Sequel to the first part which talked about OGB...an average Nigerian who is facing harsh realities in today's Nigeria; this divination considers the thinking, pains, wishes and arguments of Nigerians concerning the new fuel price. Since the present hike is usually discussed in comparison to the hike in 2012; the narrative in this divination also considers that.
The Last Administration, Fuel Price, and Subsidy Removal
At an actual pump price of N144.70, the Federal Government under Goodluck Ebele Jonathan (GEJ) was paying N79.70 for every litre of fuel consumed in Nigeria. However, in January 2012, the government announced the removal of fuel subsidy and caused fuel price to move from N65 to N141. The government had argued that without the subsidy, they could save up to N1.2 trillion yearly, which then can be invested in the infrastructural development around the country. This was strongly opposed by Nigerians who cited their distrust of the government and argued that there was no assurance that the proposed savings would be utilised for common good especially with the high rate of corruption and cost of governance. In a previous post, I discussed my reservations about subsidy removal in 2012, although I acknowledged the long-term benefit if properly managed. GEJ’s government was later to partly rescind and dropped the price from N141 to N97. At this time, according to Index Mundi, a barrel of fuel was selling at $106.89. Before GEJ left office, his government further reduced fuel price to N87 in response to fall in oil prices, which sold at about $52.50 per barrel. At N87, GEJ's administration was subsidizing fuel to the tune of N2.84 per liter.
Buhari/APC's Reaction to the Last Administration's Position on Fuel Price
Fast forward to today, there is a new government under Buhari and the APC. A number of people who make up this government and party were also vocal against GEJ and his government as it concerned the price of fuel…For example, in January of 2015, Buhari himself released a statement criticising GEJ for leaving the price of fuel at N97 per litre despite falling oil price as reported by Premium Times. He explicitly said, “stop stealing from Nigerians and allow them to enjoy the relief that has come to consumers of petroleum products globally”. Fashola, while commending the later reduction from N97 to N87 by the past administration said it “was a good try but Naija can get a better deal”.
After Buhari was elected President but before he was sworn in, he granted an interview with journalists from Daily Trust who asked about his take on fuel subsidy. Buhari narrated how as a petroleum Minister, he had set up refineries in Warri and Kaduna; and how as Head of state, his administration constructed more than 20 depots, laid more than 3,000 pipelines and built a number of stations to take trailers off the road. He said he did all these without borrowing money from anybody and that it was easy to work out the cost of oil production across the value chain. Buhari then asked: “I can understand if Nigerians pay for those costs. But somebody is saying he is subsidizing Nigerians. Who is subsidizing who?”. Confused by the answer, the journalists asked: “Does it suggest that you don’t believe in the subsidy? So, you are not going to agree to its continuation in any way?” to which Buhari replied that he would like to be on ground to see what is going on, so gave no specific answers.
The Present Administration, Fuel Price, and Deregulation
In December 2015, the Minister of State for Petroleum -Ibe Kachikwu- announced that fuel subsidy policy has been scrapped, and instead of an expected increment on N87 as was sold then, the new pump price would be around N85. This seemed magical and a clear break from the past where any removal of subsidy meant a hike in fuel price. Well, a few months later, in April of 2016 precisely, the Federal government returned the fuel subsidy policy and the official price of fuel was pegged at N86 if buying from NNPC outlets and N86.50 if buying from other outlets. According to the Petroleum Products Pricing Regulatory Agency (PPPRA), the expected open market price of fuel as at the 28th of April 2016 was N99.38 per litre. Therefore, the government was paying N12.88 and 13.38 per litre as the subsidy. However, on the 11th of May 2016, the federal government once more decided to review the pricing of fuel. PPPRA suggests that the new open market cost of fuel is about N138.26 per liter, and the pump price shall be capped between N135 and N145 per litre meaning that the government shall no longer pay subsidies. So within the space of 5 months, this present government has changed their stance on the issue of subsidy thrice. Furthermore, what the latest change entails to the fuel subsidy policy is not yet clear as officials from the same government have different explanations.
According to Kachikwu in his appearance on Channels TV, the new pricing regime ensures that government has less control over the oil business thereby freeing it up and allowing firms and individuals to compete. According to him, this would drive down the price of fuel as it did diesel. He, however, said that he wouldn’t want to discuss whether this new regime can be called ‘deregularisation’ but that it allows market dynamics to take place within the price ceiling as set by PPPRA.
