•Why Buhari Postponed Implementation
•Tactical Decision Prevented Disruptions to Economy, Electoral Process
•Uproar Over Outrageous N3trn Price Tag
January 30, (THEWILL) – The Federal Government may have found itself in a dilemma over its recent decision to postpone the removal of the oil subsidy regime, which it had fixed for February 2022 after several attempts.
Instead of the expected applause it expected to receive from Nigerians for its volte face on the controversial subsidy regime, the 18-month postponement being put forward has rather exposed the lack of political will by the Muhammadu Buhari Administration to go headlong with a decision many Nigerians had looked forward to as a major reform that it should have embarked upon in its almost seven years in office.
The Nigeria Labour Congress (NLC), which promised to paralyse the nation with mass protests if the subsidy is removed as promised by the Federal Government, also appears to have soft-pedalled as it is now singing another tune over what has been described as yet another victory. However, many observers of the development are not quite impressed with the shifting of the goalpost by the Federal Government over an important decision, such as the subsidy removal, as some have taken it as a postponement of the proverbial evil day.
Only last Tuesday, the Chief Executive Officer, Nigeria Economic Summit Group, Laoye Jaiyeola, while speaking at the launch of the NESG 2022 Macroeconomic Outlook Report in Abuja, said the fuel subsidy, which was “conceived initially as a short-term support tool, has endured over time, thereby becoming a threat to fiscal sustainability.” He however noted that the removal of subsidies on petrol “will come at a cost,” adding “Tough reforms are costly and the cost of inactions is also enormous.”
The NESG report maintains that “the abrupt removal of fuel subsidies pronounced on January 1, 2012, led to a week-long nationwide protest and demonstration,” stressing that “Since the EndSARS protest in 2020, Nigeria has been in a fragile state and therefore, abrupt fuel subsidy removal might lead to protests that the country cannot afford.”
Jaiyeola however urged the Federal Government to “work to minimise the cost on citizens through direct and indirect interventions,” saying, “Implementing subsidy reforms without complementing the policy with effective mitigation measures will only elevate economic hardship for Nigerians and stoke social unrest.”
The International Monetary Fund, which had earlier encouraged the Federal Government to remove the subsidy on petrol, is also calling for caution. The IMF Nigeria Country Representative, Mr Ari Aisen, has advised the Federal Government to take full charge of its reform programmes.
Aisen, who spoke on the decision of the Federal Government to back down on the removal of the subsidy, urged the government to “be in charge of reforms instead of being reactive” and to desist from carrying out reforms only when it is convenient.
With all eyes set on the 2023 general election, the governing All Progressives Congress (APC) may have tactfully postponed the implementation of the subsidy removal under the guise of having the interest of the masses at heart. The speed with which the Nigerian National Petroleum Company Limited (NNPC) also came with a N3 trillion figure as the amount to cover the subsidy for 2022 also gave the government out.
The Nigerian Governors Forum was the first to react, describing the N3 trillion projected as subsidy for 2022 as fraudulent and called for an investigation into the subsidy regime.
The humongous sum of money being put forward also got representatives at the National Assembly furious on Wednesday and Thursday last week as they kept asking questions on the controversial petroleum subsidy to which many Nigerians in their homes and on the streets have been seeking answers for many years. The issue has become a recurring decimal on national life.
On the first day, the Speaker of the House of Representatives, Femi Gbajabiamila, called for an investigation into the stage of the ongoing rehabilitation of the four refineries in Port Harcourt, Warri and Kaduna and the actual volume of petrol being consumed in the country daily, which the Nigeria National Petroleum, Group Managing Director, Mele Kyari, put at 60 million litres.
Sequel to the adoption of the Speaker’s order, two other motions by Minority Leader, Ndudi Elemulu and Ademorin Kuye, (Somolu Constituency, Lagos) were raised and adopted on Thursday.
Elumele’s motion titled, ‘Need to ascertain the actual consumption of Premium Motor Spirit in Nigeria’, noted that “the House was concerned about the large sums of money paid as subsidies and the controversies they have generated,” adding that, “the House was worried that it may not be possible to ascertain the actual sums of subsidy required and being paid without accurate data on the daily consumption of Premium Motor Spirit.”
