It is worrisome that our leaders have not been as imaginative as necessary on the recurring issue of fuel subsidy removal over the decades. New refineries were not built and existing refineries collapsed under mismanagement and graft
We have it on record that while the vibrant civil society organisations, NLC, TUC,PENGASSAN,NUPENG and others in the polity cried themselves hoarse on the fraud, corruption and mismanagement that ballooned fuel subsidy outlays in 2011 from budgeted N245 billion to over N2trillion, our government perhaps deliberately turned deaf ears.
That was until the nation was brought to a screeching halt by an avoidable week-long national strike and mass action of the Labour/civil society amalgam precipitated when the Federal Government, goaded by the state governors in particular, went ahead to remove fuel subsidy on the first day of January 2012.President Goodluck Jonathan and his government were indeed direly jolted by the unprecedented mass action.
The president was adequately forewarned by almost everyone from our redoubtable patriarchs Gowon, Obasanjo, Buhariand Babangida, to some of us lesser mortals to no avail very massively on his social network feedback facebook slot to pre-empt an avoidable imbroglio. In particular, Professor Patrick Utomi in a published interview bluntly stated that just about half of refined fuel imports into Nigeria could be genuine, and about the same time Simon Kolawole in a seminal article in Simon Kolawole Live! woke us up to ‘Fake Subsidy’ instead of ‘Fuel Subsidy’.
Eventually massive barefaced fraud, mismanagement and corruption by government officials, oil marketersand all and sundry were detected by the House of Representativesadhoc Committee and by government investigators (Aig-Imoukhuede Presidential Committee).While government downsizes the fraud to N400billion, human rights lawyer Femi Falana (SAN) has brought out about N2 trillion as the absolute fraud magnitudeand the House talked of over N1 trillion fraud. We have on our hands massive fraud all the same. Now it is crystal clear and obvious that it pays the government and Jonathan to listen more to fellow citizens as this country is a joint-venture work-in-progress for all of us, the government and the governed, both young and old.
Recently my respected Dan Majen Kano and CBN Governor Sanusi Lamido Sanusi again reportedly raised the spectre of total fuel subsidy removal as a fiscal sine qua non for the Federal Government going forward into 2013. We do not begrudge or blame Sanusi because as CBN governor, he keeps watch over government strong room.Others like the Group Managing Director of NNPC AndrewYakubu, Head of Macro-economic and Regional Head of Research for Africaof Standard Chartered BankRazia Khan and more recently Special Adviser to President Jonathan on Political Matters, Ahmed Ali Gulak have echoed Sanusi’s observations and thesis. The new Petroleum Industry Bill (PIB) currently before the National Assembly envisaged total deregulation of the downstream petroleum sector.Evidently, the storm is gathering once again. Labour had earlier cautioned the Federal Government in a pre-emptive move.
On a monetary policy aside, I would have wished Sanusi, whose patriotic efforts and fearless determination in repositioning our economy particularly in real sector production and sanity in our banking system I have acknowledged privately to him and in several published newspaper articles, had alongside his warning alert on the unsustainability of fuel subsidy also considered other or novel ways out of unceasing excess liquidity in the economy leading inevitably to messing up of macro-economic indicators like inflation rate, interest rate, exchange rate and even to some extent our external reserves..
The current monetary tightening is a fallout of this malady. Perhaps it is time for the CBN and other tiers of government and relevant government agencies to reconsider the mode of injection of our petro-dollars into the naira-based and denominated economy through federation account allocations.Clearly, it is a task way beyond Sanusi or CBN alone to enterprise as Professor Chukwuma Soludo met a brickwall when he attempted this route in 2008. Also, per se, the higher denomination of N5,000 note will not on its own bring about inflation nor can it directly undermine the economy. However, the coinage policy will be hard to justify as it may be rejected by the polity and this may make the much higher paper denominations the only trading and tradable money. This will inevitably further devalue our currency and stoke inflation.
This time, on a number of pressing issues, I hasten to invite the president and the government to be more cautious, more imaginative and more sensitive. It is classical oxymoron to repeat the same things in the same environment and expect different result.
The economic situation in our country is still dire, even more dire as consistent economic growth or GDP growth outlook has failed to uplift citizens welfare and living standards as very stridently and rightly observed by former President Obasanjo,poverty level in the nation continues upward ascent from 54% in 2004 to 69% in 2010 and most probably higher by now, macro-economic stabilisation efforts by Dr Ngozi Okonjo-Iweala and Sanusi’s CBN and the January 1, 2012 fuel subsidy slash have reduced citizen purchasing power, unemployment scales 60% of our employable youth and insecurity is still nightmarish though improving.Whatever economic policy intended by the government must not worsen the abovealarming state of our nation.For instance, a sensitive government would definitely not totally deregulate the downstream sector or deliberately or inadvertently jack up fuel price by removing fuel subsidy without first ensuring growing or adequate local refining of our crude oil.
