The latest increase in fuel pump price from N86.50 to N145 per litre is a clear indication that the nation’s leadership problem does not lie with political party colouration but the human characters, the leaders who are, at best, the dramatis personae playing different roles in the nation’s unending episodes of drama and stage plays where scenes and moods are cosmetically achieved to achieve a predetermined theme or object. The audience, in this case, the lead or followers follow and watch the unfolding intrigues, suspense, climax, conflict and its resolution. It comes with either clap or jeer but the truth is that they have been deceived or fleeced into having “fun.”
Since 1960, history has been repeating itself all over again, but it is not surprising because the same crop of people with seeming suppressive intentions have been recycling themselves in and out of military and civilian regimes. The holy Bible did not make mistake then, when it says, when wicked and evil leaders are in power, the people will suffer and cry.
When in 1986, General Ibrahim Babangida wanted to introduce the Structural Adjustment Programme (SAP), there was consensus in the country that SAP would destroy the Nigeria’s economy, breed corruption and hand hardship on Nigerians, Babagida decided to set up a committee of experts on the issue which brought about the national SAP debate of that time for about four months. Nigerians of all walks of life rejected SAP but Babangida had made up his mind and therefore the next lexicon that followed his action was “there is no alternative to SAP”. Since this singular decision of his Nigeria has been on retrogressive progression. The economy is perpetually under pressure.
Over the year, especially since the nation’s four refineries became object of political settlement, their refining capacities took flight, forcing Nigerians to depend on imported petroleum products; there have been debate on deregulating the downstream sector of the oil industry. This debate punctuated the 16 years of the Peoples Democratic Party (PDP) reign, with the height being the 2012 “occupy Nigeria” protest. It was opposition from experts, the organized labour and civil society groups in Nigeria. It became a recurring decimal in labour and civil society struggles in Ni geria for decades. In fact, the opposition party then, now the ruling party, All Progressive Congress (APC) sponsored public unrest, such that Asiwaju Bola Tinubu, described the then ruling PDP as insensitive to the plight of the people, while Babatunde Fashola current Minister of Power, Works and Housing but the then Gov. of Lagos State, under APC captured it thus: “Now, we should be enjoying cheap fuel if the price of oil has dropped globally. And even as we import the product, a major component has reduced in price. While this has reduced, the pump price of fuel in the country still remains the same. Something is wrong.
“If the price increases in the country when the price of oil goes up globally, then it should also reduce when the price of oil drops.
“I understand that I am not an economist; they (federal government) are the economists. But I have some logic and common sense to ask critical questions. For instance, if one buys flour at N10 per kilogram, and the bread is sold at N1 per loaf, if the price of flour drops, the price of the bread should change.”
Prof Tam David-West, former Minister of Petroleum Resource under President Mohammed Buhari as Head of State in 1984 rhapsodized subsidy and deregulation in this fashion: “We really do not need Federal Government of Nigeria subsidy as there was none in the first place. What is lacking, is the will to enforce law on corruption. Locally refined products cannot be sold at international price”. He further gave insight as: “(1) one barrel of crude oil is 42 gallons or 159 litres. (2) Our 4 refineries have installed capacity of 445, 000 barrels per day. (3) Actual refining capacity due to ageing equipment is 30 percent, that is, 133, 500 barrels per day. (4) 133, 500 barrels is 21.2 million litres (5) local required consumption (F.O.S) is 12 million litres (6)It means that even our moribund refineries can actually meet our local consumption need of petroleum. (7) The cost structure of crude oil production. Finding development-$3.5, Production cost- $1.5, Refining cost-$12.6, pipeline/transportation-$1.5, Distribution/bridging fund margin-$15.69, true cost of one litre of petroleum anywhere in Nigeria, total sum cost-$34.8, I litre cost -$34.8/159 litre-$0.219, Naira equivalent 0.219 xN160(then)=N35.02k now @ N200 =N43.8k. add tax N5 + 35.02 = N40.02 (N48.8k). Let FGN refute this composition and if not, they should tell us how they came about N95/85 per litre.”
