The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, recently disclosed that there is the possibility of the selling price of petrol coming down to N85 from the present N87per litre in the New Year as the price of the product shall henceforth be determined by a “price modulation” process. The Federal Government has, however, slashed petrol price to N86.50 per litre from January 1.
The selling price of petroleum products in Nigeria is presently determined largely by how much the government wants the consumers to pay after taking care of the esoteric subsidies paid to marketers irrespective of the price variations in the world market.
The present pricing mechanism is unduly arbitrary. It is purely political interference with basic economic logic. That is why it was possible for the Jonathan’s government to, at the twilight of its tenure, and for electoral reasons, wade into the already unruly subsidy environment of the Nigerian petroleum market by slashing the selling price from 97 kobo to 87 kobo per litre thereby creating additional financial burden for the nation’s treasury which was virtually at the brink of bankruptcy.
While such arbitrary exercise of administrative power over a purely economic matter might have secured some momentary respite for the then politically distressed Peoples Democratic Party-led administration, it was undoubtedly a suicidal plunge that was bound to worsen the wobbling Nigerian economy.
The argument for subsidy for petroleum products in an oil producing country was, in the first place, an admission of serious failure of integrity by those whose business it was to manage the oil sector because but for their gross inefficiency and grand corruption, it was always the legitimate expectation of all rational beings that the price of petroleum products should be cheaper in Nigeria than in those places where there are none.
It was to that end that refineries were established in the first place. Petrol efficiently refined in the country would always be cheaper than those procured from elsewhere but when those who are charged with the business of refining it; the Nigerian National Petroleum Corporation corruptly makes it too expensive or totally impossible to do so locally, the necessity for importation and “subsidy” then becomes plausible.
Rather than do the needful and revitalise the refineries, they went into an importation spree with all its opportunities for unbridled abuses.
It is like the yam farmer, who due to excessive abuses in his household with respect to the cooking of pounded yam (such as the willful destruction of his pounding mortar and cooking pots), would now find it compelling to be buying pounded yam from his neighbours. And because the price at which they are supplying him is well over his means, a Good Samaritan then steps in and pays the difference between what a fairly priced pounded yam would have cost him and what he is being made to pay for it! Certainly, people will hold such a farmer in utter contempt as being both irresponsible and foolish especially if he expects them to continue to subsidise his pounced yam consumption.
That is how I understand “subsidy” in the context of our petroleum products pricing. It is a different thing altogether if the product involved is one that is not, and cannot be produced in the country but required for our survival or wellbeing. If, for example, Nigerians are finding it difficult to purchase drugs for the treatment of malaria and those drugs are only available abroad, the government would be right to describe its support for the citizens in that respect as subsidy.
It is however wrong to call the differential which government has been paying between what it costs to bring fuel down to the pumping stations and what Nigerians actually pay for it when it could indeed have been cheaper.
It was really the alternative costs of corruption and wastage that we are paying for in the name of subsidy: if it is a fact that Nigerians could have been able to buy petrol at a far cheaper price being an oil producing country as it is the case in Iran, Iraq, Venezuela, Saudi Arabia and other oil-rich places, then, it would be dead wrong to classify the massive payouts we suffer daily as subsidy. What we call subsidy is an unforgivable cover-up for institutional inefficiency and outright exploitation; it is both ideologically otiose and economically counter-productive.
Every refinery has a serviceable life-span. From the very day it is commissioned into production, a part of its revenue ought to be set aside for depreciation and its eventual replacement. That is simple common sense. The disappearance of fiscal discipline, moderation and self-control in that sector eventually led to the abandonment of the local refineries and the sudden mushrooming of “tank farms” and the massive land haulage of inflammable petroleum products across the nation with all the risks and disastrous possibilities, not to mention the destruction of the highways and incessant traffic disruptions occasioned by the numerous fleet of badly maintained fuel tankers plying the roads.
Nigeria must be the only country in the whole world where the entire fuel transportation system is based on land trucking. Elsewhere, pipelines do the job and are sometimes complemented by railways. Embarrassingly, every drop of imported fuel, including those allegedly diverted, has to be moved around Nigeria on the surface because our underground pipeline networks have been vandalised or left to deteriorate unmaintained.
The operative logic of our past governments as far as the oil industry is concerned was essentially that of vandals who gave no damn about the future. How anyone could have suggested subsidy for an oil-producing country is a mystery. Whatever doubt that existed as to the fact that subsidy was another name for unlimited swindle soon evaporated during the famous subsidy probe which revealed disgusting humongous scams under ex-President Goodluck Jonathan which made it possible for people who did not import a drop of petrol to audaciously go to the government treasury and collect their “subsidy bonanza” running into billions of naira.
It is therefore a natural expectation of decent humanity that the new Buhari government will put a stop to these evil practices. It is only in that context that I understand the “modulated” pricing regime that is being propounded by Dr. Kachikwu. For all practical purposes, that is a euphemism for deregulation, i.e., price adjustments, up or down, in accordance with the prevailing market forces.
Honestly, if that would free the nation from the strangle-hold of corrupt practices that characterise the subsidy regime, so be it. The issue is that this government must act at all times in the best interests of the people. The outgoing subsidy system actually operated to immiserate the poor and benefit the rich. The billions of naira stolen in the guise of subsidy would have substantially ameliorated the sufferings of the masses through well-directed social services and other welfare programmes. Had the subsidies translated to lowering the selling prices it would have been tolerable. Instead, it actually ballooned them while at the same time depleted the treasury: it created a callous scenario wherein the highly connected and privileged of society were robbing the country in the name of the poor!
The All Progressives Congress government is by conception and ideological bent (in spite of its variegated membership) basically a progressive left-of-the-centre party. That much is declared in the constitution/manifesto. It should therefore not allow the distractive negativism of the Olisa Metuhs and Fayoses to sway it from its fundamental principles, pander to reactionary forces or become needlessly defensive of its ideology. Whatever will serve the best interest of the masses should be the guiding principles, no matter the name called, be it “deregulation” or “modulation.” That is why we voted Muhammadu Buhari into power.
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