Professor Yemi Osinbajo- the Vice President- later released a statement explaining that the issue in not about subsidy removal but about foreign exchange which has prevented marketers from importing fuel into the country. According to him, the marketers hitherto relied on the CBN for the forex at the official rate, but with dwindling oil price and sales, the foreign reserves have depleted and the CBN had been unable to provide the funds for marketers. This new pricing policy allows marketers to source their funds from whatever means, import fuel and sell but not above the stipulated price ceiling.
The Minister of information -Lai Mohammed- came out with a slightly different but scary explanation in comparison with Osibanjo's. According to him "the current problem is not really about subsidy removal. It is about that Nigeria is broke. Pure and simple...it is like somebody who has been earning N100,000 a month and he is faced with a situation where his employer says henceforth you will be earning N10,000 a month. He would need to make some very painful decisions and some very painful adjustments. That is the situation with Nigeria today".
Now these are 3 different explanations on what is going on, no matter how subtle the disparities. In a nutshell, Kachikwu says that the main intent of the new pricing and policy is to allow marketers compete and market forces determine the cost of fuel; this sounds like deregulation but it isn't especially with the price ceiling of N145 per litre. On the other hand, Osibanjo says it is a matter of forex with the price of fuel rising because it is expected that marketers would source dollars at an average of N285 per dollar and no longer at the official rate of N199. Lai Mohammed capped it off by saying that it isn't about subsidy removal but about the fact that the country is broke.These diverse explanations end up confusing Nigerians. For instance, if Osinbanjo’s explanation is the actual situation of things…does it mean that at the N145 ceiling government is still subsidising fuel? If the answer is yes, does it not become complicated keeping tabs on the different prices at which marketers could sell fuel and reimbursing them as necessary? If the answer is no, why was Osibanjo being economical with the truth? Never before has there been such obvious misalignment within the same government…and this isn't the first occurrence of such in this new administration. Whether these separate views are deliberate or as a result of an honest mistake remains to be seen. But one thing that is clear is that government is no longer subsidizing the price of fuel.
Annoyingly, as any observant Nigerian would have noticed, the President has a penchant for not talking to Nigerians in the country about his policies. I can recall that in 2012, GEJ addressed the nation as he tried to explain his reasons for withdrawing subsidy payment; he did this barely a week after the policy was announced. And here is Buhari -it is over a week now since the announcement by Kachikwu and not a word from him. Some may think it isn't necessary, but I disagree. It is necessary because he has asked Nigerians to make one of the biggest sacrifices yet as a consequence of failure in governance; it is necessary because this sacrifice comes in a period when people are losing their jobs, being owed months of unpaid wages, being owed over a year of unpaid pension, facing rising costs of transportation, feeding, etc.; and it is necessary because of the different versions of information coming out from the government he runs. As has been seen in the past, there is every chance that the first time Buhari would discuss this issue of subsidy removal is during a trip abroad; Nigerians at home can make do with what the ministers tell them.
My Opinion: Streamlining the Past and the Present
I know some people have questioned why Nigerians haven’t reacted to this recent hike in fuel price as they did in 2012. APC chieftains have said it's mainly because Nigerians believe that the present government can be trusted to manage and use any saving from the removal of subsidy for the common good; pro-Jonathans and PDP supporters said it was hypocrisy. However, I do think it is a question of conditioning. In GEJ’s case, people were used to buying fuel at N65 and suddenly woke to a price of N141 especially after the Christmas season…it was a rude shock. However, in this current case…people have been buying fuel at ridiculous amounts, sometimes even close to N200 or above; they have also experienced a severe shortage. So it didn’t come as much of a shock when the government said it would be sold tops at N145 especially for those who have even been buying fuel close to that amount or even more.
That said, as always, I do believe that deregulation is the way forward but I still have my reservations:
- Under GEJ, I doubted the sincerity of heart to reinvest the savings for the common good going by the perceived extent of corruption and the high cost of governance. In this present administration, nothing has changed that perception for me. There still remains the high cost of governance and I am yet to be convinced that this present government has solved the problems of corruption.
