Kachikwu: Subsidy Removal Will Save N16.4bn Paid to Marketers Monthly

0
  •  In Abuja, Venezuela’s ex-energy minister congratulates Nigeria for bold move 
  • NLC’s planned strike faces headwinds, House to deliberate on fuel price hike monday

Chineme Okafor, Damilola Oyedele and Paul Obi in Abuja

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said that the federal government would have had to cough up N16.4 billion every month to offset the subsidy claims of oil marketers had it not taken the decision to remove the subsidy on petrol.

Kachikwu, in a series of tweets sunday, explained that at the time the government made the decision, it was incurring about N13.7 kobo as subsidy on each litre of petrol bought by Nigerians.

But his tweet failed to resonate with the major labour union in the country – Nigeria Labour Congress (NLC) – which said yesterday that it had commenced the full mobilisation of workers and civil servants for the nationwide strike and complete shutdown of the economy.

This is just as the House of Representatives will today hold a special session to deliberate on the recent removal of subsidy on petrol.

Kachikwu said at the rate of N13.7 kobo per litre as subsidy claims, the government would have paid out N16.4 billion to marketers monthly, adding that the government does not have such funds in its 2016 budget, more so now that the country’s earnings from crude oil have dropped.

He also listed the benefits of the new policy: “There is no provision for subsidy in 2016 appropriation. As of today, the PMS (petrol) price of N86.50 gives an estimated subsidy claim of N13.7 per litre, which translates to N16.4 billion monthly. There is no funding or appropriation to cover this.”

He added: “NNPC has continued to utilise crude oil volumes outside the 445,000 barrels per day, thereby creating major funding and remittance gaps into the Federation Account.”

Liberalisation Gets Support from Venezuela

Also, a former energy and mines minister of Venezuela, Dr. Alirio Parra, has described the recent decision of the federal government on the downstream petroleum sector as historic and smart.

Parra, who is also a member of the global oil industry outfit, CWC Group, stated at a forum in Abuja over the weekend that the liberalisation of the downstream sector in the country was a bold testament to the fact that oil is a market-driven commodity.

A statement from the Group General Manager, Public Affairs of the Nigerian National Petroleum Corporation (NNPC), Mallam Garuba Deen Muhammad, stated this.
According to Parra, “One really important change in the oil and gas industry in Nigeria is the decision by the federal government to open the domestic market for competition.
“I am not necessarily talking about the elimination of subsidy, but opening the market is a statement that oil is market driven and that with time, it is going to be to the benefit of Nigeria, and to all Nigerians.”

He further stated that the opening up of the market would in no time encourage more players to bring in petrol which would eventually lead to a new era of competitive pricing.

“Soon people will start to rush out to bring in oil thinking they are going to make a huge profit but as more oil comes into the market, things would start to stabilise and slowly it would find its own level at a price no one can forecast but surely it would be at a competitive price.

“I think this is a historic decision and it is one of the smartest that Nigeria has taken in recent years,” he said.
The statement also said Parra endorsed the nomination of former Group Managing Director of NNPC, Dr. Mohammed Sanusi Barkindo, by the government as Nigeria’s candidate for the Secretary General of the Organisation of the Petroleum Exporting Countries (OPEC).

“I think that Barkindo will make a fantastic secretary general, he will return the dignity of Nigeria in the international service, he will be a secretary general of huge category and an important figure in the international oil industry,” he said.

House to Hold Special Session

In a related development, the House of Representatives will today hold a special session to deliberate on the recent removal of subsidy on petrol.

During the session, Kachikwu is expected to be present to brief the lawmakers on the government’s decision to liberalise fuel imports.
However, before his appearance, several lawmakers had already voiced their support for the removal of the subsidy element on fuel.

The Majority Leader of the House, Hon. Femi Gbajabiamila, on a blog expressed support for the removal, even though he was vehemently against its removal in the past for ostensibly political reasons.

Gbajabiamila as minority leader at the time, by his own admission, had written a caustic and scathing letter to former President Goodluck Jonathan in 2010, opposing any planned removal of the subsidy.

“So what if it costs the government billions of naira to subsidise every year? Mr. acting President, so what? Every year for the past eight (8) years, government has funded different events costing the tax payers billions of naira, some of which many will consider unnecessary… For crying out loud, you have just proposed in your 2010 budget to spend billions on such fancies but no we do not have billions to subsidise oil for the welfare of Nigerians? Commonsense. Mr. acting President, common sense,” Gbajabiamila had written.

Gbajabiamila in his blog at the weekend, however, noted that he was convinced of the need for the reversal after the “doomsday prognosis” by the minister of state for petroleum at a stakeholders meeting last Wednesday.
He noted that it would however be necessary to consider a review of the minimum wage to cushion the effects of the fuel price increase for Nigerian workers.

Also, the Minority Leader, Hon. Leo Ogor, explained that the country could not continue to subsidise consumption.
“Especially for an import whose primary product is exported from here,” Ogor said and called on the government to urgently engage the labour movement in dialogue on palliative measures.

