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Under unending oil subsidy throes

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One thing the current furore and angst against the recent hike in pump price of petrol in Nigeria  highlights as much as the lull in the country’s economy is that the people are yet to enjoy the benefit of the nation’s status  as a big oil producer.

Instead of growth and joy, Nigerians have  arguably , reaped woes, throes and squalor from the early years of the second half of 20th century when crude oil was discovered in their country. What had been source of economic and social bliss to other nations have turned very sour for the country.

Time and again, the masses are thrown into the mire and puzzles of oil subsidy debates; right-pricing of oil products; oil refineries’ maintenance and related rigmaroll. Our reporters probe these seemingly unending national development amid the background of the current vexed hike in pump-prce of petrol. Excerpts: 

 TWICE in a space of two months, the pump price of premium motor spirit was increased which according to the federal government, through the Petroleum Products Pricing Regulatory Agency (PPPRA) was done following the deregulation of the downstream sector and the removal of fuel subsidy.

  In August, 2020, the federal government increased the premium motor spirit between N145.86 and N148.86. The latest increase was on September 2, 2020, when the PPPRA further hiked the price to N151.56. 

  According to the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), MeleKyari, the era of fuel subsidy is gone forever in Nigeria. “There is no fuel subsidy anymore in Nigeria. It is zero subsidy forever. “Going forward”, the oil chief said,“There would be no resort to either fuel subsidy or under-recovery of any nature. NNPC will play in the petroleum marketplace, just like another marketer in the space,” he said.

  The federal government said it has had enough of the subsidy fuel regime and wants to pave way for deregulation of the petroleum industry to allow market forces dictate the pump price of petroleum products. The FG further said that by subsidising the price supposed to be paid by the final consumer of the product, which is less than the actual cost of delivering the product to the consumer the government bears the burden of the difference, which it says is no longer attainable.

  The discovery of crude oil shifted the economic paradigm of Nigeria that down the years that any policy on it affects the socio-economic lives of the people. Most Nigerians believe that the abundant deposit of the mineral ordinarily should make the pump price of fuel one of the cheapest commodities in the country but experiences the contrary.

  The first instance of fuel pump price increase in Nigeria was in 1973, during the Gen Yakubu Gowon regime. The Gen Gowon regime hiked the fuel pump price from N6 to N8.45, hinging the increment on two factors.

The first was attributed to oil and energy volatility following the 1973 oil crisis resulting from the conflict in the Middle East. The crisis was accompanied by an increase in price volatility for all commodities. Besides that the Gowon government said it needed extra revenue to fund the Fourth National Development Plan.

  The first increment established the fact that hikes in fuel pump wasn’t hinged on subsidy removal. The subsidy regime which many Nigerians doubted came in much later.Thus beginning of an era when the nation’s refineries packed up and the country had to refine her crude oil and import in the country. The stand on subsidy by the government is that it spends huge amount to peg the cost of petroleum products to make it reasonably available to the citizenries. Most Nigerians and organised labour have not really bought the idea of fuel pump price increase or subsidy (if any as they claim) removal.

  Governments have always found it difficult removing oil subsidy, which it described as budgetary burden.Successive governments have tried to remove the subsidy but have backed down with price reduction in the face of widespread public protests.

  No increment in fuel pump price that doesn’t come with economic challenges for the average Nigerian. As a mono economy, dependent on oil the masses find it difficult why it has to pay for the government ineptitude of fixing our refineries than passing the cost of importing refined crude oil which should cost less. The masses have always had the backing of labour unions in recent times, which has led to protests, demonstrations and sometimes strike action.

  Nigerian Labour Congress has always maintained that without removing the subsidy that the government is at no loss but rather, inflicting pains on Nigerians. In its report in 2010, the NLC committee on deregulation, among other things said, “the subsidy claim by the government with regard to the difference between crude oil to NNPC for domestic market and the international market price is a notional subsidy or an opportunity cost.”

  “More worrisome is the claim that the amount the government spends is increasing. To expose the problem with this claim, we only need to know what is subsidised and what quantity of the product is subsidised. The position of the NLC is that even at the current or indeed any price at which a barrel of crude oil is sold to local refineries, the federal government still makes a profit.”

  “This is because the production cost of crude is always less than the price of a barrel of crude oil. This profit is apart from the royalties and petroleum profit tax accruing to the federal government on the crude oil produced. The situation did not change even when the price of a barrel of crude oil increased over the years. Why complain about subsidies, when profit is made?”

  The present administration may have germane reasons for removing subsidy on petroleum products due to dwindling revenue caused by COVID-19 impact on the economy as it claimed. If times are hard for the government, it is equally hard or even harder for the citizens; more economic burden on them.

As an opposition party in January 2012, the present administration was visible in the resistance of subsidy removal, joining millions of Nigerians to kick against it. President Buhari, as a member of the opposition had in October, 2011, said; “if anybody said he is subsidising anything, he is a fraud.”

  The Occupy Nigeria, the socio-political protest movement that began in Nigeria on Monday,  January2, 2012, in response to the fuel subsidy removal by the administration of President Goodluck Jonathan fuelled protests that took place across the nation engineered by the opposition, it lasted for two weeks.

