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Fuel subsidy: Labour, energy experts differ as fuel queues return

By Collins Olayinka, Kingsley Jeremiah (Abuja), Femi Adekoya, Tayo Oredola (Lagos) Ayodele Afolabi (Ado Ekiti), Ahmadu Baba Idris (Birnin Kebbi) and Rotimi Agboluaje (Ibadan)
14 April 2019   |   4:09 am
The Federal Government’s tacit endorsement of the International Monetary Fund’s (IMF) advice on fuel subsidy removal has already triggered far-reaching consequences, with most petroleum marketers hoarding or rationing Premium Motor Spirit (PMS). Expectedly, this has led to fuel queues appearing across the country. The planned subsidy removal notwithstanding, the inability of the Federal Government and…

Drive in and buy at Mobil Filling Station along International Airport Road Lagos…yesterday PHOTO: FEMI ADEBESIN-KUTI

The Federal Government’s tacit endorsement of the International Monetary Fund’s (IMF) advice on fuel subsidy removal has already triggered far-reaching consequences, with most petroleum marketers hoarding or rationing Premium Motor Spirit (PMS). Expectedly, this has led to fuel queues appearing across the country.

The planned subsidy removal notwithstanding, the inability of the Federal Government and depot operators to agree on a pricing template is also at the heart of the fledgling fuel crisis.
While the Nigerian National Petroleum Corporation (NNPC) cautioned depot owners or terminal operators against selling petrol above the official ex-depot price of N133.28k per litre, the Depot and Petroleum Products Marketers Association (DAPPMA) has declared its intentions not to sell PMS at the control price of N145 until cost-related issues are addressed by the regulatory agencies.

Consequently, petroleum marketers have now defied all odds and begun rationing the volume of fuel sold, despite assurances by the NNPC on the availability of petroleum products.

The Managing Director of the International Monetary Fund (IMF), Christine Lagarde, while addressing a joint annual spring meeting of the World Bank in Washington DC, United States, last week, asked the Federal Government to consider the complete removal of fuel subsidy, claiming the move would save a lot fiscally and in terms of human lives.

“We believe that removing fossil fuel subsidies is the right way to go.” Lagarde affirmed.

In a swift reaction to the advise, Finance Minister, Zainab Ahmed, who spoke at the sidelines of the meetings said: “The advice from the IMF on fuel subsidy removal was a good one, which will be implemented in a manner that is both successful and sustainable. We are not in a situation where we will wake up one day and just remove subsidy. We have to educate the people, we have to show Nigerians what the replacement for those subsidies will be.”

Back home she had barely finished her remarks when fuel queues resurfaced. 

WHILE experts maintain that sustenance of fuel subsidy might further push the country’s economy to near collapse, the Nigeria Labour Congress (NLC) insists that its stoppage could send more Nigerians into extreme poverty. 

In fact, the union maintains that fuel subsidy remains a myth and an avenue for unbridled corruption by those in privileged positions in the oil industry. 

Leading the opposing views yesterday, while speaking on the forthcoming 12th Nigerian Association for Energy Economics (NAEE) conference, which kicks off in Abuja, tomorrow, president of the group, Prof Wunmi Iledare argued that benefits of petroleum subsidy were far less than what it costs the nation.
While calling for a review of the subsidy regime, Iledare said: “Anytime a government has a policy, there is always a need for it to be reviewed to see whether the benefits that come from that policy are more than the cost, or they are equivalent. Let us look around. The roads are bad; hospitals are bad; schools are bad, and infrastructure not available.

The most uncomforting part of it is that looking at the budget for health, education and budget for defence, they are not up to what was spent on petroleum subsidy in 2018. Is it not time for government to look at all these?”
On the likely fallout of subsidy removal, he said: “Yes, there would be social unrest whenever a policy reversal takes place, but such unrest would be only for a while. Government must mount aggressive public education for the populace to see that petroleum subsidy benefits no one.”
The economist, who cautioned government against borrowing to service debt argued that such move will mortgage the future of Nigerians. 
On the need for an energy sector that is supportive of economic development, Iledare explained that while a sustained low oil prices may not be good for rent seeking and rent sharing, it certainly makes access to energy affordable to a large extent, at least in the short run. There is an indirect correlation between oil consumption and economic growth in countries with pragmatic petroleum policies that are geared towards the maximising of national interests rather than personal interest,” he stated. 

