News - Special Focus - January 25, 2022

Why Nigerian govt. suspended June deadline for fuel subsidy removal

By Bassey Udo

The indefinite suspension of the June 2022 deadline for the final removal of subsidy from the country’s petroleum products pricing template was informed by the spiraling socio-economic conditions in the coutry, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, said on Monday.

At the recent presentation of the 2022 Budget details in Abuja, the Minister said latest by June this year all petroleum products in the country, including petrol, would be fully deregulated in line the procisions of the recently enacted Petroleum Industry Act (PIA).

But speaking during a meeting with the Senate President, Ahmed Lawan, to discuss issued concerning the controversy surrounding the planned removal of fuel subsidy, the Minister described the timing of planned subsidy removal as problematic.

The meeting convened by the Senate President was also attended by the Minister of State for Petroleum Resources, Timipre Sylva, and representatives of oil companies.

During the meeting, the finance minister said although a provision was made for fuel subsidy in the 2022 budget for January till June, a review became necesssry after consultations with interest groups on the prevailing socio-economic conditions in the country.

In deciding on additional provisions in the budget for fuel subsidy, the Minister said considerations were given to the rising inflation and current economic hardships in the country.

From the consultations, she said it became clear the timing for the removal of fuel subsidy as spelt out in the PIA would not only be problematic, but would worsen the socio-economic conditions of Nigerians, still grappling with rising inflation in the country.

In his contribution, Sylva said the timing for the planned removal of fuel subsidy was bad, both politically and economically.

The Senate President in his speech appealed to the leadership of the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) to reconsider their planned industrial action over subsidy removal as the suspension of the decision has rendered such exercise unnecessary.

Labour insistson strike
The decision by the government to suspend the planned fuel subsidy removal appears not to persuade the labour movement to shave its nationwide strike action scheduled for January 27, 2022.

The NLC and its affiliates have stepped up their mobilization and sensitisation of Nigerians towards the strike.

On Monday, the body wrote to the governors of the 36 states of the federation to draw their attention to the dire consequences of another increase in fuel prices at this time.

In the letter, the NLC President, Ayuba Wabba, said Organized Labour was of the view that the proposed hike in fuel price if allowed to go through would induce and impose an unprecedented degree of hardship on Nigerian workers, their families and the generality of the populace.

“The net and multiplier effects of such socio-economic dislocation, especially with regards to decent standard of living, productivity and national security are better imagined than experienced.

Wabba said Nigerian workers believed the significant amount of money paid out by the government as petrol subsidy would have been totally unnecessary if government was alive to its responsibilities of proper management of critical national assets, especially our local refineries.

The mismanagement of the nation’s four public oil refineries over the years by successive governments, the NLC President noted, was the reason the government was embarking of mass importation of refined petroleum products, resulting incessant increases in the prices of refined petroleum products in the country.

Conceding the view that no country can control the price of a commodity it does not produce, the NLC said to allow the importation of a critical national security product like petrol and other refined petroleum derivatives was akin to handing over the country’s national sovereignty to another country.

“There is no better description of neo-colonialism and toxic neo-liberalism than this. Nigerian workers believe the scourge of incessant hike in the pump price of petrol is self-inflicted and therefore totally unacceptable,” Wabba said.

Labour blamed the current avoidable crisis on th failure of the government to maintain Nigeria’s public refineries and build new ones; absence of importation price model as the template for price determination in the downstream petroleum sub-Sector, and distortions in the petroleum sector/broader go

Labour described as tragic and shameful that Nigeria is about the only OPEC member-country that cannot refine her own crude oil, despite several billions of tax payer’s money invested overhauling the country’s national refineries.
Between 2012 and now, the NLC said about $9.5 billion has been spent on Turn Around Maintenance (TAM), Greenfield Refinery Projects, apart from) public investments in private refineries.

“Nigerian workers believe there is no reason our oil refineries should not be working at full installed capacity. The predatory argument that our refineries are too old for maintenance falls flat in the face. Evidence from around the world shows that refineries that are much older than Nigerian refi

Although the NLC acknowledged the establishment of an Importation Price Model in the PIA recently signed into law, it criticised the arrangement as amounting to handing over the country’s petroleum industry to private sector investors.

“This amounts to putting the final nail on genuine efforts to recover the country’s capacity for local petroleum refining, and for affordable pricing of petroleum products for Nigerians.

“The surrender of the downstream petroleum sub-sector to a few private investors is in violation of Sections 16 and 17 of Chapter 2 of Nigeria’s 1999 Constitution.

