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Fuel price reduction and subsidy



THE reduction of petrol price from N97 to N87 per litre has rightly failed to elicit excitement from Nigerians because what the government has offered is neither a palliative nor a truthful representation of what the price should be. The development has indeed inexorably shown the Federal Government to be unresponsive as long as it is unable to adequately provide answers to these questions: at what point would  the government stop its policy of subsidy?  And how did it arrive at the current price of N87 per litre? The Minister of Petroleum Resources, Diezani Alison-Madueke, who disclosed the reduction the other day said that the government did this in response to the fall in the global prices of oil. She insisted that the reduction was a reflection of the global economic reality and not a political stunt amid the ongoing electioneering.      

   But beyond this official position, Nigerians are waiting for the government to explain at what point it would stop its phantom fuel subsidy payments. This has become important against the backdrop of the insistence of the Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Farouk Ahmed, that the government is still subsidising fuel despite the crash of the prices of oil by about 50 per cent. As Ahmed was quoted to have said: “ … at the new price of N87 per litre, government is still subsidising the pump price of  petrol … there is no linear relationship between the price of crude oil and the pump price of petrol.” Yet, the government had often canvassed the point that subsidy was justified on account of the high price of the pump price of fuel.   

   Nigerians’ opposition to the government over so-called subsidy and fuel price increases peaked in 2012 when they rejected an attempt to remove the yet inexplicable subsidy and increased the price of fuel to N141. But now that the price of fuel has fallen drastically, the government is expected to tell Nigerians that there is no more subsidy. Obviously, the government is not willing to do this because subsidy has become a euphemism for the process of unconscionably swindling the nation of billions, sometimes trillions, of naira.  How ruinous  subsidy has become to the nation and the citizenry is underscored by figures from the PPPRA which indicate that in only two years, in 2013 and 2014, the Federal Government spent N1.29  trillion on  the scheme.

  Worse still, the government’s subsidy as it exists does not affect all the parts of the country. While in places like Lagos and Abuja, the price of fuel is in most cases in line with the government’s policy, it is not so in other places. This is why while the fuel price is N87 in Lagos and Abuja, it is above N100 in some places in the eastern and northern parts of the country. In this regard, the government definitely has questions to answer about the Petroleum Equalisation Fund meant for ensuring uniform prices for petroleum products. And why should the price of kerosene not fall? While government claims to have made kerosene available at N50 per litre, consumers pay as much as N150.

   Quite in sync with government’s insensitivity and policies shrouded in mystery, it did not bother to explain to Nigerians how it arrived at the price of N87 per litre of fuel. If the price of crude oil has crashed by 50 per cent, Nigerians expect the pump price of fuel to be below the amount this government has conceded.  This has  become  imperative  as other oil-producing countries  have made sure that their citizens benefit from the fall in the global prices of crude. For instance,  these  are the price reductions since the fall in crude oil prices in these countries: United Kingdom (23.75%), the United States (36.57%)  and Singapore (21%). But  in Nigeria, it has been brought down by only 10.3%.  Because the reduction in Nigeria is so insignificant, it has not resulted in lower fares and cheaper prices of food.

   Indeed, a litmus test of government’s sincerity as regards its denial that the reduction was not actuated by  political considerations is its ability to retain the price cut after the elections. The government should not be compelled by a complicity of selfish considerations and the entrenched interests of those who feed off  the byzantine and opaque character of the operations of the oil sector to attempt to explain why this price regime is no longer obtainable. The government should avoid  a  situation where it would say that because the fuel price is high, so the subsidy regime has become inevitable. It should put in place measures  to further  reduce  the cost of fuel or at least to make the current price regime sustainable.

   While Nigerians await the government to give a more convincing explanation for its retention of the subsidy regime  beyond the perfunctory one given by the PPPRA, when the policy would be stopped and how it arrived  at the  price of N87 per litre of fuel, it  should take cognisance of the fact that Nigerians are by no means excited by the minuscule price reduction. The government  should end its  deliberate incapacitation of the refineries, sell them to private investors  and curb its obsession with importing fuel which has become a means of defrauding the nation. The dictates of good governance impose on the Federal Government the necessity of considering ways to provide the citizens cheaper petroleum products. It must brace the challenge of launching itself into the league of oil-producing  countries  such as Venezuela, Saudi Arabia, Libya, Qatar, Kuwait and Algeria that make their citizens pay the lowest energy prices in the world. 

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