Wednesday 2 December 2015

Recurrent Fuel Crisis And Subsidy Question

Fuel Scarcity
Lingering queues in petrol stations nationwide, coupled with arbitrary increase in the price of fuel, are symptoms of the abnormality in the Nigerian downstream sector. 

Evidently, the threat of sanctions by the government regulatory agencies, or even the sanctions reportedly meted to some fuel marketers, are unlikely to resolve the problem. And it does appear that a workable solution to the subsidy issue may not materialise quickly, due to obvious official difficulty in taking such fundamental decisions. While there is a consensus that government should sooner than later take a position, there is no doubt that immediate, short-term and long-term measures are required to end the impasse.

The oil subsidy question in the country has now assumed the legendary status of the tortoise that is central to every African folklore. The country is going through another lock-down with the fuel pumps short on supply; petrol being sold at exploitative prices, and as always, with the Christmas and New Year holidays close by. 

The argument is the same old one: that the government has yet to pay the backlog of subsidy owed to the marketers and for that reason, the marketers are unable to import refined fuel into the country. The irony of the claims is ridiculous, against the backdrop of a country with four refineries which, unfortunately, are unable to meet even a reasonable fraction of the populace’s needs. And this, due to no more than contrivance of the nation’s thieving elite, that had seemingly prevented the oil majors from involvement in the downstream sector.

Yet, oil marketers’ regular claim that the government owed them unpaid arrears of subsidy and their subsequent demand for payment remain at loggerheads with the conviction of many Nigerians, backed by logic and sometimes official findings, that oil subsidy is a scam and hardly exists. The government recently paid out about N200 billion in order to restore normalcy, only for the marketers to demand another supposedly outstanding N500 billion. Curiously, there is no consensus on what is actually owed the marketers, thus making the oil subsidy an opaque issue. The government has more recently approved N413 billion payment to the marketers.

Sadly, fuel subsidy in this country has become more of an imaginary supplement that government pays on the importation of refined petroleum products, especially petrol, kerosene and diesel in order to cushion its effect on domestic consumers. The argument is that what the Nigerian people pay domestically is far below the international price for a product exploited in Nigeria and therefore, Nigerians must pay the international price. This graduates into wholesale importation as the nation’s refineries are either comatose or not working at optimum capacity; and secondly, haphazard efforts of government to do Turn-Around-Maintenance of the refineries are either sabotaged or handled inefficiently.

The consequence of this is dependency on the importation of refined fuel from far flung countries. Those who profit from this contrived process are members of the oil cabal, many of whom were named by the House of Representatives Oil Subsidy Probe Report (2009-2011). Players in the sector have established that the marketers’ mischief goes to the extent of financial claims projection even before arrival of products.

The cabal appears to be a syndicate of intellectual, commercial, bureaucratic and technical actors that revel in using ‘fuel subsidy’ as a rationalisation of the looting of public treasury which costs are foisted on the suffering Nigerians. 

To resolve the issue requires firm political will; but there must be primary, medium and long terms measures to cure the body polity of this embarrassing scourge. At primary level, local refiners operating the so-called illegal refineries, which are destroyed daily by the military Joint Task Force in the Niger Delta should be collectivised into cooperatives and regulated for standard and order. They may well form the foundation of an indigenous technology. 

On the medium term, licence for modular refineries should be issued or those with licences to build refineries should be encouraged to invest in modular refineries to cure the resort to importation now that the refineries would likely gulp huge amounts for rehabilitation before they can come to the rescue. The option of investing in a new plant remains attractive. 

In the longer term, large capacity refineries should be built by private investors to complement the one being built in the Lekki Free Trade Zone expected to commence production in 2017.

Credit: Nigerian Guardian

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