- Under GEJ, I asked for moves to cushion the effect of the subsidy removal on the citizens. Such moves are even more imperative now going by the situation of things in the country. In today’s economy, people are losing their jobs, salaries are not regular (for those who have jobs), power supply is so poor that reliance on fuel has increased -not just for personal use as in residential houses but also for commercial purpose, the 45% hike in electricity tariff despite court order against it, rising rate of inflation, the stamp order imposed on citizens by the government and various other charges by banks to help generate funds for government, etc. They keep telling the citizenry to sacrifice...just how much can the common man take? Yet we don’t see a commensurate sacrifice from the ruling class. For instance, Lai Mohammed had recently asked for N13.12 from the National broadcasting corporation in order to attend a conference in China; the Senate recently bought 36 cars at the cost of N36.5 each spent N36.5 -with their penchant for lying, they could have even spent more than they have made known. Even after all the hullabaloo concerning the initial budget, the 'revised' version still contains mind-boggling figures earmarked for the most mundane of things even in a period when citizens have been asked to sacrifice. For instance, is the Vice President's library which is expected to be restocked with books costing over N4 million; N340 million for BMW vehicles; the over 700 million Naira for President's local travels; the over N800 million for cable work in the State House; over N62 million for the National Health Insurance Scheme in the State House (whatever that means); over N218 million for feeding and refreshment; the strange N50 million-plus for rent in the State House...I can go on and on, but just visit the Budget Office and see for yourself. It is a big shame, yet they will act like they feel what the common man feels... like we are all in this together. Fashola, for instance -who by the way is becoming rather deceptive and two-faced and is rapidly losing the respect I had for him- had the guts to open his mandibles to claim that he also bears the brunt of poor power supply and that his children are suffering from heat rashes. Well...what truth do you expect from a man who said Jimi Agbaje was too old to govern Lagos yet he supported Buhari to head Nigeria? What do you expect from a man who was asked how N78 million on a website and his response was that he was never in charge of the State's finances as a governor?
- These chaps are quick to cite diesel as an example of what deregulation can bring. Diesel was deregulated in 2009, 7 years later...wondered how much diesel sells for in Nigeria today even with the fall in global oil price? Surely, things are not as bad today as they were in 2008 when diesel sold for about N200 per litre, however the Nigerian story of diesel doesn’t reflect the global fact as its price has remained high mainly because marketers have kept a monopolistic grip on the commodity by deciding on the minimal price for which it can be sold, which does not reflect market dynamics. For instance, in 2015, the PPPRA argued that diesel shouldn't be sold for more than N114 per litre; however, marketers were selling it for as high as N150. I have always imagined that post-deregulation, filling station owners - in Owerri for instance- could meet and decide that they would not sell fuel for less than N100 a litre even when market forces indicate that they can make a profit at N80. Are there ways by which such exploitation can be prevented?
- Okay, let's say we have this 'semi-deregulation', what plans does the government have to ensure that no one sells above the N145 ceiling? It isn’t news that DPR struggled to implement the N86.5 official pump price, what then is the assurance that they would now? For those who were envisaging a Buhari government than can ‘whip’ Nigerians into conformity, well…that isn’t the case now. This problem with implementing an official pump price mirrors the problem in the banking sector where banks have failed to sell foreign currencies to customers at the official price…this is yet to be resolved as banks continue to sell forex almost as high as in the parallel market.
My suggestions
This government should unify its thinking about this policy and have the balls to tell Nigerians what exactly it is. Is this a partial deregulation of the downstream petroleum sector that has come to stay? Is this a permanent removal of subsidy without deregulation? Or is this a temporary stop in subsidy payment?
Once the government has decided on what it really is, they should sell it to Nigerians and not force it down their throats. There are obvious benefits of deregulation and/or subsidy removal...but they aren't for the very short term. In that case, the pain of today's economic condition shouldn't be for the common man to bear alone. The common man has never controlled or mismanaged public funds...all he wants is to live...or at least survive. The masses keep giving and giving with nothing to benefit for being Nigerians. To show goodwill, if I were the President, I'd start by stopping the stamp duty; by cutting off all those luxurious excesses in the budget, and by ensuring that my cabinet members conform to austerity measures that are most befitting for these hard times. The President should, for instance, agree to pay for his feeding from his allowances. As a matter of fact, these are things that Nigerians should demand as sine qua non for accepting this policy.
To those Nigerians who want to go against this new fuel price regime simply because most of those in today’s government were against a similar effort by GEJ in 2012…do think again. Ask not about who refused this move in 2012, ask about how this move would be of benefit to you today and in the future. Reject and accept this new policy solely on its benefit to you or lack thereof. If this move is really going to make fuel available and bring down the price, does it make sense to fight for a subsidy policy which you hardly benefit from? Does it make sense to fight for a policy that enriches the already wealthy and dubious oil marketers while you keep buying fuel for N200 instead of N86.5 just because you want to spite the government in power?
To the Nigeria Labour Congress (NLC) and those who are gearing up for industrial actions and demonstration...don't just ask for the subsidy policy to return. Give government the conditions under which this new policy would be accepted. The enemies- in my opinion- are the oil marketers who benefit from the subsidy payment, but the cost of fighting these enemies should not be for the ordinary Nigerian alone to pay.
The Oracle has Spoken!!
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