  Protesters shut petrol stations and formed human barriers along motorways. Youths went on the rampage, setting fire to buildings and cars in Lagos. Nigeria’s main trade unions later announced an indefinite strike. The protests by Nigerians also occurred in other countries to show solidarity with the plight of Nigerians back home.

  When President Goodluck Jonathan reduced the petrol pump price from N97 to N87 per litre in January, 2015, former Lagos State Governor, who is now Minister of Works, Power and Housing, Babatunde Fashola said N10 reduction of the petrol pump price was too low and that Nigerians will get a better deal under Buhari.  

  On April 14, 2015, President Buhari’s ally and former Minister of Petroleum and Energy, Prof. Tam David-West, told Nigerians that Gen. Muhammadu Buhari, then President-elect, will reduce the fuel pump price from N87 to N40 per litre, which was never debunked.

  From the first time that Gen Gowon regime raised fuel pump price in 1973, the premium motor spirit price has been jacked up 32 times, President Olusegun Obasanjo has the highest number of increment on PMS; nine times, while Gen Sani Abacha, Goodluck Jonathan, Muhammadu Buhari and Olusegen Obasanjo, Abdulsalami Abubakar, had reduced fuel pump price and later hiked the price. Yar’Adua was the only president who did not increase the pump price of fuel rather; he reduced it from N75 to N65.

  For the reasons that Gen Gowon gave for the increased in 1973 from N6.00 to N8.45, there was no official statements for the 1976 Gen Murtala Mohammed N8.45 to N9.00 increment to Oct1,1978 Olusegun Obasanjo N9.00 to N15.37 and to April 20, 1982 hike in pump price of fuel. Shehu Shagari increased it from N15.30 to N20.00. Gen Ibrahim Babangida on 31 March, 1986, said the increase from N20.00 to N39.50 was due to the devaluation of the naira.

  The first time the word ‘subsidy’ was used for hiking the price of PMS was by Gen Ibrahim Babangida on April 10, 1988, from N39.50 to N42.00. He said subsidy on petroleum products was a burden to the government’s purse. He further increased the price twice on December 19, 1989, and on March 6, 1991, from N42.00 to N60.0 and N60.00 to N70.00 respectively. During his short time in office, Ernest Shonekan on November 8, 1993,   increased fuel price from N70.00 to N50; his administration described subsidy as budgetary burden.

   After assuming office, Gen Sanni Abacha reduced the price of fuel from N5.0 to N3.25 on November 22, 1993, to gain public support and later hiked it to N15.00on October 2, 1994. Due to response to labour and public resistance, Gen Abacha reduced it  from N15.0 N11.0 on October 4, 1994. Gen. Abdulsalami Abubakar, Nigeria’s last military administrator, introduced his price regime on December 20, 1998, with an increase from N11.0 to N25.0 but due to response to labour and public resistance, reduced fuel pump price from N25.0 to N20.0 on January 6, 1999.

  On June I, 2000, Olusegun Obasanjo administration gave elimination of waste as the reason behind the new fuel pump price of N30.00 but would later reduce it to N22.0, after seven days due to  labour and public resistance. From that pump price to N26.0 on January 1, 2002. The Obasanjo administration said it wanted to encourage foreign and local investment in the upstream sector by increasing fuel pump price to N40.0 on June 6, 2003, but bowed to labour and mass protest by pegging pump price at N34.0 on October 1, 2003.

  On Democracy Day in 2004, President Obasanjo administration announced a new regime of pump price of PMS at N50.0 with further increase to N65.00 in August, 2005. President Obansanjo left office on May 27, 2007, with a pump price of N75.0. President Musa Yar’adua, on assuming office had a downward review of fuel price from N75.00 N65.00. President Goodluck Jonathan did the opposite by hiking the price of fuel from N65.00 to N141.00 on January 1, 2012. Mass protests across the country forced President Jonathan for a price drop to N97 on January 17, 2012, and a further downward review of N86.50 in February, 2015.

  Barely a year in office, President Muhammadu Buhari effected subsidy removal by increasing fuel pump price from N86.5 to N145 on May 11, 2016. In March, 2020, the pump price of petrol was reduced to N125 from N145 per litre.

The Petroleum Products Pricing Regulatory Agency (PPPRA) in May, 2020, announced a new pump price between N121.50 to N123.50 per litre. But in July, 2020, it was further increased to between N140.80 and N143.80. In August 2020, it was again hiked to between N145.86 and N148.86. The latest increase was on September 2, 2020 when it was further increased to N151.56. Most Nigerians doubts if this will be the last of oil subsidy and fuel pump price increase discomfort. 

  If the federal government really understands the pains of the average Nigerian considering the economic situation in the country, however germane the policy seems, this is not the appropriate time to have an upward review of fuel pump price, coupled with hike in electricity tariff and depreciating value of the naira.

No well-meaning Nigerian will kick against any meaningful government policy that aims to grow the economy if that is what the whole idea of removing the oil subsidy seemed. But it sounds doublespeak for the government to have partaken and mobilised forces against oil subsidy removal not long ago, to now want to remove it. Many opponents of January 1, 2012, petrol subsidy removal who are in the present government then called oil subsidy removal, “fraud promising to bring down the pump price of fuel.”

  And to now hike fuel pump price twice in the face of increased electricity tariff amid the economic and health challenges of COVID-19 is a heavy burden for the average Nigerian to bear.

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