10 January 2018

Nigeria: Removal of Petroleum Subsidy, Will Buhari Bite the Bullet?

Photo: Premium Times
Fuel scarcity.
opinion

No doubt, the debilitating shortage of petroleum embarrassed President Muhammadu Buhari, more so because the Nigerian National Petroleum Company had successfully ensured a sustained availability of petrol at the pumping station for most of the year. Then suddenly in December as the end of year holiday season took off, the pumps dried up and endless queues emerged nationwide. As is common with such a situation, the transportation sector was thrown into chaos and intolerable human suffering for commuters trying to be home for Christmas and the New Year.

An angry President Muhammadu Buhari, who had intended his New Year message be devoted mainly to informing about the intense efforts his Administration is putting to address our country's huge infrastructural deficit, had to open with this assertion of being "saddened to acknowledge that for many this Christmas and New Year holidays have been anything but merry and happy. Instead of showing love, companionship and charity, some of our compatriots chose this period to inflict severe hardship on us all by creating unnecessary fuel scarcity across the country."

President Buhari bemoaned the sad fact that his government's efforts had been sabotaged with the "consequence that not many could travel and the few who did had to pay exorbitant transport fares. This is unacceptable given that NNPC had taken measures to ensure availability at all depots".

The President vowed that he was "determined to get to the root of this collective blackmail of all Nigerians and ensure that whichever groups are behind this manipulated hardship will be prevented from doing so again." As the nation awaits this, the scarcity of petroleum, has not abetted, at least not at the time of writing this column.

The Minister of State for Petroleum Resources Dr. Ibe Kachikwu who suddenly showed up at the driver's seat from his relegation was at pains to explain the situation to the National Assembly, which was interested in solution and not the causes for which it had already made up its mind it would seem. Kachikwu highlighted three solutions being considered for our petroleum products crisis.

"One, is for the Central bank of Nigeria (CBN) to allow the marketers access forex at the rate of N204 to a dollar as against the official rate of N305 to keep the pump price of fuel per litre at N145. This is a failed old technic

"Two, to give room for modulated deregulation where NNPC would be allowed to continue selling at N145 per litre in all its mega stations across the country while the independent marketers should be allowed to sell at whatever price is profitable to them in all their outlets.

"Three, to look at the direction of blanket subsidy for all the importers in bridging the gap which would be like going back to a problem that had earlier been solved."

Nigerians have been up this creek before, in a cement boat and without a paddle. In the end, the nation sank in the ravine of our calamitous corruption, and queues persisted, while marketers laughed home with their sleazy cash from all levels of the petroleum distribution chain. There is no faith in any of Kachikwu's options.

For the Central Bank of Nigeria (CBN) to allow the marketers access foreign exchange at the special rate of N204 to a dollar as against the official rate of N305 takes us back to the tired old and failed regime of a dual exchange rate, so fraught with corrupt tendencies. The mechanism for managing the special grant of a lower dollar rate is faulty and unreliable and we can be certain, only a cartel will develop without having the nation's needs met satisfactorily.

The second option to give room for modulated deregulation where NNPC would be allowed to continue selling at N145 per litre in all its mega stations across the country while the independent marketers should be allowed to sell at whatever price is profitable to them in all their outlets, will still create a cartel at NNPC, the sole supplier of the product. Marketers will cut deals and profiteer filthily, and the shortages and exorbitant prices at the pumps and black markets will persist to the disappointment of the public.

The third option even to Kachikwu, is a "No No", and he confessed that when he asserted that the direction of blanket subsidy for all the importers in bridging the gap would be like going back to a problem that had earlier been solved.

Thus put frankly, Nigerians are being held over a barrel by heartless practitioners in the country's dirty oil business. The NNPC has no refining capacity, yet is the only institution with capacity to import fuel products! This is unpatriotic and untenable. Indeed, I fear that President Buhari was unaware that subsidy which is not in the budget was being sustained with approvals he does not seem aware he has given! This is what results from the compromise of Minister of State Kachikwu's role evident in the Managing Director Dr. Maikanti Baru's criticised side tracking of his Minister of State for direct approvals from the President. What else could have prevented the continued payment of subsidies to marketers up to the end of the year and precipitated the "sabotage" by marketers, said to have been the root cause of the last painful scarcity?

Nigeria has no option but to refine its own crude with new refineries and not with the old outmoded ones whose turnaround maintenance comes at the cost of a new refinery, we are told by experts. The dreaded option to outright withdraw the subsidy and allow licensed marketers to access foreign exchange in a single regime applicable to all seems to be the sword to fall on. Things will get worse but in the end, better. Can President Buhari bite this bullet?

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