In the same vein, Kuye’s motion titled, ‘Need to Ascertain the Actual Cost of Rehabilitation of Nigeria Refineries,’ noted “that several billions of dollars of taxpayer’s money have been expended into the Turn Around Maintenance and rehabilitation of the nation’s refineries without any productive outcome.
“The House observes that past government efforts have been sabotaged by variation costs from partners or lack of proper project costing and analysis.”
While the members of the lower chamber of the NASS were doing the work they were elected to do, another telling drama was playing out at the Lagos State High Court sitting in Ikeja, Lagos. There, on Wednesday, the Chairman of the Economic and Financial Crimes Commission (EFCC), Abdulrasheed Bawa was undergoing cross-examination as the fifth prosecution witness in the ongoing trial of Abubakar Ali Peters and his company, Nadabo Energy Limited, for an alleged N1.4billion oil subsidy fraud before Justice C.A. Balogun.
The EFCC is prosecuting Abubakar and his company on a 27-count charge for allegedly using forged documents to obtain N1, 464,961,978.24 from the Federal Government as oil subsidy, after allegedly inflating the quantity of Premium Motor Spirit, PMS, purportedly imported and supplied by the company.
Under cross-examination by the defence counsel, E.O. Isirame, Bawa, who has been mounting the dock on this case since December 20 2021, said, among others, “This is the bundle of documents submitted by the defendant to the PPPRA, which we requested from the agency for the certified true copy and they obliged us.
“The covering letter as seen in Exhibit B was signed by Ted Okonkwo, Head, Port Harcourt Zone of PPPRA,” whom he said, “acted, to the best of our knowledge, based on the documents available to him and information received allegedly. Through our investigation, we found out that the content of the documents submitted, including a letter written by Masters Energy to PPPRA that the defendant discharged 14,000MT equivalent to about 19,000,000 litres of PMS in their tank farm is false. From our findings, some documents from the Department of Petroleum Resources (DPR) were also false.”
Nadabo and company have pleaded “not guilty” to the charges.
When THEWILL asked EFCC’s Head of Media and Publicity, Wilson Uwujaren, whether the Commission would charge DPR and PPPRA officials along Nadabo, for complicity, he drew a blank.
“The matter is in court and the EFCC cannot decide what is already before the court,” he replied. The kernel of the question centered on why relevant government agencies would agree to pay without verification and authentication. Attempts to reach officials of Midstream and Downstream Petroleum Regulatory Authority of the NNPC failed as nobody said a word.
Last week, a national newspaper quoted a lawmaker as saying: “We cannot believe NNPC’s claim that Nigeria consumes over 65 million litres a day. It is outrageous. All of them (stakeholders, NNPC officials, oil marketers) will be summoned to explain what is happening. We also hope to summon customs and others to explain how petrol is being smuggled out of the country. Are petrol tankers going through bush paths?”
EXPLAINING THE DECISION?
That same Wednesday, revelations emerged on why the Federal Government, which had a few weeks ago set June 2020 as the target date to end payment of fuel subsidy amid the provision of palliatives of N5, 000 to 40 million poorest of the poor Nigerians, transportation subsidy, ate its own words, just like previous governments before it did in the past 40 years.
In an interview on Channels Television’s ‘Sunrise Daily’ programme on that same Wednesday the House and Bawa were dealing with the now controversial petroleum subsidy removal or continued payment, the Special Adviser to the President on Media and Publicity, Femi Adesina said: “If that subsidy had been removed, it would have been a show of will that we want to solve this problem (oil fraud). There was a will, but if you have a will and what you want to do will upturn the system, throw the country into a tailspin, then you would have to reconsider, you will weigh it. That is why further consultations will still happen.”
A presidential source told THEWILL anonymously that intelligence reports revealed that the planned protests against the removal of petroleum subsidy could have caused tremendous damage to the fragile economy that is still recovering from the coronavirus lockdown and would also have disrupted the electoral system with the forthcoming Ekiti and Osun governorship elections as well as primaries to elect candidates for the general elections slated for the first quarter of 2023.
Attempts to reach Adesina for more clarification proved abortive as his phone was unreachable. But the question remained. Does this mean that the government lacked the political will to remove the subsidy? And was it playing politics with subsidy removal after it had promised to do so and failed at the last minute?
After all, official consultations took place in the last two months from last November 2020 when Governor Nasir El-Rufai, at the unveiling of the World Bank report, advised Nigeria to cancel the subsidy programme by January 2020 and warned that if the subsidy regime remained, state governors may be unable to pay salaries by 2022 when the IMF directed the country to remove the subsidy regime and use the accrual to provide infrastructure and social capital.
