NLCAs the federal government and the organised labour continue to dilly-dally over ending the huge amount being paid as subsidy on imported petrol, Peter Uzoho writes on the adverse impact of such indecision on the Nigerian economy.
Recently, the organised labour comprising the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) which have been in an endless meeting with the federal government and other stakeholders, has insisted on their position of no increase in petrol price until refineries are fixed and working.
In its position paper issued penultimate week, labour said it would resist any attempt to remove petrol subsidy. It also demanded the adoption of production-cost pricing method for petrol imported from other countries into Nigeria as against the current import-parity pricing model. This labour’s position has been described by economic policy experts and industry watchers as unrealistic at the moment.
The federal government on its part, has not formally responded to the conditions put forward by labour, however, its body language is showing that it is aligning with the position of the organised labour. This is because the federal government through the Nigerian National Petroleum Corporation (NNPC), has continued to rule out any increase in petrol ex-depot price, and by extension, the pump price of petrol, an indication that subsidy will remain for a long time to come.
The government continues telling the Nigerian public that it is still engaging with labour and other stakeholders and has not finalised on how best to approach the subsidy removal issue. This frequent response from the government, according to analysts, is just a way of avoiding further questions regarding why the delay in such critical economic decision at a time the country is bleeding economically.
NNPC had declared recently that it would not be remitting money into the Federation Account in May (and probably the following few months) as it would be deducting N112 billion subsidy fund from its April revenues.
In a letter served the Accountant General of the Federation (AGF), Mr. Ahmed Idris, the NNPC said the shortfall was due to the rising average landing cost of fuel, which it said, jumped to N184 per litre in March, as opposed to the existing N128 ex-coastal price.
This, analysts believe, would impact negatively on the revenues of the states as most of the states depend heavily on the money they receive from the monthly Federal Accounts Allocation Committee (FAAC) disbursements to run their states.
Earlier in March, NNPC had disclosed that Nigeria currently spends about N120 billion every month to subside petrol imported from abroad and consumed by Nigerians and, even neighbouring African countries. The corporation put Nigeria’s daily petrol consumption volume at 60 million litres a day.
Although, the actual volume of petrol consumed in the country, whether on a daily or monthly basis, has remained an object of controversy as different figures are being bandied around. Even the figure that comes out from the Department of Petroleum Resources (DPR) many times contradicts that of the NNPC.
Some schools of thought believe that the country consumes well over 60 million litres a day, some opine that the figure is below 60 million, while others, even from the government, suspect that the volume is even over 90 million and that, a huge chunk of that is being smuggled out of the country for fatter profit.
Whichever figure is accurate, the fact is that Nigeria spends well over N50 on each litre of petrol bought at the filling stations as subsidy and this is being borne by the NNPC, the sole-importer of petrol, to fulfil its vaunted mandate of ensuring energy security for the nation.
The inability of government to come to terms with the nation’s current economic reality where government’s revenue has depleted and the debt burden continues to balloon, even as hundreds of billions of naira is still being wasted on fuel subsidy, is baffling.
As at December 31, 2020, Nigeria’s total public debt portfolio stood at N32.92 trillion, the National Bureau of Statistics (NBS) had disclosed in March, in its Nigerian Domestic and Foreign Debt report for Quarter Four, 2020. As worrying as such high debt profile should be, there is no sign that the debt will ease any time soon as government continues borrowing while the flittering away of the nation’s resources on petrol subsidy persists.
Labour’s Condition Impossible
Although, the organised labour believe it is doing the Nigerian workers and masses good by insisting that subsidy should remain and that there should be no increase in fuel price until all the refineries are fixed and functional, analysts say that such condition was impossible in the current Nigerian situation.
According to them, while such proposition might be popular, considering the unrest in the country, it should not be lost on labour that building or rehabilitating a refinery takes no less than two to three years to be completed. That implies that subsidy will continue for the next two to three years while the nation’s economy continues suffering.
To this end, analysts advised labour to understand that the situation on ground does not warrant such impossible condition for the subsidy to be removed.
Weighing in on the issue, an economic policy expert and Arise News’ Analyst, Mr. Chika Mbonu, in an interview with THISDAY, advised labour and the federal government to find a middle ground that will help the country to stop wasting money on petrol subsidy.
Mbonu said Nigeria is currently bleeding and cannot be able to sustain subsidy. He acknowledged that labour’s hard position was informed by the lack of trust between Nigerians represented by labour and the government as shown by the failure of successive governments to fulfill their promises to the people.
He, therefore, suggested that the middle ground should be for government to remove the petrol subsidy and at the same time, increase workers’ salary as compensation for the attendant rise in the cost of living of the workers.
Mbonu said: “Even before NNPC came out to speak, I’ve always said consistently that Nigeria cannot sustain this level of subsidy and I’ve always said also that the government’s side and labour which represents Nigerians must find a middle ground on how to deal with this subsidy issue because we can’t sustain it, we can’t carry it.