“The challenge with Importation Price Model for refined petroleum products is that apart from being a clog in the wheel of industrialization and self-actualization, it also constitutes a grave national security threat,” the NLC said.

While Nigerian workers welcome the investment by the Nigerian private sector in the building of new refineries, Labour urged caution, as the overarching goal of private investment is profit maximization.

Given the massive size of investments in private refineries in Nigeria, the NLC expressed fears that the absence of optimally performing public refineries would eliminate competition and open the doors for monopolies and cartels at the expense of ordinary Nigerians.

Under the current importation price model for refined petroleum products, the NLC said Nigerians were being forced to pay for all manner of acquired and transferred costs, including the profit margin of foreign oil refineries, taxes paid by foreign oil companies, international shipping and logistics.

Ultimately, Labour said eall these costs are transferred to the end consumers, even as government pays a fraction of this cost as the so-called petrol subsidy.

“Apart from inflicting very harsh financial blows on the pocket of ordinary Nigerians, the retention of the Importation Price Model also fleeces the government of scarce hard-earned revenue.

“All these price distortions and inflation acquired in the process of mass importation of petrol, including the corollary implication of mass export of potential jobs and mass import of poverty, would be automatically eliminated once our local refineries are made to work at full installed capacity a

Making a case for Local Production Price Model, NLC said apart from driving industrialization for self-actualization, it would also secure the country’s petroleum industry from the volatilities and sometimes conspiracy prevalent in the global commodities market.

“We believe the present scourge of insecurity in different states in Nigeria is primarily fallout of mass unemployment and poverty. This ugly narrative can change if we strategically use our mineral assets to create decent jobs and prosperity for our people,” the NLC said.

Labour expressed concern over the crisis in Nigeria’s downstream petroleum sector, saying the situarion was further aggravated by the persisting tumult in the upstream sub-sector and broader governance challenges.

With almost 200 million barrels of crude oil reportedly lost in Nigeria’s petroleum industry in 2021, the NLC said this was as a result of crude oil theft, smuggling, ageing infrastructure, poor long-term investment, poor security of the country’s inland waterway, and challenges arising from conflicts.

More disturbing, the NLC noted, was that just like the failed TAMs, no major culprit has been arrested and successfully prosecuted by the government.

These concerns, Labour pointed out, did not signify sufficient commitment by the government that savings from the removal of oil subsidies would be invested in developing the economy and improving the lot of the ordinary Nigerian.

Over the years, Labour drew attention to evidences of weak and unconvincing commitment and investment by government in developing social and physical infrastructure as a buffer to the Nigerian people if government withdraws subsidy on petrol.

Regardless, it noted that public schools and hospitals are still in shambles forcing many Nigerians to resort to high fee charging private schools and hospitals, public power supply is still tottering despite recent privatization initiatives, forcing Nigerians and businesses to source more than 50%.

On the agreement signed by representatives of the workers with the Federal Government on September 28, 2020 to freeze further increases in the pump price of petrol, the NLC said the Memorandum of Understanding with government also agreed to set up a Technical Committee to undertake a review of the committee’s recomendarions.

The mandate of the Technical Committee comprising of relevant officers of government and affiliate unions in the Petroleum Industry, it recalled, was also to monitor and track the fulfilment of government’s promises towards taking necessary actions to revamp the country’s refineries.

After a few interactions with government, Labour expressed disappointment that discussions were suddenly adjourned sine die, with the situation remaining unchanged for nearly two years.

Apart from its insistence on its demand for the government to halt its plans to increase the pump price of petrol, Labour asked the government re-engage Organized Labour to discussions to find mutually acceptable solutions to the current quagmire in Nigeria’s downstream petroleum sub-sector.

Also, Labour asked the government to demonstrate seriousness and commitment to overhaul the local refineries as a lasting solution to mass importation of refined petroleum products, Importation Pricing Model, and a host of lost opportunities, official corruption and self-inflicted dislocations in the petroleum industry.

“Governments at all levels in Nigeria should take immediate steps to improve governance and public accountability in order to regain the confidence of Nigerians that the cardinal constitutional mandate of guaranteeing the welfare and security of Nigerians has not been traded off,” the NLC said.

Although Labour pledged its readiness to work with government to find enduring solutions to the crisis in Nigeria’s downstream petroleum sector and other areas of challenge in governance, its said planned nationwide srrike on January 27, 2022, was to alert the government on the sufferings Nigerians

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