Keeping the price of petrol unchanged at N162 despite increasing international crude cost is a clear indication that subsidy is back, a development completely different from what the Federal Government initially promised about a year ago.
By March 19 this year, the Nigerian downstream oil industry would be marking its first anniversary of a supposed liberalised sector and exit from payment of subsidy, which in essence meant that the forces of demand and supply would thenceforth determine the prices at which Nigerians buy petrol.
One big part of that announcement was that since the market had been essentially opened up, a horde of players will naturally come into the petrol and other associated products importation business, raising competition and eventually leading to lower prices.
However, close to one year after the announcement, indifference attitude towards deregulation, uncertainties, intrigues and a face-off between the Federal Government and organised labour unions have worsened situations for a sector in desperate need of private investments.
What exactly the government said then
Like every government before it, the Federal Government through the ministry of petroleum and other government agencies such as Nigeria National Petroleum Corporation (NNPC), gave several reasons why deregulation was the way to go.
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It stated that it was to ensure economic growth and development of the country, stop the subsidy regime because it was benefiting the rich, rather than the poor and ordinary Nigerians.
“Deregulation means that the government will no longer continue to be the main supplier of petroleum products, but will encourage the private sector to take over the role of supplying petroleum products,” minister of petroleum, Timipre Sylva, said while defending the policy in March last year.
He pointed out that in line with global best practices, the price of petroleum products would be determined by market forces, stressing that henceforth, the government’s regulatory function would be similar to that played by the Central Bank of Nigeria (CBN) in the banking sector.
“We need to free up that investment space so that what happened in the banking sector, the aviation sector and other sectors can happen in the midstream and downstream oil sector,” he said
He disclosed that the deregulation policy would attract more investments into the oil sector, create more jobs and opportunities and free up trillions of naira to develop infrastructure instead of enriching a few Nigerians.
Sylva said Nigeria plans to save as much as one trillion naira ($2.4 billion) a year after abolishing the support that the state has provided since the 1980s.
In April 2020, NNPC’s GMD Mele Kyari, in a television programme monitored by BusinessDay, said the corporation would just be another player in the downstream sector.
“As at today, subsidy/under-recovery is zero; going forward, there will be no resort to either subsidy or under-recovery of any nature. NNPC will just be another player in the market space,” Kyari said.
Current realities
Close to a year after the government initially proposed deregulation, the policy is yet to kick-off as the federal government through NNPC remains the sole importer of these products and still calling the shots in the industry as to who should import or how much marketers should sell the products they manage to get.
Also, labour unions, especially the Nigerian Labour Union (NLC) and the Trade Union Congress, which could not stand the speed at which the pump price was heading as crude oil price rebalances at the international market had held government by the throat after succeeding in reducing the price from N167 to N162 per litre.
NNPC’s group manager of public affairs division Kennie Obateru maintained that the corporation was not contemplating any raise in the price of petrol in March 2021 in order not to jeopardise on-going engagements with organised labour and other stakeholders on an acceptable framework that would not expose the ordinary Nigerian to any hardship.
He equally cautioned petroleum products, marketers, not to engage in an arbitrary price increase or hoarding of petrol so as not to create artificial scarcity and unnecessary hardship for Nigerians.
However, most marketers have ignored warnings from NNPC with queues of vehicles formed outside filling stations in Lagos, Abuja and other cities late last week and early this week an indication that the NNPC could be running low on stocks
Visits to some parts of Abuja revealed that some filling stations were shut while the others are besieged by long queues of motorcyclists, private and commercial drivers.
In Ibadan, the Oyo State capital, some commuters confirmed they were stranded following the fuel situation as commercial drivers and motorcyclists struggled to buy fuel.
In Lagos, two filling stations on Ikorodu road sold at N165 and N170 per litre to commercial drivers and private individuals with no queues.
“There was never deregulation in the first place,” Mike Osatuyi, national operations controller of Independent Petroleum Marketers Association of Nigeria (IPMAN’s) told BusinessDay. “Somebody is definitely paying for the current subsidy.”
Omowumi Iledare, a professor of petroleum economics and policy research, insisted that prices of petroleum products at the pump must remain a commercial decision, not a policy decision.
“I don’t see how NNPC can survive if it has to finance that kind of gap,” said Tunji Oyebanji, the chairman of the Major Oil Marketers Association of Nigeria and chief executive officer of 11 Plc, a large operator of filling stations.
Since 2015, Africa’s biggest oil-producing country has prioritised fuel subsidy spending over N2 trillion over funds allocated to education, health, and defence and agricultural and rural development that would have increased the economic growth or standard of living of its over 200 million people.
It maintains a dizzying number of workers to manage the business of the importation of refined petrol. Yet it spends a fortune paying the bureaucracy managing the three petroleum refineries that are even unable to produce enough petrol to power government-owned generators.
Although, for a vast majority of its 200 million people, cheaper fuel is the only benefit they see from a state that built no social-safety net for its citizens during the oil boom.
