Nigeria is Africa’s largest producer of crude oil, nevertheless, it remains the continent’s largest net importer of petroleum products.
Since the discovery of crude oil in the Niger delta in early 60s, the country’s economy has largely been run by proceeds from the sale of crude oil. Yet, there has continued to be a total neglect of the four refineries in the country by successive governments.
The four refineries; Warri Refinery, Kaduna Refinery, and the two Port Harcourt Refineries, have a combined capacity of 445,000 barrels per day. However, the Nigeria National Petroleum Corporation, NNPC, whose responsibility it is to run these refineries has over the years managed to run them aground.
Sadly, these refineries have become more of national relics, producing next to nothing despite huge budgetary allocations each year on what is termed ‘Turn Around Maintenance’.
The failure of NNPC to refine crude locally, has led to the continuous importation of refined petrol such that over 90percent of PMS used in the country is imported.
Fuel subsidy is a government programme created to reduce the impact of the cost of the product on Nigerians, as well as protect the citizens from crude oil volatility on the international market.
It is a form of price control whereby the government fixes the pump price of fuel and pays the retailer the difference between the actual market price and the regulated or official price per litre.
The fuel pricing strategy was first introduced in 1970 during the Arab -Israeli conflict that resulted in the global oil price skyrocketing. This was put in place to shield Nigerians from the surge in oil price in global market, and to keep the price of oil at an affordable rate for Nigerians.
Over the years, there has been attempts by successive governments to remove fuel subsidy. But none has been successful. President Shehu Shagari’s government increased the price of petrol in 1982, from 15.3 kobo a litre to 20 kobo. Though this happened without the government making reference to easing subsidies.
In 1986, President Ibrahim Babangida announced a partial removal of oil subsidies, which saw petrol price rise from 20 kobo to 39 kobo per litre. This followed his implementation of the Structural Adjustment Program as set out by the International Monetary Fund.
There was a huge uproar against the decision, which reached a crescendo when workers, students and civil society groups embarked on massive demonstrations across the country.
Massive and sustained protests against Babangida’s economic policies played a big role in his hurried exit from power. The administrations that followed left subsidies in place. It wasn’t until 2012 that action was taken again.
President Goodluck Jonathan parried down fuel subsides and used the savings to invest in education and infrastructure. But he encountered virulent pushbacks from labour unions, students, and civil society groups. He was subsequently forced to cut the fuel price by 30%.
In August 2021, President Muhammadu Buhari signed the Petroleum Industry Act, PIA. The law contains provision for elimination of fuel subsidies within six months.
However, labour unions have rejected government’s planned hike in pump prices, threatening nationwide protest and urging authorities to speed up work on upgrading the country’s four refineries, which have been poorly maintained for decades.
On Monday, January 24, 2022, the Federal Government announced the suspension of the removal of subsidy, consequently the suspension of the implementation of the Petroleum Industry Act 2021 by 18 months. This was announced by the Minister of Finance and Budget Planning, Zainab Ahmed, and her counterpart in the Ministry of Petroleum, Timipre Silver.
According to the government, the timing is not yet ripe for the complete removal of fuel subsidy, as inflation figures remains high and Nigerians suffering economic hardship as a result of it. Therefore, the 18-month window is to allow for further consultation with stakeholders.
As relieving as this may be to some Nigerians, the subsidy debate has continued as many see government’s choice of reclining its decision as political. They believe that the incumbent government is only continuing the subsidy just to keep them in a good stead with the people as election approaches.
Petroleum has always been heavily subsidized in the country resulting in steady increase in subsidy bill. For instance, Nigeria’s subsidy bill in 2021 was N1.15trillion, but recently the Minister of Finance requested for N3trillion for subsidy in 2022, making it an average of N270billion required for fuel subsidy monthly.
Many Nigerians have questioned the claims of over 100 million litres monthly consumption. In 2015, Nigeria’s monthly fuel consumption stood at 50 million litres, leaving the question why the sudden jump in consumption without a corresponding rise in GDP.
The argument of labour is always about building refineries and keeping the subsidy to prevent hardship on the masses.
However, the question remains how long will the country continue to fund this venture that is steadily bloating out annual budget? The government should therefore take a decisive decision about fuel subsidy in Nigeria.
All avenues of corruption and conduit pipes used to drain our national treasury in the name of subsidy must be eliminated.
Government should move beyond talk shows about needs to revive our national refineries, to actually revamping them and building new ones so as to end the regime of importation, to actually exporting refined products.
Nigeria must find a way of ending this perennial debate and tussle between government and Labour unions over subsidy removal.
