Daily Independent Online.
Thursday, August 28, 2003.
The President and the nation
By Rotimi Durojaiye
Speaking in his monthly radio programme,
“The President speaks,” in Abuja last Saturday, President Olusegun
Obasanjo said Nigerians will continue to suffer from recurring scarcity of
petroleum products until the people are ready to pay the right price for the
He explained that the Federal Government was paying a
subsidy of N5 for every litre and the smugglers were making between N16 and N36
for each litre they moved out. In
the wake of a surprise hike in the price of petrol from N26 to N40 per litre in
June, the Nigeria Labour Congress (NLC), joined overwhelmingly by the Nigerian
people, embarked on a protest to bring down the increase. After a debilitating
eight days of nation-wide strike, government representatives in active
negotiation with NLC agreed on a pump price of N34 per litre. The reduction in price was also
extended to diesel and kerosene that came down from N38 to N32 per litre.
As justification for the increase, government mentioned that
it was spending some N250 billion a year on fuel subsidy, which money it said
could have been better utilised to improve agriculture, health, education,
transport and so on. Another
reason advanced for the increase was to ensure the constant availability of
petroleum products at filling stations thereby eliminating the perennial fuel
queues that occurred from to time.
Inspite of the evident and undiminished opposition witnessed
nationwide against the last hike in the price of petrol, it is surprising that
the president is still talking of another attempt to raise the price of petrol.
It was under the regime of late Gen. Sani Abacha that petrol
price, for example, rose from N6 to N11.
But Abacha set up the Petroleum Trust Fund (PTF) to carry out some
social services designed to cushion the effect of the hike. Whether the effort was enough,
effective, result-oriented and commensurate with the funds available to it is a
different matter. After Abacha
died, the pump price of fuel rose from N11 to N20 under Gen. Abdulsalami
It is pertinent to ask if the cost of producing petrol for
public consumption should be what it is at the moment? This, is on two excellent grounds. First, the oil industry is a secretive
and malodorous enclave. There is
no doubt that quite significant savings can be made if inefficiency, waste and
corruption are ruthlessly rooted out. The second large contributor to the cost
of getting petrol to the consumer is the politically-motivated petrol pump
price equalisation policy.
While the policy might be
defensible on grounds of national unity and even development, it has to be
realised that the nation loses a lot by it in economic terms, this is because
government subsidises the cost of transporting petrol to far-flung corners of
Secondly, the transportation of oil is characterised by
widespread abuse and corruption.
These are sources of savings that are not being addressed by the
government. Another reason usually given by government to justify the increase
in the pump price of fuel is the desire to make the smuggling of petrol less
Nothing could be further from the truth. First, petrol will always cost
significantly more in Nigeria’s non-oil producing neighbouring
countries. They simply do not have
oil, let alone a transportation subsidy.
So smuggling will always be profitable.
Besides, the President is in effect confessing an inability
to curtail petrol smuggling. This
is scandalous indeed. The nation’s security network cannot claim
ignorance of the identity of so powerful a syndicate.
Why has the country not found the will to officially market
Nigerian oil in West Africa and thus, put smugglers out of business?
Another reason usually given by government to justify fuel
hike is the need to refurbish refineries, pipelines and so on. The journey to make petroleum products
available to Nigerians, which commenced since 1974 has failed. The refining capacity of the plants
established by government under the NNPC had dwindled over the years inspite of
the huge amount expended to run them.
Is it not the case that the refineries (four of them with a
total refining capacity of 445,000 barrels per day) were to be amortised over
15 years? Has the money designated for the purpose been
spent? If it has, why is
scare-mongering being deployed to get Nigerians to pay for it from their
The government has also been arguing that since petrol costs
more elsewhere than in Nigeria, Nigerians must pay more. This is a most unworthy
instance of sophistry.
Anyone who believes Nigerians should pay the pump price of petrol being
paid in Saudi Arabia or the United States of America should make available in
Nigeria the high wages and low interest rates available in those economies.
There are a number of compelling considerations which will
make any further increase unreasonable for now. The first is the likely economic consequences.
These are likely to be wholly and entirely negative: huge
price increases system-wide, massive pressure on wage levels, run-away
inflation, more unemployment and an overall deepening of the recession. This is not to mention the likely
It is doubtful if there are good grounds for risking
additional pressures on a populace already so stretched and stressed, after
four and half years of democracy with enormous pain and precious little gain.
The reputation for fiscal rectitude of the Obasanjo
administration is, to put it mildly, at a very low ebb at the moment, the
presence of the World Bank experts in his cabinet notwithstanding.
Nigerians are groaning under the burden of having to buy
petrol at N34 per litre. They can
endure it, but they are saying no more to fuel price hike.