It was also during that period that the Minister of Finance and National Budget, Zainab Ahmed, proposed the N5, 000 palliatives to be disbursed to the poorest Nigerians,” through the e-wallet system for a maximum period of 12 months and a minimum of six months… from the Federation account… because government can no longer bear the cost of petroleum subsidy at N250 billion monthly because NNPC has been making zero remittance to the Federation Account.
As the minister later admitted at a meeting with the NASS on January 24, a combination of pressure from Nigerians and the rising inflation has forced government to beat a hasty retreat from its planned removal of subsidy and spread the plan over an 18- month period during which it would consult more with stakeholders and put measures in place to reduce the consequential impact of the removal on the populace.
Mr Victor Ononokpono, a gas and oil expert, was National Treasurer of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASAN, told THEWILL in a brief interview that he would choose to look at the current government decision over subsidy regime from the standpoint of the political economy.
The fact that the government has economic decisions to make does not mean it will not take political decisions that have far reaching effects on the people, he said. He does not subscribe to the idea of a cabal having hijacked the oil subsidy regime to milk the country dry and prevent the people suffering from enjoying the impact of the major foreign revenue earner for the country.
He said, “There are sharp practices everywhere in any industry, in any sector in every society. It is left for the security and anti-graft agencies to do their work. I think we have passed the argument in this country that petroleum subsidies should be removed. What we are talking about now is the timing.
POSTPONING THE EVIL DAY?
Professor Ayo Olukotun, Director at the Institute of Governance, Olabisi Onabanjo University, Ago Iwoye, Ogun State, thinks the government is playing politics of the 2023 election with the oil subsidy regime.
He told THEWILL on Friday that as usual in a political season, the voters would be given, “all kinds of unusual favours for well-known reasons. Recall the famous words of the Swiss philosopher, J. J. Rousseau, made centuries ago, that “the people of England regards itself as free, but it is grossly mistaken. It is free only during the election of members of parliament. As soon as they are elected, slavery overtakes it…”
According to him, after the Buhari administration’s, “Eight years of the so-called reformism, we have come full circle, regarding the abracadabra of subsidy, resulting in a gargantuan foreign debt and the spectre of national bankruptcy.
“This apart, the Minister for Finance, Zainab Ahmed, confirmed recently that the deepening suffering of Nigerians as a result of high inflation is one of the reasons why the removal of fuel subsidy, which was earlier slated for June, has been put on hold.
“The eternally opaque Nigerian National Petroleum Corporation told us that Nigerians consume fuel to the tune of 65.7 million litres daily and that it will require a sum of N3 trillion to underwrite the cost of the postponement of fuel subsidy removal by 18 months.
“Unsurprisingly, an irate Dr Kayode Fayemi, Governor of Ekiti State and Chairman Nigeria Governors’ Forum fired back that “there is a lot of fraud in consumption and distribution figures,” suggesting that no one is sure anymore about the competing and contradictory figures churned out by NNPC.”
Surprisingly, a top NNPC official, who works with one of the refineries in the country, supported Olukotun’s position in his response anonymously in a mail to further enquiries by this newspaper.
According to the official who spoke anonymously, “There is a scam called fuel subsidy, encouraged by importation of the product instead of local refining.”
“It is disgusting to see how policies without proper planning get breached by the same policy makers. The Petroleum Industry Act is clear on subsidy removal. The Act allows for proper market economy and commercialisation of the oil and gas sector. NNPC Ltd by the PIA has nothing to do with fuel subsidy.
“I watched the GMD of NNPC, (Mele Kyari), saying we consume about 60 million litres daily. How? This must be authenticated. It’s an open secret that the number of liters claimed to be imported are dubious and part of it goes across our porous borders for sale to neighbouring countries where PMS is much more expensive than the Nigerian subsidisedproduct.
“No one is talking about the diesel and kerosene that has been deregulated for years in the country. Our industries run on diesel as backup to epileptic power supply. The articulated vehicles use diesel also. Kerosene for cooking is used by the poor. This increases the cost of production and it is passed to the consumer. No one discusses the inflation caused by it. Insecurity has also led to food production shortages. So the burden is always passed on to the poor people.”
