•Ex-MOMAN Chair says subsidy payments have security implications to country
Peter Uzoho
The Managing Director of 11Plc (formerly Mobil Nigeria Plc), Mr. Adetunji Oyebanji, has said the current disruption in the petrol supply and distribution system in the country, which has thrown Nigeria into severe fuel scarcity was partly caused by Nigeria’s default in its crude swap deal obligation with European refiners.
Oyebanji, who is the immediate-past Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), also warned that the huge amount being spent on fuel subsidy even through borrowing, poses severe security implications to the country if not stopped.
Oyebanji made the assertions in Lagos, at the weekend during his paper presentation at the 2022 Annual Dinner of the Institute of Change Management (ICM), where he was honoured with the Honorary Fellow of the institute.
The topic of his paper presentation was, “The Impact of Insecurity and Oil Subsidy on Nigeria’s Economy.”
Following the withdrawal of the oil marketing companies from the importation of petrol in protest against the subsidy debt owed them by the federal government as well as the foreign exchange accessibility challenge, the then Nigerian National Petroleum Corporation (NNPC) had emerged as the sole importer of petrol in the country.
To achieve its energy security mandate, the then NNPC had gone into the DSDP arrangement with the foreign oil refiners in a trade by barter arrangement of giving them certain amount of crude oil and in turn receive petrol equivalent of that crude volume from them.
In the past few months, the country has been suffering fuel scarcity and queues at filling stations, with the pump price selling between N250 to N300 per litre at fillings stations and about N400 per litre at the black market in some parts of the country.
The former MOMAN chairman said the federal had started the Direct-Sale-Direct-Purchase (DSDP) popularly known as crude swap deal with foreign refiners, where Nigeria supplies them with crude oil and in turn get petrol equivalent of the amount crude supplied.
He explained that when the deal started, Nigeria was keeping to the terms of the deal by supplying the refiners crude as and when due.
He said, however, at the moment, because of Nigeria’s current financial challenge, the country no longer meets up with the supply of crude to the refiners as and when due.
Oyebanji further blamed the scarcity on the delay in supplying crude to the refiners.
According to him, the European refiners are now suspicious of the situation and that they are now worried that the next administration come 2023 may not want to honour the agreement in the DSDP deal.
Oyebanji said, “Nigeria started the DSDP arrangement. You know, it’s supposed to be, take the crude and then bring the petrol back. But because of our financial position, we started saying give me the petrol first, I will give you the crude by next week. Then we extended it to I will give you the crude in three weeks time.
“So the problem came when Nigeria started defaulting by saying ‘I will give you the crude two weeks later, one month later, and till now, we are now saying in three months time, we will give you the crude.
“So the people who are bringing the fuel say no, government wants to change, I’m not going to give you all this product, then another government will come tomorrow and say sorry, we don’t know about that agreement you had. That is what caused the problem,” he explained.
He warned that the huge amount being spent on fuel subsidy even through borrowing, poses severe security implications to the country if not stopped.
Oyebanji bemoaned a situation whereby Nigeria was wasting whopping sums on subsidy payments to the tune of N4 trillion for 2022, while neglecting investments in critical economic sectors like road, education, healthcare, power among other.
With Nigeria’s population growing exponentially and expected to hit about 400 million by 2030 and with a high number of unskilled young people, who have no jobs, he said it portends serious security implications for the country.
“So the main topic today is the link between insecurity and the subsidy. When you have this high subsidy payment which this year is going to reach N4 trillion, the reality is that it will lead to increased borrowing, which I had demonstrated earlier.
“You begin to see socio-economic collapse. Because you have a budget that is constrained, you have a huge deficit, you cannot invest in capital projects, you are barely covering your recurrent expenditure, your external reserves start to decline and then you start to have the rise in inflation.
“About two or three years ago, inflation was at about 12 per cent. Today, it is at about 20 per cent. Ghana is 40 per cent today. I pray we do not get there because by the time you get to that point, it means the middle class that is just managing to put its heads above water will go down, everybody will be poor except only the few rich”, he said.
He explained that if those monies used to fund fuel subsidy were invested in building road, ramp up power generation and supply and fix the healthcare system, they would lead to job creation for the youths.
“We have an unskilled and growing population, we are not creating enough jobs to accommodate all those people. How won’t there be insecurity? Because you have a lot of young men, who are able-bodied but they don’t have job, you are not investing in the things that will attract them to do any job.
“So the choices you have made have led ultimately to creating insecurity in the country. If people are gainfully employed, how many people do you think will readily go and follow Boko Haram?” Oyebanji added.
He listed insufficient products in the petroleum supply and distribution pipeline, high cost of renting Daughter vessels, foreign exchange challenge and the regulated price of fuel and attendant smuggling as other factors contributing to the recurring petrol scarcity.
According to him, “instead of the pipe being full at all times, it’s only having about 25 or 50 per cent product inside it and what does that mean?
“Along the whole pipeline that includes the ship that will bring it to Nigeria or the refineries that produce it if it is refined in Nigeria, none of them are operating at an optimal levels.”
