Fresh perspective to fuel subsidy removal

Peter-Esele-CopyTHE search does not preclude age, sex or even proximity to the producing states, Nigerians troop out in their hundreds looking for where petrol is available.

They are also searching for it not minding how much it is sold. Mind cast back to January 2012 when they trooped out in their thousands in Ojota, Lagos roundabout famously tagged ‘Freedom square’ to demand a return of petrol subsidy which the then government of Goodluck Jonathan had insisted must go. They were unanimous in their rejection of the move.

Three years down the line, is their mindsets changing? Are the ubiquitous queues a return to the familiar terrain? – Is it time for subsidy to go? These are the posers as queues for petrol at filling stations stage a dramatic and demonic comeback.

Indeed, there has never been a more suitable time for government to remove the fuel subsidy than now that most Nigerians are in agreement that the time for Nigerians to pay appropriate price for petroleum products has come.

While it is no longer a matter of why but when, it is also appropriate at this time to examine the factors and methodologies that will most likely shape the removal. In other words, what is the most suitable line of action government should follow for the country to reap the full benefits of the removal.

There are many options to the issue. One, government just remove the subsidy and hands off the sector to market forces to determine the prices going forward? Should government adopt deregulation, privatization of the refineries or engender a robust policy option that will take the Nigerian situation into context with the sole aim of eradicating fuel queues forever in the land?

Deregulation is defined to mean when government reduces or eliminates industry restrictions to improve the ease of doing business. Government removes a regulation when businesses complain it interferes too much with their ability to compete, especially with foreign products (importation of petroleum products).

It can be argued that deregulation allows more innovation from small, niche players; allows the free market to set prices which often leads to drop in prices. No doubt, deregulation can also expose people to fraud and excessive risk-taking by companies that will do anything to gain higher profit and most fundamentally social concerns are lost. This is where government vigilance is most critical as agencies saddled with the monitoring of standard and prices will have to be on the edge.

The second policy option opened to government is to privatize the existing four refineries in Port Harcourt, Warri and Kaduna.

But narratives on the removal of fuel subsidy have failed to interrogate the subject and have rather lazily adopted the slogan ‘remove fuel subsidy’ without foundation upon which such call is made.

Should government remove subsidy without addressing the profitability question that has been raised by marketers? Will the marketers not put Nigerians on the slaughters’ slab, as they would be required to pay all associated costs of imported products?

Happily, both the Major Oil Marketers Association of Nigeria (MOMAN) and Depots and Petroleum Products Marketers Association of Nigeria (DAPPMAN) have thrown their weight behind the removal of subsidy.

Indeed, there here have been cries from stakeholders that the downstream oil sector is not only facing imminent collapse, but this may serve as forerunner to inevitable collapse of the Nigerian economy. To them, total and immediate removal of subsidy is not only desirable but also inevitable and an urgent issue.

The stakeholders are of the opinion that the situation might get worse in the coming days, if President Muhammadu Buhari does not swiftly take decisive action on fuel subsidy. They posited that recent narratives of fuel subsidy have shown that the practice is unsustainable, encourages corruption, kills competition among marketers and limit the choice of Nigerians.

Indeed, the Executive Secretary of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, was quoted saying that marketers are not averse to deregulation and stoppage of subsidy on petrol.

He argued that marketers are fully persuaded that a free downstream market will boost efficiency, promote transparency and boost competition amongst marketers and along the whole supply chain. Government will have the resources and expertise to monitor and regulate standard within the system. It will equally liberate the system and allow for entrants into refining sector. The way the system is now, no investor will risk his investment here because the environment is not conducive for business growth. Both the demand and supply ends must be competitive a robust industry. He then lamented that the desired environment is not what is prevailing now.

On the trade union side, while government has less to do to convince Trade Union Congress and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), it needs some more explaining to do to the Nigeria Labour Congress (NLC) and National Union of Petroleum and Natural Gas Workers (NUPENG). NLC and NUPENG have consistently said they do not believe that government pays subsidy on petrol.

To them, comprehensive Turn Around Maintenance (TAM) of the refineries and building new ones, which will provide more jobs to the unemployed and guarantee the employment of their members, is paramount. They also hold the opinion that the private sector will prioritize profitability over quality service and that arbitrary price increase will be the order of the day.

On the other hand, TUC insisted that it is not opposed to deregulation but that government use the saved money to provide infrastructure that will alleviate mass movement, revival of social infrastructure and provide alternatives to services that rely on petroleum usage.

Commenting on the thorny issue, a former President of the TUC, Peter Esele said: “The position of the Trade Union Congress (TUC) has always been very clear. We have never said No to deregulation. What we have always said is that there must be specific development milestones that have to be met before deregulation can take place. Up to now, government has not done what we demanded should be done. If infrastructure like building of new refineries, ensuring the four existing refineries are working at optimal capacity and effective transportation system is in place, I will be the first person to carry placard that deregulation must begin. The way things are now, taking away deregulation will spell domed for the ordinary Nigerian, if deregulation not taken away, the Nigerian nation is still doomed. The poser is: how do we create a middle road that we will not be doomed? And that is where government comes in. If Nigerians know that the future of their children will be better than what they have now, they will be more than ready to make the necessary sacrifices today. Therefore, the All People Congress (APC)-led Federal Government must give this assurance in unequivocal manner now. Government must work very hard to enable Nigerians see the picture of a glorious tomorrow that it, indeed, will be well with generations yet unborn.”

In realizing self-sufficiency in local refining, there is also the need for the President to be personally interested on how to engender a business-friendly environment as well as the much-needed incentives to the private sector in order realize the objective.
This was the opinion of the Chief Executive Officer of Capital Oil, Ifeanyi Ubah.



Ubah submitted that the removal of subsidy on petrol remains the only viable option for President Muhammadu Buhari to get the country out of perennial scarcity.

He further advised the Federal Government to assist investors interested in building refineries in the country, noting that failure by government to give the right support to players in the oil and gas sector in spite of their capacity to run the industry successfully had subjected Nigerians go through harrowing experience for too long.

His words: “I urge President Buhari to take a bold step and deregulate the oil sector. He is not a stranger to the sector having being a former minister of petroleum. He will be respected for taking the step, there’s no point neither paying subsidy when Nigerians are nor benefiting it. The president will be doing the right thing if he deregulated the sector ‎so that that products will be sold at cheaper prices in the future.”

Ubah urged Nigerians to support President Buhari if he decides to implement deregulation in other to get petroleum products at the lowest price.

He said: “I have always been of the view that we should deregulate so that we can cut out corruption but unfortunately Nigerians didn’t take it from Jonathan.”

Indeed, removal of subsidy will surely be one of the quickest ways to pluck leakages and wastages.

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