Poverty level too high for costly fuel

Sopuruchi Onwuka

Stakeholders in the Nigerian downstream petroleum industry have called on government to take convincing steps towards addressing multiple imbalances that unsettle the domestic fuel market, warning that it has become increasingly difficult to convince the public to pay more for petrol.

The Oracle Today reports that domestic fuel market is in the final stage for full deregulation with only petrol still subsidized among all other refined products including kerosene.

Government had dismantled price control on all petroleum products in the domestic market except petrol. And the N6.0 trillion official cost of subsidizing the single refinery product is strongly disputed by market, industry and labour stakeholders in the country.

Representatives of the Trade Union Congress (TUC), the Nigerian Labour Congress (NLC), local cooking gas distributors and independent marketing companies who spoke at the Strategic International Conference of the Association of Energy Correspondents of Nigeria (NAEC) urged government to explore more ways of addressing the country’s economic crisis rather than fixating on subsidy removal.

The delegates who declared their positions on deregulation of petrol also called for deep cuts in the allowances and benefits lavished o political office holders, adding that overall cost of governance must also be slashed to save money for government’s fiscal plans.

The Oracle Today reports that despite being designated the world poverty capital and accumulating record debts in the African continent, the present administration of the federal government still pays one of the world’s largest financial benefits to political leaders. Nigeria also runs one of the world’s lowest official minimum wages.

Besides, the country is Africa’s biggest oil and gas exporter and stands eminent among the members of the Organization of Petroleum Exporting Countries (OPEC) and the Gas Exporting Countries Forum (GECF). The nation’s four refineries are however mismanaged and have remained moribund for decades despite hundreds of billion Naira spent on botched rehabilitation attempts.    

Consequently, the government runs a state fuel import monopoly criticized by the industry players as opaque and bogus. Whereas the Nigerian National Petroleum Company (NNPC) Limited claims daily petrol consumption of 70 million liters, the Organized Private Sector (OPS) contends that vehicles and machines that run on petrol in the country cannot consume more than 30 million liters per day.

Thus, the cost burden associated with imports is proportional to volume. Therefore the disputes over the actual consumption rate for petrol is directly related to disagreements over the actual cost of subsidy claimed by the government and investigated by the federal legislature.

Additional puncture on subsidy claims, industry pundits point out, is the verified allocation of 445,000 barrels crude oil feedstock to NNPC’s dilapidated refineries. The entire crude oil allocation is traded by the national oil company in barter for petrol. Other products from the crude are subsidized to allow full cost and margin recovery from the market.

At the NAEC conference hosted at Eko Hotels and Suites, Lagos, the President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Comrade Festus Osifo, insisted that the Nigerian workers would not accept subsidy withdrawal on petrol under the prevailing poor accountability in the NNPC import programme.

In disputing official figures, he pointed out that large transportation vehicles in the country including haulage trucks, tankers, light generation sets, heavy construction machinery and urban mass transit buses run on diesel. He noted that the only cars, neighborhood transport buses, tricycles and motorbikes currently use petrol in the country. He expressed worry over the volume of daily petrol consumption declared by the NNPC.

Comrade Osifo also argued that it would be illogical and unfair for government to transfer the cost of its inefficiency on the people, pointing out that massive fuel importation has deprived the domestic economy all the cost benefits of local refining and imposed drain on the nation’s foreign exchange reserves base.

While agreeing that domestic product pricing be ultimately yielded to market forces, he insisted that all imports must be displaced with domestic refining. He pointed at the need to avoid increasing stress level in the society where, he noted, most people live below the poverty line.

Comrade Osifo attacked the lavish lifestyle of the political and the massive financial benefits they claim from the nation’s bleeding economy as insensitive to the high level of suffering in the larger society. He called on government to demonstrate resource accountability, fiscal discipline and cuts in remunerations and emoluments entitled to political office holders before contemplating petrol subsidy removal.