President of the NLC, Ayuba Wabba while inaugurating the Local Organising Committee (LOC) for the public declaration of Nigeria’s hosting of the 6thAfrican Meeting of Solidarity with Cuba in Abuja, yesterday, warned against increasing the pump price of petrol.

He reminded President Muhammadu Buhari of his earlier position when he sad: “Let me tell our government that they should be wary of the International Monetary Fund (IMF) prescriptions. We observed that IMF is urging our government to remove subsidy. In the first place, is there subsidy?

“That is the question we as a country have not been able to answer. Let me align myself with what President Muhammadu Buhari said sometimes ago that subsidy is corruption and who is actually subsidising who? Labour stands by that position and we have remained consistent.”
He noted that the country could only end subsidy when she increases her local capacity for refining crude oil, adding that labour would soon present a document to government on subsidy issue.

The NLC chief pointed out that refineries in the country can work and have their capacities increased to meet the current daily consumption.

“There is nothing that is wrong with our refineries. It is simply a conspiracy that is preventing them from refining what we need and even exporting to neighbouring African countries. We have examples of refineries that have been upgraded around the world. Why is our case different? We are going through what we are going through because it pays the corrupt individuals in the system for Nigeria to keep importing finished products.”
For former President and Chairman of Council, Chartered Institute of Bankers of Nigeria, and the Dean, College of Postgraduate Studies, Caleb University, Prof. Segun Ajibola, unless Nigeria operates functioning refineries, the impact of the removal of subsidy would be hard-hitting.

According to him, IMF as an international financial institution does not support government subsidy in whatever form, but the impact of subsidy removal would affect practically every goods and services in the country.

“For countries attempting to accept IMF loans, removal of subsidy is one of the conditionalities. IMF is therefore not saying anything new. They have severally clamoured for removal of fuel subsidy by the Nigerian government. 

But the problem with subsidy removal in Nigeria is that it is capable of growing the poverty index as so much is attached to cost of fuel in the country because all other prices take a cue from fuel subsidy,” Ajibola said. 

Stating that the IMF argument is often supported by the envisaged impact of the application of the funds garnered from fuel subsidy removal to socially desirable projects that would benefit the populace and cushion the pains of the removal, Ajibola insisted that the Nigerian government has a bad record in managing and delivering on such promises.

He said: “We have not been seeing this happen in Nigeria, at least at a commensurate scale. Petroleum Trust Fund (PTF) of old tried to apply the removed subsidy in this manner until it ran into operational hitches. The question therefore is that, if subsidy is removed, how will the negative impact of the removal on the poor majority of Nigeria be cushioned? 

“As a country, we have never succeeded in coming up with a workable template till date. This is the dilemma in Nigeria with the IMF prescription. The majority of Nigerians will bear the brunt. Another question is, how is the subsidy determined, as the cost of fuel in the global market is not a good reference.

“Lastly, why can’t we make our refineries to work? We need to remove this unholy alliance between local fuel price, dollar price per barrel of oil in the international oil market and foreign exchange rate.”
Managing Partner, Chancery Associates, Emeka Okwuosa agrees with the government on subsidy removal, but on a gradual note since the regime has been subjected to fraudulent practices.

“We need to follow best practices obtainable in other countries. Paying for subsidy is no longer sustainable, so we should allow market forces to determine the prices of petrol just as we did with diesel.

The Chief Executive Officer, International Energy Services (IES) Ltd, Dr. Diran Fawibe said the Federal Government must not be cynical about the advice offered it by the IMF, insisting that the economy and the Nigerian people were facing serious challenge because of the development. 

Fawibe said that everything humanly possible must be done to ensure that we refine our crude locally, adding that Buhari stands a better chance of removing subsidy.

To the Lagos Chamber of Commerce and Industry (LCCI), it is a paradox that crude oil export remains Nigeria’s biggest foreign exchange earner, yet, the biggest foreign exchange expenditure is also on the importation of petroleum products.
The chamber noted that though increases in crude oil price benefits the Nigerian economy, with regards to foreign exchange earnings, it penalises the economy in terms of the huge foreign exchange commitment to importation of refined petroleum products and high energy cost. 