Ogor however disagreed with the price of petroleum being pegged by the government, advising that the market should be allowed to determine the price through competition.

On its part, the Peoples Democratic Party (PDP) caucus in the House has demanded an apology from the All Progressives Congress (APC) and its leaders for their roles in the protests which led to the reversal of the removal of fuel subsidies in 2012.
Ogor, in an interview with THISDAY, recalled that President Muhammadu Buhari, then an opposition leader, APC chieftain, Senator Bola Tinubu, and several others, vehemently opposed the removal in 2012.

“El-Rufai (Kaduna State Governor), Tunde Bakare (Buhari’s running mate in the 2011 elections) led major protests against the removal and Jonathan was blackmailed into dropping the laudable policy which would have saved us trillions of naira by now. They have set the country back by several years,” Ogor said.

“They also owe Nigerians an apology for not thoroughly investigating the issues surrounding the subsidy before opposing it,” he added.

Hon. Uzoma Nkem Abonta (Abia PDP) also accused APC members of adopting a destructive position in 2012 and now turning around to adopt same policy.

“They ‘Occupied Nigeria’ in 2012, so what changed between 2012 and now causing the increase? That means they were ignorant and lacked political reasoning.

“They criticised Jonathan and tried to condemn him. Those who surrounded Buhari misled Nigerians using the Labour movement. Lai Mohammed was one of those who occupied Nigeria. What would he say now?” Abonta asked.
“I hope the Eighth Assembly would do the right thing and let the removal stay, although those at the helm now all canvassed against it. So now they should tell Nigerians sorry,” he added.

Labour Begins Mobilisation

Meanwhile, the NLC sunday said it had commenced the full mobilisation of workers and civil servants for the nationwide strike and shutdown of the economy once the three-day ultimatum given to the federal government expires tomorrow at midnight.

The union said considering the manner with which government went ahead to announce the price increment without recourse to labour, it would ensure that the strike is total.

At one of their clandestine meetings held to strategise on the strike, NLC Secretary General, Dr. Peter Ozo-Eson, told THISDAY that organised labour would not relent in making sure that the strike and shutdown of the economy is effective and efficiently carried out.

According Ozo-Eson, “We so declared and we are mobilising. You can see today is Sunday (yesterday), and we are about to enter the meeting, it is part of the preparation for action.”

The NLC chief scribe accused the federal government of ambushing the labour union by unilaterally announcing the petrol price increase only to turn round to allude that the decision was taken in collaboration with labour and other stakeholders.

He recalled that the NLC received a letter from the presidency inviting them for a meeting with the subject matter indicated in the invitation.

He said those present at the meeting comprised some senators led by the Deputy Senate President, Ike Ekweremadu, some members of the House of Representatives, led by the Speaker of the House, Hon. Yakubu Dogara and the Chairman of the Nigerian Governors’ Forum (NGF), Abdul’aziz Yari of Zamfara State.

Others included the President of TUC, Bobboi Kaigama, and NUPENG President, Igwe Achese, the Governor of Kaduna State, Ahmed el-Rufai, Imo State Governor, Rochas Okorocha, and Delta State Governor, Dr. Ifeanyi Okowa.

But as NLC met monday to discuss the nationwide strike, a source within the union informed THISDAY that there were growing reservations over whether the strike will be successful.

The source explained that unlike the Jonathan’s administration that consulted widely before announcing the removal of petrol subsidies, the Buhari administration abruptly announced the same policy without consulting with stakeholders across a broad spectrum of society.

The source further stated that geopolitics and regional sentiments might impede the strike, taking into cognisance the fact that many in the north would not come out in support of the industrial action as they did in 2012.
Meanwhile, security around Abuja metropolis appeared to have been beefed up, as labour threats to shut down the country takes shape.

Similarly, NLC does not have the support of several civil society groups this time around like it did in 2012, as a coalition of 20 civil society organisations yesterday called on NLC and the Trade Union Congress (TUC) to shelve their proposed strike over the increase in the price of petrol.

This was contained in a statement signed by Mr. Tosin Adeyanju, Executive Director, Conscience Nigeria, for the group, reported the News Agency of Nigeria (NAN).

He listed some members of the coalition in support of the liberalisation of fuel imports to include Stand up Nigeria, Centre for Leadership Development (CPALD), National Youth Council of Nigeria, and Arise Nigeria.
Adeyanju said embarking on the strike would do more harm than good to the country’s economy.

“We all know the implication that will arise as a result of this sudden change. We must endure this phase in order for our country to survive these present economic realities that are very obvious.
“We equally appeal to the NLC and other civil society colleagues to shelve the proposed nationwide strike and engage the government.

“We want NLC to engage government on the need to create immediate palliatives to cushion the effect of this policy instead of worsening the already bad economy of the country.

“If our country is shut down as proposed, billions of naira will be lost and the country will suffer for it in the long run,” Adeyanju said.

He said that no fewer than 20 CSOs were in support of the bold step of the federal government to fully deregulate the oil sector.