Earlier in his presentation at the conference, the President of the Nigerian Association of Liquefied Petroleum Gas Marketers (NALGAM), Mr Oladapo Olatunbosun, pointed at high poverty rate in the country as the main reason for low penetration of cooking gas in the country.

He maintained that the level of poverty in the country has made use of liquefied petroleum gas for cooking unaffordable to many households that live from hand to mouth.  

In making case for cooking gas subsidy in the country, Mr Olatunbosun noted that the rising cost of cooking gas and kerosene in the country has forced many families back to use of firewood and charcoal.

He declared that cost of cooking gas has overtaken the cost of food it is supposed to cook. He argued that it would be difficult for low income earners on N18,000 per month to spend about N12,000 on cooking gas in the same month. He added that most students that use camping gas now spend more on gas than the food they cook.

“Some of these students spend over N1000 for a kilogramme of gas just to cook N600 beans.  How do you justify that in a country that produces oil and gas?” he noted.

High cost and anti-subsidy sentiments, he argued, form the major reasons why government’s gas penetration programmes have failed.

On closing the income gap in the economy, Mr Olatunbosun lambasted the political class for insensitivity to the suffering of the mass of poor people in the country. He also called on government to explore cost savings from salaries and allowances of political office holders.

He made it clear that the cash haul among the political class does not recommend the sympathy nor justify any move by the government to further squeeze the impoverished masses.

Earlier in his presentation, the Managing Director of Rainoil Limited, Dr Gabriel Ogbeche, noted that the price for cooking gas has increased by about 200 percent from 2021 levels, noting that strong prices have pushed households to revert to dirtier fuels.

He pointed out that the surge in global crude oil prices has pushed estimated market value of petrol in the country to about N587 per liter, adding that cost of subsidy on government calculated at about N1.55 trillion between January and June 2022 was no longer sustainable.

He also pointed out that government spent N12.47  on fuel subsidy between 2006 and 2021, arguing that the amount could have been deployed in developing infrastructure in the country.

He however agreed that lavish lifestyle of the political class has made it difficult to take the message of possible savings from subsidy removal to the masses.

Dr Ogbeche joined the chorus of voices in demanding cut in the cost of governance in the country, saying that sacrifices for the economy should logically begin with the ultra-rich privileged political class which, he said, regularly flaunts power privileges in the face of hungry Nigerians.

He agreed with other speakers that whereas there is need for market forces to rule prices of petrol, sacrifices for the economy of the country must not be left for the poor masses alone.

In a keynote presentation delivered on his behalf, the Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Mr Olumide Adeosun, noted that government’s postponement of price deregulation in the market slowed down implementation of the Petroleum Industry Act 2021 “with respect to benefits expected from free competitive open market pricing, such as new investments and subsidy removal.”

Mr Adeosun who is also the Chief Executive Officer of Ardova Plc however noted that consultation among government and private players in the domestic fuel market has improved with the introduction of the PIA.

He said that sustained subsidy in the market has caused delay in mass switch to gas usage because, according to him, petrol remains the cheapest transport fuel in the country. He called on government to displace fuel subsidy with other social and infrastructural benefits for easier social acceptability.

“To wean Nigeria off this subsidy, a lot of investment must be done to sensitize Nigerians in convincing them and finding alternatives. We need to begin to remove the subsidy and mitigate the pains Nigerians will feel when petroleum prices begin to manifest their true value.”

Mr Adeosun also demanded greater transparency and resource accountability in order to approach the pubic with convincing message.

“We need to move to an era of transparency and information dissemination,” he said.

The Oracle Today reports that stakeholders’ calls on the NNPC to make the nation’s petrol import programme transparent and accountable have not attracted the desired responses.

Stakeholders at the conference made it clear that efficient management of resources, financial disciple in government, resource accountability, resuscitation of midstream operations, and displacement of importation are necessary in transiting the downstream petroleum sector to full commercial liberalization.