By Sheriffdeen Tella
In the last one week, the issue of fuel subsidy took centre stage as the new leadership of the Nigerian Labour Congress is looking for ways of introducing itself. First, the leadership went into the Central Bank of Nigeria policy mismanagement threatening to go on strike if the chaotic situation did not improve. The strike was, as usual with NLC in the last 15 years, suspended before it took off.
The ‘battle’ has now shifted to fuel subsidy removal without any provocative statement from the government in recent times. The Minister of State for Budget and National Planning, Clem Agba, on 15 March, 2023, explained that no concrete decision had been agreed on when the subsidy would be removed while the Minister of Labour and Employment, Chris Ngige, informed that the matter would be handed over to the incoming government. These statements do not warrant the threat by labour unions. Possibly, it was a preemptive statement from the unions.
I have written before that there is no fuel subsidy but just a ploy to continue to siphon the country’s hard earned foreign exchange into private accounts abroad. Recently, the oil price has not gone up substantially but our output has risen, vacillating around two million barrels per day which is far better than nine months earlier. Yet, the country’s external reserves have continuously been reported declining! What has been responsible for that? Debt servicing, undefined largess to unknown poverty-stricken citizens and oil subsidy are candidates to watch.
The calls on ‘making the refineries work’ are unnecessary. The refineries cannot work anymore if they are truly not working now. None of the refineries is less than 30 years old when the technology is less advanced than what we have today. That is, the spare parts are likely out of stock and would only cost more to produce for specific requests. According to market price, a new refinery with modern technology will cost between US$6 and US$8bn while a complex one like the Dangote type is around US$19bn. What is the difference between the amount we spend annually on subsidy plus the wasteful turn around maintenance and cost of a new refinery?
I once proposed that instead of repairing the existing refineries, we should remodel them. I apologise for such a suggestion. Having checked the price of new refineries on the net and found it less expensive than I thought, I take back that suggestion. A new car is not the same as what car dealers call a Grade A Tokunbo car. So, a new refinery will always be better than a remodelled refinery. It will not require turnaround maintenance for the next 10 or more years and close the present corruption gap. The level of efficiency of the new technology driven refinery cannot be compared to a remodelled machine, just as the issue of depreciation of a new refinery will be at the minimum in the early years. We should have new refineries not remodelled.
The question now is ‘government has no business in business.’ If the government has business in refurbishing old refineries, then it has better reason to be in business of new refineries. More importantly, the new refineries will be owned and operated by the Nigerian National Petroleum Corporation Limited just as the present old ones. A country like Nigeria with weak private sector, low private sector investment and low private saving requires not just government intervention but active participation within the context of developmental form of government or what is referred to as developmental state. This is a government that is sufficiently organised and has the power to achieve its developmental goals. It is where the government tries to balance economic growth and social development using state resources and influence to expand economic activities and thus reduce the level of poverty.
In this connection, the Nigerian government will engineer economic growth by directly using the country’s human and non-human resources effectively. Doing so will pull the weak private sector up through its income-enhancing activities with consequent improvement in domestic saving and credit creation by banks. At the level our country is presently, the public sector has to play a leading role within Keynesian economic doctrine. That is, the state leads but gives way to the private sector eventually. Let us return to the refineries.
What happens to the existing refinery? Of course, they have to be sold off to avoid the continuous wastage of funds or funding of corruption. If the NLC and the Trade Union Congress of Nigeria have money, they can buy them. Or local and foreign investors that have money can pay immediately. The idea of saying ‘they want to sell our commonwealth’ in the case of property that is draining resources or serving as refuge for corruption should be ignored. When the old refineries are sold and become functional, they will employ Nigerians who are going to earn incomes and pay taxes to the government. The businesses themselves will generate taxable revenues. So, the government still earns revenue without spending money beyond tax administration costs.
Available information indicates that construction timeline for a modular refinery from start to production of the first barrel of processed oil is between 15 and 18 months. The question then is why have the approved modular refineries companies not been able to produce after almost three years? Why is the Dangote refinery taking so long? The answers are not far-fetched. It was due to deliberate actions of the regulators of the industrial sector, the NNPCL and others who are benefiting from the fraud called subsidy. One would have thought that NNPCL buying into Dangote refinery would have provided funds if there was shortage but it looks like deliberate efforts to delay the project production and to prolong subsidy fraud.
Let us also return to the issue of fuel subsidy, which is the topical issue of the moment. We can start asking questions on what happens to pump price of fuel in the interim while trying to build the new refineries? What is really happening now? Is there really a subsidy being paid to importers?
The International Monetary Fund in the recent past lent its voice to the issue of removal of the subsidy on fuel by the Nigerian government. But the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, in 2020 was reported to have said that the government had removed the subsidy and there was no rebuttal. When was the subsidy issue returned to the table? All allocations and actual payment of subsidy thereafter were fraud promotion. In fact, in the last six months, the pump price of oil nationally depicts deregulation.
The pump prices vary from petrol station to petrol station. The NNPCL stations have been selling fuel at the pump of N190 per litter and others such as Total, Oando and institutionalised stations sell between N190 and N200 per litter while the other private petrol stations sell between N210 and N250 per litter. This implies that the government has been unable to control petroleum supplies and prices which are typical of deregulation situations and the public seems to have adjusted to the new order.
If the government had been giving subsidy to a body, institution or any entity as they claim, they would have been able to enforce regular supplies and approved uniform prices at the fuel stations. Anyone who claimed to have paid a subsidy to some importers, at least in the last six month, should be made to refund the money. Those who are flying the kite of subsidy at this time are doing so to prepare the ground for continuous allocation of fund for non-existence subsidy. Following Shehu’s position and I believe him, the subsidy had been removed long ago.
Those who are milking this country should realise they are bringing shame to their fatherland and the continent. How can a country regarded as the largest economy in Africa also bear the tag of ‘poverty capital of the world’? It is because of institutionalised corruption like the oil subsidy case. The NNPCL needs to wash itself clean of the current accusations of missing N20bn for one to believe that its activities are clean and in the interest of Nigeria.
The NLC and TUC should clamour for building of new refineries, even through joint ventures rather than repair or remodelling of the existing refineries. That is the most economical way of stopping the fraud call subsidy.
