector whether at the depot or wherever the product is, but we will not put a cap to say this is what the price must be,” Ahmed said.
He disclosed that the NMDPRA, the Federal Government and Consumer Protection Commission, FCCPC. would mount aggressive monitoring of the activities in the downstream sector to prevent profiteering by marketers.
According to Ahmed, the marketers are now free to source their foreign exchange anywhere around the world to import petroleum products and recover their costs without impediments. He explained that the role of the NNPC is to fix prices of the petrol it imported and not take over the responsibilities of the Authority.
“In the case of the NNPC, the organisation is the sole importer at this point. We told the NNPC to recover its costs because they know how much it cost them to import the product and sell it.
“Of course, we also know how much shipping, offshore, ex-depot and ex-pump are. But we cannot tell them to sell at a price because the market is deregulated,” he added.
The NMDPRA boss also disclosed that the Federal Government has officially scrapped petroleum equalisation as well as the national transport allowance.
He said that, “based on this, the price would no longer be static rather depend on the international price of the gasoline market.
“This did not imply that marketers could sell at any price”.
According to him, the NMDPRA and FCCPC will collaborate to curb excesses if certain prices were way above the expected profit margin.
“Dangote Refinery is a game changer in terms of accessibility. By the time the NNPC refineries and other modular refineries across the country come on stream, Nigeria will be a net exporter of petroleum products,” he said.
Speaking on the future price of petrol in the country, the CEO of the NNPCL, Mele Kyari, stated that local production of petrol by Dangote Refinery, Port Harcourt Refining Company and others in the country is not going to change the pump price of the commodity.
Kyari said during an interview on Arise television in Abuja on Thursday, June 1, 2023 that the notion that petrol prices would reduce once the country starts domestic production was false.
Kyari confirmed that the Dangote Refinery, which was inaugurated on May 22, 2023, by former President Muhammadu Buhari, would start pushing out products by the end of July and early August.
He also stated that the Port Harcourt Refinery would be delivered by the end of the year, adding that the facility was expected to further boost local production of petrol.
But Kyari declared that despite the volume of petrol being expected from these facilities, the cost of the commodity would not reduce, regardless of the fact that the product was produced locally.
“There is a notion that if the product is processed locally, prices will reduce. Let me make it clear that it is not going to change anything. If you produce locally, the refineries will also input the cost of production and other things and it will be sold at the current price. There will also be no subsidy when local production starts because there is no cash-to-back subsidy, this country no longer has the resources to continue with subsidy,” Kyari added.
The challenges of providing affordable petroleum products, especially petrol can be successfully tackled if there is the political will on the part of the federal government and its agencies to rid the sector of corrupt practices and revive the government owned refineries to operate efficiently and compete with the private refineries so that local consumers of petrol will buy the commodity at pocket friendly prices.
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Tags: CSJ Dumebi Kachikwu Eze Onyekpere Farouk Ahmed Femi Falana Festus Osifo General Olusegun Obasanjo Joe Ajaero Mele Kyari NLC NMDPRA NNPCL
