Who gains from fuel sub­sidy?

The Punch - - SPORTS - Lekan Sote lekan­[email protected]­hoo.com 0805022081­6

AN oc­to­ge­nar­ian un­cle, who is not likely to be too ex­cited if his name were men­tioned here, called to draw at­ten­tion to a cover page story, ti­tled, “Nige­ria to spend N750 bil­lion on fuel sub­sidy in 2020,” in The PUNCH of Wed­nes­day, De­cem­ber 11, 2019.

Af­ter 34 min­utes on the tele­phone, the oc­to­ge­nar­ian left no doubt of his out­rage at what es­sen­tially amounts to some­one sim­ply dash­ing away Nige­ria’s money to whom­so­ever he likes. If you were privy to the con­ver­sa­tion, you would pick the angst and frus­tra­tion of an old man who is ex­tremely im­pa­tient for Nige­ria to get it right.

Min­is­ter of Fi­nance, Bud­get and Na­tional Plan­ning, Zainab Ahmed, an­nounced, some­time in Oc­to­ber 2019, that “a pro­vi­sion has been made in the (2020) Bud­get for un­der­recov­ery, (another word for sub­sidy), for the (im­por­ta­tion of petrol) in the sum of N450 bil­lion, ( a cost to be borne by the NNPC as part of its cost of op­er­a­tions).”

How­ever, a team of The PUNCH cor­re­spon­dents found out, from ex­trap­o­la­tion of data ob­tained from the Petroleum Prod­ucts Pric­ing Reg­u­la­tory Agency, that the ac­tual cost of the sub­sidy should be a stag­ger­ing N750.81, an in­crease of N300.81 bil­lion.

But if you go by the 61 mil­lion daily con­sump­tion of petrol an­nounced by the PPPRA when try­ing to jus­tify the clo­sure of the bor­ders by the Fed­eral Gov­ern­ment, the fig­ure will be even more stag­ger­ing than re­ported by The PUNCH.

If you mul­ti­ply the av­er­age daily con­sump­tion of 55 mil­lion litres, ad­mit­ted by the NNPC, by the av­er­age sub­sidy spend­ing of N37.40, de­rived by this team of cor­re­spon­dents, you will ar­rive at the N750.81 bil­lion they pro­jected.

But you then won­der if this dis­par­ity is due to in­com­pe­tence, in­sin­cer­ity, or de­lib­er­ate pol­icy of the denizens of the oil sec­tor. The take of this oc­to­ge­nar­ian is that there is some­thing in the African that makes him wrong headed, nearly all the time.

The only way gov­ern­ment can dis­prove this as­sumed fig­ure is by show­ing that the con­sump­tion of petrol is lower than the 55 mil­lion litres per day. Al­ready the PPPRA has claimed a drop to 52.22 mil­lion litres of daily truck-out of petrol from de­pots af­ter the clo­sure of Nige­ria’s bor­ders.

Many peo­ple are how­ever, wait­ing on the usu­ally truth­ful Na­tional Bureau of Sta­tis­tics to con­firm be­fore they can de­cide which of the fig­ures to be­lieve. As you prob­a­bly know, the truth, even data, in Nige­ria is mas­saged to serve cer­tain in­ter­ests, and so they are usu­ally un­re­li­able.

In­ter­est­ingly, Cle­ment Isong, Ex­ec­u­tive Sec­re­tary of Ma­jor Oil Mar­keters As­so­ci­a­tion, a car­tel of In­ter­na­tional Oil Com­pa­nies op­er­at­ing in Nige­ria’s down­stream oil sec­tor, ad­mits: “We have no idea as to what sub­sidy spend­ing is as of to­day. We are there­fore un­able to make any com­ment on whether (sub­sidy fig­ure) is go­ing up or down.”

He de­clares, how­ever: “We are con­sis­tent in our view that the sub­sidy pay­ment... in the petroleum down­stream sec­tor, de­grades op­er­a­tional ef­fi­ciency and eco­nom­ics of the down­stream sec­tor.”

Af­ter sug­gest­ing that “This (down­stream oil in­dus­try) is fraught with mal­prac­tices through­out the sup­ply chain, and needs im­prove­ment and trans­parency,” Isong sub­mits, “(MOMAN) thinks it is only dereg­u­la­tion that can help us clean up the in­dus­try and bring back ef­fi­ciency.”

Some­body sug­gests that MOMAN, and its coun­ter­part the In­de­pen­dent Petroleum Mar­keters As­so­ci­a­tion of Nige­ria, are up­set with the NNPC for ex­clud­ing them from par­tic­i­pat­ing in the im­por­ta­tion of petroleum prod­ucts that at­tract usu­ally in­flated sub­sidy pay­ments that are usu­ally un­mea­sur­able, go­ing by the words of former Cen­tral Bank of Nige­ria Gov­er­nor, who has since been el­e­vated as Muham­madu Sanusi II, Emir of Kano.