FG Rolls out Palliatives to Cushion Price Hike

Also, in a bid to cushion the harsh effect of the new price of petrol on the people, the presidency is set to implement the N500 billion earmarked in the 2016 budget for social welfare.

A statement by the media spokesperson to Vice-President Yemi Osinbajo, Mr. Laolu Akande, in Abuja yesterday stated: “All together the federal government would be directly impacting the lives of more than eight million Nigerians in different social spending that would provide succour and be a ready-made palliative to ordinary Nigerians.”

Giving a breakdown of the interventions and palliatives, Akande said that there would be “the direct payment of N5,000 monthly to one million extremely poor Nigerians for 12 months as provided in the 2016 budget for which N68.7 billion has been appropriated.”

Similarly, the government has made available a “direct provision of very soft loans/cash payments to market women, men and traders, including artisans and agriculture workers.
“This would be for a total of 1.76m Nigerians, without the requirement for conventional collateral. Some of the traders will likely get about N60,000.

“A total of N140.3 billion has already been appropriated for this in the budget”.
A further breakdown showed there would be payment of between N23,000 and N30,000 monthly to 500,000 unemployed graduates who would be trained, paid and deployed to work as volunteer teachers, public health officers and extension service workers, among other responsibilities.

“They would also be given electronic devices to empower them technologically both for their assignments and beyond,” Akande stated.

According to the media aide, “100,000 artisans would also be trained, for which N191.5 billion has been set aside for this in the passed budget.”

He also said that at least 5.5 million Nigerian primary school children starting first in 18 states in each of the geopolitical zones would be fed for 200 school days under the free Homegrown School Feeding Programme. For this, N93.1 billion has been appropriated in the 2016 budget.

In this same vein, “100,000 tertiary students in science technology engineering and maths (STEM) plus education, will benefit from the N5.8 billion education grant in the budget”.

Akande stated that the payments would be made directly to the students.
He stated further that these measures would start in a matter of weeks and would lift the ordinary man from the pangs of economic hardship and poverty.

Fuel Scarcity May Worsen over Dollar Shortage

However, despite the liberalisation of fuel imports, it emerged sunday that at least 75 ships with two and a half million tonnes of fuel were waiting for importers in Nigeria to find the dollars they need to pay for the cargoes, according to ship tracking data and fuel traders.

Some of the vessels arrived a month ago and their frustrated owners had almost given up hope and started to offer their fuel to buyers outside Nigeria, several traders told Reuters.

The armada of fuel ships and tankers stuck mid-sea and unable to unload their cargoes of diesel and petrol is an even-present reminder for President Buhari that another fuel crisis is looming on the horizon.
A slump in world oil prices has hammered Nigeria’s state income and because crude oil sales are the government’s main source of revenue the fall has caused crippling shortages of dollars within the economy that have been hurting businesses for months.

In a bid to break the impasse and head off more fuel shortages, the government raised the price cap for petrol by 67 per cent, officially sanctioned importers to use the black market to find the hard currency they need to get cargoes off the ships and allowed any Nigerian company to import fuel.

Announced last week, the reforms were welcomed by some in the oil industry as badly needed steps in the right direction. The changes have largely eliminated the system of heavily subsidised fuel prices, removing one strain on Nigeria’s increasingly stretched finances.

But the so-called parallel market has struggled to cope with the demand for dollars that followed the reforms.
Nigeria consumes an estimated 45 million litres of petrol a day, or roughly 280,000 barrels, which would require the market to provide some $18 million a day.

Though importers cover about 30 per cent of this, with the state oil firm covering the rest, it is still a big strain on the market for dollars.

The naira has already weakened due to the spike in demand for dollars from fuel importers. At the weekend, the US currency fell to N360 on the parallel market, whereas the official exchange rate has been held firm at just under N200.

“The risk is that the parallel rate will depreciate even more, giving the marketers a pretext for yet further price increases at the pump,” said Alan Cameron, an economist covering Africa with Exotix Partners.

Buhari has resisted International Monetary Fund (IMF) calls to devalue the naira, though Vice-President Osinbajo sparked speculation a devaluation might be on the cards when he said the central bank had to change its policies.

Nigeria has four refineries but decades of neglect mean it has to import most of its fuel, which was less of a problem when crude was at $115 a barrel and the OPEC member was the leading oil exporter in Africa ahead of Angola.

As well as the slump in crude prices, which touched a 2016 low of $27 in January and were below $48 last week, Nigeria’s output has also been hit by instability in its oil producing Delta region, further reducing the state’s dollar revenues.

Nigeria’s production dropped this month to 1.65 million barrels per day from 2.2 million and risks slumping to its lowest since 1970.

In an effort to address the looming fuel shortages, the NNPC has begun talks with at least three international firms to swap more of its crude for gasoline, according to traders and oil executives.

But the drop in output due to the unrest in the Niger Delta – as well as the fact that oil firms take more physical cargoes as payment for services when prices are low – means the NNPC has less crude to swap for fuel.

“There aren’t enough cargoes available to NNPC,” said Dolapo Oni, head of energy research at Ecobank. “I don’t see how it can get more from international oil companies.”