The removal of petroleum subsidy by the new administration of President Bola Ahmed Tinubu has again brought to the fore this issue that has bedeviled Nigeria’s oil sector for several years. What started as a simple intervention of the Federal Government to make petroleum products affordable to Nigerians at a reasonable rate, has turned out to be a monster choking the Nigerian system.
Subsidy in the Nigerian context is the money the Nigerian Government pays to oil marketers for Nigerians to get petroleum products at a subsidized rate. This practice has been since the late 70s, which was just a minute fraction as Nigeria could no longer refine the quantity of petroleum products required for the entire nation. Over the years, the amounts required to subsidize petroleum products have been on the increase which the government now believes it can no longer bear. As of 2012, when the government of President Goodluck removed the subsidy, the price of PMS moved from N65 to about N145. This led to a massive protest by NLC, TUC, and several other civil society groups that literally brought Nigeria to a standstill. Upon several deliberations, the price of PMS was reduced to N97 per litre while the government still bears the remaining burden. Fast forward to 11 years after, the amount government is allegedly subsidizing PMS is a difference of N537 per litre and N195 per litre, which is about N342 per litre on average.
Looking at the history of Nigeria and the fact that Nigeria has been blessed with crude oil in abundance, should the word ‘Subsidy’ for petroleum products be heard in Nigeria? The reason why the Nigerian government has to pay subsidy is that when the crude oil is refined and brought to Nigeria, it is brought at an exorbitant price which is not affordable to Nigerians. The government now pays off part of the selling price of the product and then allows Nigerians to have it at a fairly low price.
One unanswered question over the decades for the Nigerian government is “Why is Nigeria not refining its crude oil within its borders and selling the same to Nigerians at a price convenient to the government and to the people?” This question leads us to the topic of this article, visiting the failure of governance on the masses.
Despite the abundance of resources (both human capital and material), the various governments of Nigeria over the years, have failed in their responsibilities in meeting the needs of Nigerians with regard to the supply of refined petroleum products. Nigeria has four government-owned refineries located in Port-Harcourt in Rivers State, Warri in Delta State, and Kaduna in Kaduna State. These refineries when at their combined maximum capacity, can shoulder the responsibility of refining all the crude oil Nigeria needs for consumption and even for exportation. Unfortunately, these refineries have been in a state of comatose for the past decade and successive governments have not been able to bring these refineries back to life and maximum performing capacity.
Just in the recent past, Nigeria had a set of leaders that were at the helm of affairs for 8 years. They had promised to build one refinery per year in addition to the existing 4 refineries for Nigerians. The Head of the Government incidentally doubled as the Minister of Petroleum for the said eight years. I remember a plenary session in the Senate where there were many questions to be answered regarding the oil sector and the attention of the Minister of Petroleum was needed. A Senator stood up to move a motion to have the Minister of Petroleum summoned to the floor of the house to answer the questions, which automatically meant inviting the President to the floor of the house to be bombarded with questions from the Senators. The move was immediately exasperated as the members of the President’s party would not afford to allow the President to be brought to the floor of the house to be ridiculed by embarrassing questions, particularly from Senators in the opposition parties. Incidentally, throughout the lifespan of the immediately said government, proposals were made to repair the refineries. As usual, the amount proposed for the repair of the refineries was more than enough to build new refineries for the country, but none of these (whether repairs or new refineries), saw the light of the day until 8 years swept by.
Now with the failure of the government to put the refineries in a working state or to build new ones at bragged, the country resorted to exporting 100% of its crude oil and oil marketers now bring back the refined products into Nigeria, factoring in the cost of refining, transportation and other logistics, to slam a price on Nigerians. This price is what the government has tried over the years to subsidize to make refined products available and affordable to Nigerians. Now that government has removed its hands of fellowship, the people are forced to bear the entire burden of purchasing refined products at the price fixed by the marketers. The people are now forced to bear the consequence of the ineptitude of the government. Is it the people’s fault that refineries were not maintained and used properly? Is it the people’s fault that the government failed to build new refineries as promised? Is it the people’s fault that the subsidy ever existed? Why should the people now bear the brunt?
Now to the harsh reality of buying PMS at the international market value, what are the modalities put in place by the administration to cushion the effect of the removal of subsidy? Did the administration think of the ripple effect of the removal? Automatically, the prices of all the goods and services in Nigeria will skyrocket. The first victims are commercial travelers who now have to pay extra costs to travel, then purchasers of goods and services will be required to cough out more funds to transport their goods and services to the location of the consumer which again automatically leads to a rise in the price of the goods and services. There were no transportation buses, trains, etc, made available to ease the pains of the subsidy removal, what then does the ordinary Nigerian stand to gain? The administration provided no palliative whatsoever to cushion the effect of the increment which would have doused the tension of Nigerians. The ripple effect of this subsidy removal will haunt Nigeria for several years because the prices of virtually everything will go up.
My position on subsidy has never changed and still remains as it has always been since the topic became popular during the era of President Goodluck Jonathan. One of the only few things that the common man directly benefits from the government in Nigeria is the subsidization of petroleum products. When you take that away, there is literally nothing left. Education has become nearly unaffordable to the average Nigerian. The power supply is nearly nonexistent; Nigeria is powered by generators and private power plants. Both small and large-scale businesses depend heavily on power to function, this is not provided for by the government. Pipe-borne water is mostly provided for by individuals through personal boreholes, the roads are in their typical state of dilapidation. Security in Nigeria is at its lowest. In all, the only thing Nigerians can point to that government is doing for them is subsidy. When that is taken away, what then is left of the government to do?
From a personal view, the removal of fuel subsidy is not the solution to the problem, it would not make the government richer because there are persons already waiting to loot the resources of Nigeria. We will only hear of the things they hoped to do with the money saved from the subsidy but might never see what they used the monies to do. When the subsidy was partially removed in 2012, the next thing we saw in the media was the subsidy scandal. The monies the government had saved at that time had been looted by those who were supposed to remit the funds to the Federal Government. The prosecution of these persons never saw the light of day as everything was swept under the carpet. What then is the guarantee that the funds saved will be used for visible purposes? This is not the first time that subsidy has been removed by the government. What happened to the funds saved or allegedly saved?
In conclusion
Until government fixes its refineries or builds new ones, international forces will always determine how much PMS is being sold which will make the price of PMS to fluctuate. But when our refineries are working and we can refine our own crude oil, the government will be able to determine the amount PMS will be sold to Nigerians, which price does not necessarily have to be the same with the international market. Until government stands up to its responsibility and fixes its refineries or build new ones, subsidy will forever be an unresolved issue in Nigeria.
Akintayo Balogun Esq., LL.B (Hons), BL, LL.M, is a legal practitioner in private practice and based in Abuja, FCT. A prolific writer, public affairs analyst and commentator on national issues. akinson6@gmail.com, 08051051659