This was Prof David-West at his best under Jonathan’s regime. What has changed now?
Today, all these men are in power but suprisingly, they have repeated Babaginda’s lexicon “there is no alternative to (deregulation)”.
The questions remain: What has changed between 2012 and 2016 in Nigeria? Is it about timing? Was it a strategy to gain power by using Nigerians? Were the civil society, organized labour and Pastor Tunde Bakare and Co. used by the opposition and dumped?
Former President Goodluck Jonathan’s government had raised the pump price of petrol from N65 to N141 per litre in 2012, sparking the protest then. Consequently, the price was reduced to N97 per litre. Towards the twilight of his administration in 2015, Jonathan further reduced pump price to N87 per litre.
The incumbent President Buhari reduced the price from N87 to N86.50 per litre. However, in a dramatic turn-around, he increased the pump price last week to N145 per litre.
In his defence of the new price regime, the Minister of State for Petroleum, Dr. Ibe Kachikwu said it was anchored on the problem of foreign exchnage.
According to him, the unavailability of forex and inability to open letter of credit has forced marketers to stop importation and imposed over 90 percent supply, on the Nigerian National Petroleum Corporation (NNPC) since October, 2015 in contrast to the past where NNPC supplies 48 per cent of the national requirement.
He continued that NNPC does not have the resources for and is not designed to meet this increase in supply, thus has resulted in the current fuel situation across the country.
Kachikwu mantained that NNPC has continued to utilize crude oil volumes outside the 445, 000 barrels/day thereby creating major funding and remittance gaps into the Federation account.
“There is no provision for subsidy in 2016 Appropriation. As at today, the current premium motor spirit (PMS) price of N86.50 gives an estimated subsidy claim of N13.7 per litre which translates to N16.4Bn monthly. There is no funding nor appropriation to cover this,” the minister added.
Now, the question: If NNPC or the government cannot source foreign exchenge for importation of fuel is it the private sector operator that can source it? The Central Bank of Nigeria (CBN), a government agency manages the forex flow even under the liberalized fuel import regime. This means that not every willing importer can import fuel, despite meeting the condition for importation as a result of the government’s forex constriants, denoting that the promise by the federal governmendt that in six months time,pump price of fuel will reduce is absolutely incorrect because the expected forces of demand and supply are not at work here. This means that the subsidy was removed but the sector not deregulated and the consequence is progressive increase in fuel pump price even at filling stations not to talk of black market prices. The simple language here is without forex for import the little quantity availiable can be sold at N300 per litre at filling stations through the creation of artificial scarcity.
The Vice-President, Prof. Yemi Osinbanjo sealed the hopes of Nigerians when he said last week that the executive was “not responsible for monetary policy”, adding that it is hoped that the CBN would soon come up with a flexible forex policy.
As a real sign of what has befallen Nigeria, after two months of stability, the naira last week Thursday depreciated by N14 at the parallel market, in response to demand pressure occasioned by the subsidy removal in fuel importation by the federal government, which said importers have been permitted to source for their foreign exchange requirement from secondary sources. This mounted demand pressure on the Bureau de Change operators, leading to sharp depreciation of the naira.
The parallel market exchnage rate which had been stable at N320 per dollar since end of February, rose to N334 per dollar at close of business on Thursday, last week.
According to the president of Association of Bureau de Change Opertaors of Nigeria (ABCON), Alhajai Aminu Gwada, the market had been stable all this while due to drastic reduction in import activities. But because of the new fuel import regime, more demand for petrol importation is expected in the market meanwhile, there is no supply of dollar. Some people with dollar, especially those who bought when the exchange rate was high, feel the rate is too low for them to sell, hence they are withholding their dollars, waiting for the rate to go higher”.
Now, at what point will the exchnage rate go down? Foreign reserve is still badly low, not much of export is being done by Nigeria, more naira still chase foreign currencies, the crude oil price at the international market is still low, what has the government done to stop the new regime from being hijacked by a cabal?
Please, is this government clueful or clueless?
By Kingsley Anaroke