SOCIAL IMPLICATIONS AND WAY OUT IN 18 MONTHS
As the NNPC official noted, the poor will continue to get temporary relief as continued subsidy has not even alleviated their suffering with the continued height in inflation as noted by Minister Ahmed, smuggling of the product across the border, Naira/ Dollar exchange rate that is unstable because market is dollarize which make control difficult for an economy that is import dependent.
According to the NNPC official, “We are a poor country in terms of revenue generated and in-spite of our abundant resources. The Federal deficit budget of N17. 1 trillion (less than $50 billion) already approved by NASS has actual projected revenue of about N11 trillion.
“That means we need to borrow plus other additional sources to make it up to N17.1 trillion. Capital expenditure is about N5.5trillion, recurrent expenditure is about N6.9trillion, debt servicing is put at N3.8 trillion. Now NNPC is requesting about N3 trillion for fuel subsidy that was not initially in the budget approved by NASS. The big question now is where will the money come from? Now we are almost back to square one. Do we really need 18 months?”
“The way out is to ensure local production of petroleum products to meet our demand and even export.
“All these should have been planned two to three years ago, ensuring the local refineries are operational to be augmented by Dangote Refinery. That will be possible with Dangote, Port Harcourt refineries coming on stream, in the short term and Kaduna and Warri refineries on the long run. Hopefully when Dangote and the Port Harcourt refining starts producing the game will be over. Dangote in full capacity will meet our needs and also export.
“Alhaji Abdulrahman Samad’s BUA Company will be going into refining soon.
“The appropriate pricing of local refined products in line with the dynamics of the economy must be agreed to by all stakeholders.
“Just as Lagos state, other states should invest in mass transit for the people.
“I think Governor Babajide Sanwo-Olu is already working ahead and some governors should follow his footsteps according to their strength. Sanwo-Olu’s blue line project is commendable. States that cannot do the same should invest and encourage the private sector in providing mass transit for the populace.”
Ononokpono however warns that the impending amendment of the PIA should not in any way give room for the re-establishment of the old regime of, “over regulation,” of the industry. Over regulation kills investment in the industry.”
He gave examples with the failure of licensed investors in oil refineries to operate their license since 2006 when DPR issued the licenses after the open bidding.
“Refinery is a marginal business. It involves a lot. To build a refinery you need to have a full complement of refining products and petrochemicals otherwise you may not make a lot in the long run, that is if you are going to be buying crude at the prevailing international market price but you are not allowed to sell to maximize profit.”
He however agrees with the NNPC official that the coming Dangote refinery, Port Harcourt and the a proposed one in Anambra together with the modular refineries in Edo and Rivers, things would make the subsidy removal practicable.
He said that between 1999 and 2000 for instance, the country was consuming about 18 million litres daily. At that point, the refineries were producing less than 18 million per barrel per day. Increasingly we had to balance the difference in consumption and that came with increased population and demand with importation.
The 18 months delayed the implementation of subsidy removal could be beneficial to the country, Ononokpono argues.
“In 18 months, the price of crude in the international market could drop or go up. There are many indices to contend with. The lingering crisis in Ukraine between Russian, American and Europe, for instance, could affect prices. It could crash or go up. If Saudi Arabia responds by flooding the market with crude beyond its 18 million barrels per day production during that 18 months; we could gain or lose.
“But then there is a brighter future when infrastructure is fully in place to help the people and we have a pricing template of STP, that is Ship to Ship, at a low of N3 per litre because the Lekki ongoing Deep Sea port can take bigger vessels, which are avoiding Apapa for now together with the rehabilitated Port Harcourt refinery alongside Dangote Refinery and the one being proposed in Anambra as well as modular refineries.”
He explained further that with a huge refinery like Dangote taking care of local consumption, the cost of freight and insurance that usually come with importation would be eliminated to the advantage of the country.
“If we have all these things in place, the cost of the product will come down drastically. It would be unlike before when whatever we are bringing in is regulated by the exchange rate.”
This picture, likely to happen very soon, may be the game changer for Nigeria and Nigerians as far as petroleum subsidy is concerned. But until then, Nigerians can only hope and expect that the Nigerian factor of corruption and lack of government will to implement even its own programmes and projects and deal with business sharks, will also change.
Amos Esele is the Acting Editor of THEWILL Newspaper. He has over two decades of experience on the job.
