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Chanchangi, Albarka shun new air fares

LogoDaily 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 products.  

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 Abubakar.

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 the country.

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 attractive.

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 pockets?

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 political impact.

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.




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