Yes, Jonathan envisages an upbeat economy and improved social welfare in Nigeria from around 2013. As an economist and a life-long public affairs enthusiast and public affairs commentator,I have reasons toagree with him. It is there for all to see that impressive efforts are building and consolidating the substructure of our economy in finance and macro-economic management under Okonjo-Iweala, real agricultural revolution proceeds under Dr. Akinwumi Adesina, and power sector improvement with the NationalIntegrated Power Project (NIPP) under former minister Bart Nnaji.The emerging Nigeria economy could dazzle in just a year or two if wrong policies and political moves are not introduced.
Recently, the Federal Ministry of Trade and Investment announced a wonderful programme of foreign private sector investment of $4.5 billion in six modular refineries with completion from 12 months to 30 months and with a total refining capacity of 180,000 barrels of crude oil per day. Two of the modular refineries could be completed within 12 months and reportedly releasing daily output of 10 million litres of petrol, diesel and kerosene. On completion, all six modular refineries would have a combined output of about 30 million litres of fuel daily including up to 27 million litres of petrol or almost the equivalent of our entire national daily fuel consumption of 35million litres.
We still have our four comatose refineries reportedly being turned around to be capable of achieving 90% capacity from 12months to 24 months.Also Orient Refinery in Anambra State, Qua Petroleum Refinery in Akwa Ibom State and reported planned refinery in Niger State are all expected in production by 2014/2015.Obviously, and ceteris paribus, our nation should be awash in locally refined fuels latest 2014 and end fuel importation. Our fastest route in guaranteeing improved local fuel refining capacity are the NNPC turn-around maintenance (TAM)in renewed and refocused effort under Allison-Madueke and the proposed modular refineries being spearheaded by Olusegun Aganga’s ministry.
Curiously and alarmingly NNPC has reportedly disowned and dissociated itself from this giant step taken by Aganga’s ministry to boost local refining capacity and local fuel supply and availability. This to me appeared as some contradiction to the great efforts going on at the NNPC itself to ensure higher local refining capacity. It exudes weak or absent linkage and coordination in the running of the economy particularly between our investment drive and the implementing ministries and agencies.I believe this cannot be so, because we have involved in these ministries very effective ministers, those of finance and co-ordinating minister for the economy, petroleum resources and trade and investment.
Lately, a follow-up report appears very reassuring, but it is still incumbent on the Presidency to see through this welcome commitment of NNPC to at least minimise bureaucratic bottlenecks here and there.We need to be reminded that the local supply side of refined fuel deserve about the samededicated effort as the power sector roadmap. While NIPP has very largely received government serious commitment, after the most unfortunate loss of two and a half years during Yar’Adua administration,no such deliberate intervention or facilitation is available in the downstream refinery sector.It is like the government simply waits impatiently to deregulate the sector and leave the free-market to give us illusive paradise in the downstream. We also seem to forget that fuel subsidy removals, and hardly ever power failures, always led to social upheavals which actually climaxed in the unforgettable January 2012 national strike.
It cannot be overemphasised that without any further delay NNPC should be directed by the president to avail the Trade and Investment Ministry every collaboration and facilitation in the above-mentioned private sector epic achievement. In fact, a similar coordinating body like that of the NIPP under Vice-President Namadi Sambo should be immediately constituted to push through every facet of this novel private sector refinery initiative and possibly other local refining initiatives. If for instance the three Greenfield refineries initiative of the NNPC and the China State Construction and Engineering Corporation is still alive, nothing prevents this coordinating body from seeing it through as well.
It is obvious that with a dedicated turnaround maintenance of the existing four refineries (or outright privatization) and establishment of the first two private sector modular refineries within 12 to15 months, the local supply of refined fuels could be fairly substantial to support deregulation and total removal of fuel subsidy in 15 or even 20 months. Even if the total deregulation and removal of fuel subsidy will involve fuel price increase, this should be tolerable and it will be a very transient inconvenience as higher supply of locally refined fuels will in no time dampen the price increase, inevitably in a classical demand/supply nexus.
This indeed is the path of reason and sensitivity now recommended to Jonathan and his government in our effort to avoid another fuel subsidy removal, social upheaval, and dissipate and defuse the gathering storm which could complicate our existing security concerns.
Dr. Omole is a Consultant,Economist andauthor,