• Saturday, July 13, 2024
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BusinessDay

The cut in pump price of fuel (2)

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What is a very important consideration is the common knowledge that such subsidy payments never get to the intended beneficiaries as could be attested to from the experience of the country in all sectors in which subsidy had been extended, be it agriculture or petroleum products or, for that matter, any other areas where subsidies, waivers and discounts have been allowed.

The extent of the subsidy included in the importation of petroleum products has been mindboggling. As has been observed above, at some point in time the amount of this subsidy was of the magnitude of N1 trillion per annum, well in excess of the capital budget for the year. It was therefore little wonder that the level of scam that had been uncovered in the importation of petroleum products is scandalous. Even in the determination of the landing cost of the product using PPPRA template, all manner of cost heads have been included as this is seen as another veritable opportunity for rent-seeking behaviour. Why should we, for instance, include bridging cost in such calculations so that the products will supposedly be sold at the same price across the length and breadth of this country? What sense does it make to attempt to sell the products at the same price in the town through which the products are imported as well as far-flung places? And what is frustrating is the fact that products when available are often sold at a premium outside the urban centres, amounting to a complete misapplication of such provisions.

President Jonathan attempted to remove the subsidy at the end of the year 2011 but such a move was vehemently resisted leading to total lockdown of the country with unprecedented rallies and protests witnessed across various towns in the country, particularly Abuja and Lagos, which had the clear potential and danger of possibly bringing down the government. But this is a God-sent opportunity to remove the subsidy and completely deregulate the downstream petroleum products market in the country seamlessly, even with general elections round the corner. But the deregulation recommended here must be of the root and branch type, not the one we have been informed we currently have in the diesel and kerosene products markets for some time now. In spite of the freefall in the price of oil, diesel which is a by-product and which is supposedly deregulated had remained static at the same high price of N150 per litre. Kerosene, on the other hand, is supposed to be sold at N50 per litre but not many people get the product at that price. In appreciation of this fact and, as some have alleged, because of the need to score electoral points, the NNPC recently embarked on a scheme which it tags Kero-Correct, with a view to making kerosene available, accessible and affordable at all NNPC mega-stations and affiliated stations throughout the country. Therefore, something must be wrong with this manner of deregulation. It must be noted that the deregulation we canvass here is the one in which the public sector will have no part to play except to regulate and control the market. It bears emphasizing here that deregulation does not connote absence of any regulation, otherwise the bottom-line is that customers will be taken to the cleaners as it is currently being experienced in the diesel and kerosene product markets.

We have heard sentiments expressed by some legislators to the effect that in view of the crashing price of oil, the SURE-P budget of about N103 billion as included in budget 2015 is dead on arrival. One would wish to sound a note of caution as the SURE-P programme now has a life of its own. It has a board and accompanying institutional arrangements. Also, considering the laudable projects, such as lifesaving health-related programmes aimed at increasing life expectancy, HIV/AID mother-to-child transmission counterpart funding, the fight against malaria and inoculation programmes; considering the many beneficial infrastructural development programmes embarked upon leveraging on the SURE-P budget, as well as some targeted job creation programmes, such as Graduate Internship Scheme, Women and Youth Community Service Scheme, which have so far impacted the unemployment situation in the country, it would be wasteful to terminate SURE-P prematurely. Therefore, whatever we do, no efforts must be spared in avoiding any measures which would undermine the existence and continued relevance and effectiveness of the SURE-P scheme. And we must also seize this opportune moment to terminate the subsidy regime in the country forthwith and open up the product market to aggressive participation by the private sector through, for instance, the setting up of refineries, which Dangote has promised he would pioneer come 2017 to commence the termination of petroleum product importation in the country.

Boniface Chizea