Thorny as it may seem, the crisis arising from the surreptitious removal of fuel subsidy by the federal government on New Year’s Day, is not beyond solution. It only needs the government to muster the political will to implement them. For this to be done, it is important to go back to basics. The issue of subsidy on locally consumed petroleum products rests on the assumption that there is a shortfall between the cost of import and local selling price. Nevertheless, it does not address the causes of importation. The need to surmount the vagaries of international pricing led the government to establish more refineries and supply networks across the country from 1970.
Nigeria’s refineries have a processing capacity of 445 000 barrels per day (bpd), and the original vision was to satisfy domestic demand, deepen self-reliance and avoid a situation in which oil companies and marketers would enslave the country. This vision worked up to a point until some speculators took over importation of refined products because of the massive devaluation of the naira by General Ibrahim Babangida’s administration. This happened against the backdrop of low capacity utilisation, bloated overheads, inadequate technology for process upgrade and outright sabotage. These conditions have been entrenched, and successive governments have not had the courage to address them.
Ironically, Nigeria is the sixth largest oil producing country in the world and yet citizens do not enjoy affordable pricing, unlike in other oil producing nations. For example in Algiers, Algeria, a litre of fuel sells for $0.20; in Oman’s Muscat, it is $0.20 per litre; in Egypt’s Cairo it is $0.19 per litre. In Doha, Qatar, it is $0.15 per litre; in Kuwait City it is $0.14 per litre; in Manama, Bahrain, it is $0.13 per litre; in Ashgabat, Turkmenistan, it is $0.12 per litre; in Libya’s Tripoli it is $0.09 per litre; in Riyadh, Saudi Arabia, it is $0.08 per litre and in Caracas, Venezuela, it is $0.01 per litre. At the current price of N141 per litre, or about $0.60, the price of petrol in Nigeria is the highest among oil producing countries.
There is no reason why Nigerians cannot enjoy price advantage like other oil producing countries.
However, this cannot happen until the refineries are repaired and new ones built. As knowledgeable and other well-meaning Nigerians have observed, the issue of subsidy arose in the first place because the refineries are down; and some people are profiting from the situation. The information that the original builders have been invited to do the turnaround maintenance is not a guarantee that they will work, especially in an environment of intrigues. More private firms should be encouraged to set up refineries with lesser bottlenecks and devoid of the deliberate scare tactics of government officials, which many of them have complained about. The oil majors should be called upon to build more refineries, which should be amortised. Refining Nigeria’s sweet crude is not rocket science, and local refineries in the Niger Delta should be encouraged to produce for local consumption.
Government should also look at short-term measures such as refining petrol in neighbouring West African countries where they would be required to pay only shipping and refining cost, and where costs are almost at par with Nigeria. At the same time, government should work earnestly to resuscitate the comatose refineries as well as ensure the building of new ones within a specified period. Besides, government should implement a repayment strategy with major buyers, which frees the entire industry from the meddlesomeness of Bretton Woods Institutions.
Like it or not, the state would always be a major player in the energy sector. Elsewhere, the sector is tied to the military-industrial complex and guarded by the amour of the state for the larger interest of the citizenry. Therefore, a responsive government does not wait for resources from subsidy to implement capital projects like road construction and rehabilitation, railway and electricity. After all, government does budget for these projects yearly without results. Government should rather plug all the leakages in its business in order to reduce wastage and divert resources to other important areas.
President Goodluck Jonathan said the other day that he was ordering a 25% cut in the basic salaries of public officials working in the executive arm of government. He should go further than that and secure the consent of the national assembly, state governors and their officials, to cede a proportion of their emoluments to the national purse. He should also initiate and enforce such measures as a ban on all officials from embarking on all but the most essential foreign travels, which the government said would gulp N11.25-billion of the budget this year.
The Nigerian National Petroleum Corporation (NNPC) should be overhauled to enthrone transparency and accountability. A government that seeks the trust of its citizens should not shy away from confronting corruption of the magnitude reported in the petroleum sector, and making an example of those responsible for the rot.
The National Assembly should insist on the president reverting to the old price of fuel, and more consultations should be carried out. While this is afoot, the government should begin implementing some of the palliatives it has outlined in the SURE document. This will reassure the public, earn their trust and create a conducive environment for the government to eventually withdraw the subsidy.
This article was contributed by The Editorial Board of The Guardian.