“But the problem there is the fact that there is massive trust gap between government, labour and Nigerians on basically, if you take away this subsidy, what are you going to do with it? Because the import of taking out subsidy is basically, that the cost of living of Nigerians will rise with the increase in fuel pump price.
“So, we know that if that happens, it will lead to increase in the cost of living in every sense. But the issue is that government will have a lot of revenue to save. But what will it do with that revenue? And that has been the issue.
“So, the middle ground for me is that the subsidy that is withdrawn should be used to increase the salary of workers especially the lower level workers to compensate them for the increase in the cost of living.”
According to him, Nigeria can’t survive waiting for 18 to 24 or 36 months, as the case may be, for the refineries to be fixed before subsidy will be removed.
Another economic policy exert and strong advocate of good management of Nigeria’s hydrocarbon resources, Mr. Michael Faniran, concurred on the fact that there was need to bring subsidy to an end so as to save the economy of the country.
“We can’t sustain fuel subsidy and it’s a known fact,” he told THISDAY exclusively.
Like Mbonu and others who commented on the difficulty the country has found itself in, due to reckless spending, Faniran also referred to the recent NNPC declaration of non-remittance in May, saying such declaration should have told the government and labour that subsidy was no longer sustainable.
“Why won’t they be remitting money? It’s because of the subsidy; the money they are supposed to remit to FAAC has been depleted by subsidy that they need to pay. So, that’s one example.
“And NNPC’s remittance constitutes about 12 per cent of what goes to FAAC, that means 12 per cent of what goes to FAAC is gone, which means the ability of the states to run their states is in jeopardy,” Faniran noted.
He said labour cannot say the refineries must work before subsidy could be removed, adding that there was need for the downstream sector of the Nigerian oil and gas industry to be liberalised, noting that if the environment is not liberalised, investors will not come.
Faniran said the country cannot depend on the government refineries that are consuming huge amount of money through turnaround maintenance every time.
“We have been spending on the refineries but no money is coming out. So we are always in red if you look at NNPC account. So what we can do is to deregulate and liberalise the sector, then we allow investors to come in, and allow people to build modular refineries, we even allow people to partner with the NNPC to upgrade or rehabilitate the current refineries,” he submitted.
He advised that for the subsidy to be removed, Nigeria should try and endure the short-term pain for the long-term gain, warning that if that did not happen, the country would be doomed economically as the nation’s economy is not strong to withstand further shock.
He said labour should have a re-think as to who it is actually fighting for in the subsidy saga, arguing that subsidy only serves the rich in the Nigerian society and not the workers and poor people as it claimed.
Faniran said: “Who is subsidising who? The people they are fighting for are they even enjoying the subsidy? The common man on the street who belongs to the NLC, how many cars does he have?
“Meanwhile, the people who are in government have about four cars; they are going in a convoy of five cars. So imagine the volume of fuel they consume daily and they enjoy subsidy on each litre. Meanwhile, the person you say you are fighting for probably has only one car.
“That means the poor are actually subsidising the rich. So why don’t you make the money available so that at least they can build hospitals, they can build other things. If anything happens to the rich now, they fly to UK, they fly to London or to US to go and take care of themselves.
“The people you said you are fighting for cannot do that because they don’t have the money to do all those things. So the NLC people need to put all these things into context. We need to look at the impacts.”
He added that the government lost the opportunity to deregulate the downstream sector when it first came into power in 2015 when crude oil price was down and also lost the same opportunity last year when the oil price collapsed to about $15 per barrel.
Marketers Kick
Also faulting the organised labour’s insistence on subsidy and no increase in petrol price and the call for the adoption of production-cost pricing model for petrol marketing in the country, petroleum products marketers described such condition as unrealistic.
According to some of them who spoke to THISDAY anonymously, production cost model cannot be used in a country that is not producing locally.
One of the marketers said: “I really don’t understand what they (labour) are saying, because today, we are just bleeding. It’s like somebody who is losing blood, you now say let’s go and look for another solution to the man’s problem, meanwhile the man is bleeding away gradually.
“As you heard, NNPC said they are not going to be able to fund FAAC for the next few months. I think people’s suggestion needs to be realistic. Based on the reality on ground, for me, I don’t understand how that is workable.
“Are you now going to use the production cost from Rotterdam or Saudi Arabia or wherever we are importing from, as our production cost? When you bring in products from abroad, it becomes the import cost because that is production cost in another economy.
“So, if you want a production cost that will at the end of the day determine your price, it has to be production cost locally”.
He, however, accused the organised labour of being part of the problem Nigeria is having, saying labour resisted every attempt made by government to salvage the economy.
According to him, “And they shouldn’t forget, all the attempts made to sell the refineries to private investors which may have led to the refurbishment of the refineries, it was the same labour that kicked against it.
“So, when you have a policy that is always against every move –if we go this way, you say no; if government goes this way, you say no –how will things work well in the country?