“We need to prioritise local refining of petroleum products to ease pressure on our reserves,” it added.
The Director-General for the chamber, Muda Yusuf, noted that protracted delay in the passage of the Petroleum Industry Bill (PIB) and weak commitment to the reform of the oil and gas sector continue to stifle investments in the upstream and downstream segments of the oil and gas sector that might help to check subsidy payments.
“The LCCI is worried that the NNPC has practically assumed a monopoly status in petroleum products production and importation in the economy. It has become practically impossible for private sector petroleum products marketers to import and sell products because of the price distortions, which the involvement of the NNPC has created in the industry.
“The extant policy on pricing of Premium Motor Spirit (PMS) has made it impossible for private sector marketers to import or produce
PMS. It is even more disturbing that even for the products that have been deregulated such as AGO, it is impossible for private sector players to compete with NNPC because of the huge cost differential resulting from preferential exchange rate and use of crude swap for finished products importation. The situation is that of a complete crowding out of the private sector in the downstream segment of the oil and gas sector,” he added. 
On his part, the Director General of the Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir noted that subsidy removal is not an easy decision for government to take without due consultations with stakeholders.
“Removal of fuel subsidy would have some downside as regards the cost of transportation and related issues. Fuel subsidy cannot be removed easily due to the ripple effect on inflation, even though government cannot continue to subsidise fuel consumption, especially in the face of rising oil prices.
“Inflation is double digit already. Immediately you increase the price of petroleum products, every other thing increases. There is no clear-cut decision to it. Government needs to discuss with stakeholders on the way around it to mitigate its effects.
“It has to be a gradual process. To the average man, the removal of subsidy is punishment. The people need to be carried along in the decision-making process. There is need for transparency in taking that decision. It is not clear if government will remove it. The consideration is not for government alone,” he explained.

Situation Report From States As Queues Return
ACROSS the country, motorists are engaging in panic buying of petrol, while black market operators are fully back in business, despite assurances given by the NNPC on the availability of petroleum products.
NNPC’s Group General Manager, Group Public Affairs Division, Ndu Ughamadu, in a statement stated that 23 depots in Lagos, seven in Port Harcourt, 11 in Warri, six in Calabar and eight in Kaduna were fully stocked with white products.
He explained that two vessels of 50 million litres of PMS would arrive the shores of Nigeria every day.

Yesterday, many of the fuel stations visited within Lekki, Ikoyi, Surulere, Oshodi, Lagos/Abeokuta expressway and Itire Road axis were dispensing the product from onlytwo pumps.
Some of the attendants at the fuel stations affirmed the availability of the product, but noted that the decision to sell from one or two pumps was to manage supply due to rumours of scarcity.

When The Guardian contacted one of the operators at the Apapa depot, the operator who pleaded anonymity said: “What the NNPC is doing is that they are supplying major marketers and NNPC mega stations, while only few independent marketers are accessing the commodity. Government is rationing available resources across major stations and trying to manage the situation before it escalates.”
However, oil marketers assured there was no scarcity and advised fuel consumers not to engage in panic buying, as what led to the gap in fuel supply and distribution, which resulted in the queues at fuel stations, was a minor operational problem.
The problem, according to the marketers, has been addressed and depots are loading 24 hours and whatever supply gap there is would be closed between “today and tomorrow.”
An executive of DAPPMA who pleaded anonymity told The Guardian that there have been issues of pricing in recent times because what marketers are expending, especially in the area of vessel and landing cost is higher than the provided DPR template, adding that NNPC is equally aware of the challenges because they do same calculation on daily basis. 

IN Ekiti State for instance, residents are stocking up over fears that the Federal Government may commence subsidy removal right away.

The panic buying has led to the emergence of long queues in all the few stations that are selling the product, while most closed shops since Wednesday.

In most of the filling stations visited on Friday and Saturday, motorists queued for hours to purchase the product, with most of them also purchasing in large jerry cans.

Despite the scarcity, the pump price of the product has not gone beyond the official N145 per litre.

Also, at the NNPC Mega Station along Ado-Iworoko Road and its subsidiaries, petrol was sold at the official rate.

But in a statement issued in Ado Ekiti by the media aide to Governor Kayode Fayemi, Mr Yinka Oyebode, the state government noted that hoarding of petroleum product was an act of economic sabotage, which creates unnecessary hardship for the people and cripples businesses.