For­tune Obi, spokesper­son for the Petroleum and Nat­u­ral Gas Se­nior Staff As­so­ci­a­tion of Nige­ria, con­curs with Isong: “You can’t be sub­si­dis­ing for­ever. The main so­lu­tion is to re­move sub­sidy and make the re­finer­ies func­tional.”

You could ask, “Who is not al­low­ing the re­finer­ies to func­tion?” A former Min­is­ter of State for Petroleum Re­sources once said, in what has now be­come fa­mous first words, “By 2019, we should be able to exit com­pletely the im­por­ta­tion of petroleum prod­ucts in the coun­try.”

If you ask, as the Igbo would, Gini ji nwa nkita onwu, what’s hold­ing the dog from dy­ing? you’ll find the an­swer em­bed­ded some­where in the fol­low­ing words of cur­rent Group Man­ag­ing Di­rec­tor of the NNPC, Mele Kyari: “We have a clear man­date of Mr. Pres­i­dent to stop (im­por­ta­tion of petroleum prod­ucts), and we be­lieve this can be done be­tween now and 2023.”

Kyari is how­ever boast­ing that the way he and his team will de­liver on this prom­ise is as fol­lows: “First, we will de­liver on our re­finer­ies, to make them work. (But, of course, you’d say)... Se­condly, we will sup­port our part­ners to de­liver on the projects that will make (petrol) and other prod­ucts avail­able, which are es­sen­tially the many other re­fin­ery project in­ter­ven­tions that are go­ing on.”

If you be­lieve this, you’ll be­lieve any­thing. A friend who worked in the oil in­dus­try for more than 40 years says it is not in the in­ter­est of the IOC car­tel and their lo­cal col­lab­o­ra­tors to al­low the lo­cal re­finer­ies to work. He says that the prob­lem is not in the equip­ment or pro­cesses, the prob­lem is in the per­son­nel, whose val­ues do not sup­port op­er­a­tional ef­fi­ciency for the lo­cal re­finer­ies.

Another form of sub­sidy that needs to be in­ter­ro­gated is the petroleum prod­ucts equal­i­sa­tion scheme, which re­im­burses mar­keters of petrol and kerosene with the cost of trans­port from the sup­ply point to the re­tail out­let.

This fa­cil­i­tates the sale of the prod­ucts at a uni­form price na­tion­wide, as ap­proved by the Fed­eral Gov­ern­ment. The ra­tio­nale is to re­lieve the mar­keter who may have to add the cost of trans­port to his sale price in a lo­ca­tion far from his point of load­ing.

This ad­di­tional road trans­port cost is in­curred be­cause of the un­con­scionable dis­use of petroleum prod­ucts pipe­lines that are mostly rusted or van­dalised, and the al­ter­na­tive rail­way, which has be­come al­most mori­bund, though the gov­ern­ments of Pres­i­dent Good­luck Jonathan and Ma­jor Gen­eral Muham­madu Buhari (retd.), re­spec­tively made, and are mak­ing, ef­forts to re­vive it.

The ini­tial in­ten­tion of the equal­i­sa­tion scheme was to bridge only 10 per cent of the prod­ucts trans­ported. But it has in­creased to more than 40 per cent over time. The ad­di­tional cost is de­scribed as bridg­ing cost for trans­port above 450 km, but called in­ter-dis­tance scheme for dis­tances be­low 450km.

An un­cofirmed re­port in­di­cates that for the 19,785,236,180.71 litres of petrol as­sumed to have been sold by the NNPC in 2018, at a bridg­ing cost of N18.37 per litre (that the PPPRA is un­will­ing to con­firm), Nige­ri­ans paid N363,454,788,639.64 to en­sure that ev­ery­one res­i­dent in Nige­ria bought petrol at the same price. Of course, those who profit from the ex­tra bag­gage can­not be iden­ti­fied.

But you know that de­spite this ly­ing do-gooder scheme, usu­ally con­trived fuel scarcity makes non­sense of the price equal­i­sa­tion scheme. Heart­less deal­ers iron­i­cally sell petroleum prod­ucts at higher prices in states like Rivers and Delta, that have both crude oil fields and oil re­finer­ies.

The sad sob story is that Nige­ria may not quickly get out of the bind of sub­sidy fu­elled by im­por­ta­tion of petroleum prod­ucts as long as the Pres­i­dent of Nige­ria fails to ini­ti­ate and drive the petroleum in­dus­try poli­cies.

So, Un­cle, that’s the deal for now.

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