“Consequently, monitoring teams have been despatched to go round filling stations in the state and ensure that no filling station hoards fuel at the detriment of the people.

Any filling station caught hoarding fuel will receive heavy sanction,” the statement stated.

ONDO State government, which views with grave concern, the latest attempt by some unscrupulous persons to create panic through the hoarding of PMS, fuel, equally offered residents of the state the same assurances.

A statement signed by the Senior Special Assistant (SSA) Special Duties & Strategy to the Governor, Dr Doyin Odebowale said, “This assault on decency is coming at a time when the NNPC continues to reiterate facts on the availability of the product. Nigerians have been assured of regular supply of the product and this government has no reason to disbelieve the organisation.

“It is against this backdrop that the government warns, sternly, all petrol dealers in the state, to desist from any unpatriotic acts, which may inflict pains on the people. We, on our part, will resist and sanction any untoward practice, conceived and/or executed, to engender hardship in Ondo State.

“Consequently, the government directs all filling stations operating in the State to open same forthwith. Any dealer caught hoarding fuel will be arrested and prosecuted. The business premises affected shall be sealed. Any attendant caught selling petrol above the regulated pump price, under any guise, will be arrested and prosecuted.

In a similar vein, law enforcement agents are enjoined to arrest any person found hawking fuel in containers of any shape,” the statement said.

Residents of Edo State have been cautioned against panic buying by the state government, as well as oil marketers.

The caution became necessary in the wake of the rumoured shortage of petroleum products in the state, which saw some residents making moves to purchase the product.

But the state Commissioner for Minerals, Oil and Gas, Joseph Ugheoke, after a meeting with executives of the Edo Chapter of the Independent Petroleum Marketers Association of Nigeria (IPMAN) and Major Oil Marketers Association of Nigeria (MOMAN) in Benin City, at the weekend, said adequate arrangements have been made to ensure ample supply of the products, especially during the Easter break.

The commissioner urged residents to disregard rumours of impending fuel scarcity, assuring that there would not be a disruption in the supply of petroleum products.

He said the state government was working in collaboration with major stakeholders in the fuel distribution chain to sustain the present
availability of products.

On the outcome of the meeting with the oil dealers, the commissioner conveyed the resolve of the marketers to continue to dispense petrol at the approved pump price and without instigating artificial scarcity through hoarding.

On their parts, Vice Chairman of the Edo State IPMAN, Abdulhamid Baba Saliu and the chairman of major oil marketers and dealers, Tony Aghedo, affirmed the availability of petroleum products for consumers, stressing that there was no cause for alarm.

BIRNIN Kebbi, the capital of Kebbi State is in near lockdown as only two filling stations sold fuel, yesterday.

All stations visited by The Guardian were closed, except MRS and another private station along bypass that were selling the product.

A commercial driver, Mallam Usman Sani, who expressed dismay our the scarcity, urged the Federal Government to intervene in the matter swiftly in order to halt the sufferings of the masses.

The National Zonal Vice Chairman of Independent of Petroleum Marketer Association of Nigeria (IPMAN), Alhaji Muhammad Dantella, also called on the Federal Government to caution the NNPC on steady supply.

AS fuel scarcity spreads across the country, Oyo State appears to be insulated from the crisis for now as filling stations in the state are still fully operational.

As at yesterday afternoon, there was no call for alarm judging from The Guardian’s observation, especially in Ibadan, the state capital.

From Iwo Road to Ojoo-Oyo Road, to Agbowo, to Apete, to Bodija and to Basorun, there was no panic buying. Motorists, motorcyclists and others were seen across various filling stations buying the commodity at the official price.

A filling station in Ojoo area was seen dispensing fuel at N141 per litre with little or no queue. 

“There is no fuel scarcity anywhere in Ibadan. Some days ago, we heard about the impending fuel crisis, but there is nothing of such now. Though some filling stations increased their pump price a day or two ago, but the situation has now become normal. Some of them have even reduced the price to N141,” said a taxi driver who plies the Iwo Road – Ojoo route.

A motorcyclist corroborated this saying, “there is no fuel crisis in Ibadan for now. The price is still normal and there are no queues in fuel stations.”