Fuel price hike: TUC, NLC to boycott talks with govt


19 September 2011, Sweetcrude, Abuja- Crisis looms in Nigeria as both the Trade Union Congress (TUC) and the Nigeria Labour Congress (NLC) are poised to boycott planned talks today with the government on the move to deregulate the downstream petroleum market and hike the price of a litre of petrol to N150.

President-General of Trade Union Congress (TUC), Peter Esele, says the union will not be a part of the negotiations while one of the deputies of the Nigeria Labour Congress (NLC’s) hierarchy, Kiri Mohammed, now deputising for the NLC President, Abdulwaheed Omar, said yesterday he had rejected the assignment to participate in the talks.

Mohammed, said he had gone to Dutse, Jigawa State, where he works at the pension board. In his absence, the lot falls on either Promise Adewusi or Joe Ajaero who are the other deputy presidents. Mohammed had earlier announced NLC’s scheduled rally in Abuja for Thursday to protest the state-of-the-nation.

Esele alleged that government was broke and that it was searching for ways to get cheap money to finance its projects without first pruning its re-current expenditure.

He said he was requested to attend the meeting, “but we (TUC) will not attend. I also know that government is proposing N150 pump price per litre of petrol. We ask how do you do that? There is no infrastructure in place and the recurrent expenditure is as high as 70 per cent. Even a businessman does not run recurrent expenditure of more than 40 per cent talk less of the government of a country. They are quick to announce salary payment as reason for this jerk up, but I ask how much is paid on salary yearly?”

Maintaining that the government pays only N11 billion on salary yearly with the new minimum wage to its workers, he asked for answer from governmnet on how much it was expending on maintaining ministers, special advisers, senior special advisers, ambassadors, governors, commissioners and National Assembly members yearly.

He alleged that what they call constituency project is a fraud and “yet the government is not interested in plugging all these leakages but interested in removing fuel subsidy. We will resist that unless there is infrastructure for the people.”

Esele stressed that government is not coming to the negotiation table with something new, saying, “they are not coming to the table with any new idea and therefore nothing new to discuss.”

Announcing NLC’s plans for the protest rally in Abuja at the weekend, Mohammed said: “In the midst of mass suffering despite our huge natural resources and income, it is provocative for the government to want to further increase the price of petrol. In fact, this will tantamount to cruel injustice against the Nigerian people.

“The primary motive for this planned price increase is the insatiable greed of some politicians to get more money to squander; they see an increase in fuel prices as easy way to access more of the country’s wealth. There is also the calculation to render the new minimum wage worthless by embarking on a hyper inflation-inducing project like the astronomical increase in the prices of petroleum products.”

Also, governors of the 36 states of Nigeria are poised for another showdown with the Federal Government over the latter’s continued deduction of huge amount of money from the Federation Account for fuel subsidy.

In their renewed opposition to the policy, the governors said at the weekend that it was no longer relevant because ordinary Nigerians meant to be the major beneficiaries of the scheme had been sidelined.

The governors further said that the Federal Government is violating the provisions of the Constitution and an earlier agreement they reached on the matter by persistently deducting money for fuel subsidy from source in the Federation Account.

Niger State Governor Mua’zu Babangida Aliyu, who made his colleagues’ position on the matter public in Osogbo, Osun State at the weekend, said the government was breaching the agreement the parties reached that the deduction be stopped.

Aliyu lamented that the deduction, which the governors challenged in court, still continues despite an out-of-court settlement sought by the federal authorities on the matter.

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  • . Rome was not built in a day this makes me ask the question, must susbidy be removed in a day? Govt says it is for Good but which govt will suffer and I mean suffer it’s citizens all in the name of developing it’s economy? If our leaders realise that the man on the street that goes 0-1-0 in a day may now go 0-0-0 cos of hike in all things money can buy, then may be they will change their minds on the outright removal of susbidy. My sincere plea is let govt embark on this removal in stages and develop the economy also provide another alternative before the ONLY alternative of the Nigerian people is taking away. Finally Mr President please do not let your good be evil spoken off as it seems right now

  • Kunle, Bola, and Agboola can you pple read this and tell if truly there is subsidy.On December 10, 2011, if you soptped at the Mobil filling station on Old Aba Road in Port Harcourt , you would be able to buy a litre of petrol for 65 naira or $1.66 per gallon at an exchange rate of $1/N157 and 4 litres per gallon. This is the official price. The government claims that this price would have been subsidized at N73/litre and that the true price of a litre of petrol in Port Harcourt is N138/litre or $3.52 per gallon.They are therefore determined to remove their subsidy and sell the gallon at $3.52. But, On December 10, 2011, if you soptped at the Mobil Gas station on E83rd St and Flatlands Avenue in Brooklyn, New York, USA, you would be a able to buy a gallon of petrol for $3.52/gallon. Both gallons of petrol would have been refined from Nigerian crude oil. The only difference would be that the gallon in New York was refined in a US North East refinery from Nigerian crude exported from the Qua Iboe Crude Terminal in Nigeria while the Port Harcourt gallon was either refined in Port Harcourt or imported. The idea that a gallon of petrol from Nigerian crude oil cost the same in New York as in Port Harcourt runs against basic economic logic. Hence, Nigerians suspect that there is something irrational and fishy about such pricing. What they would like to know is the exact cost of 1 litre of petrol in Nigeria .We will answer this question in the simplest economic terms despite the attempts of the Nigerian government to muddle up the issue. What is the true cost of a litre of petrol in Nigeria ? The Nigerian government has earmarked 445000 barrel per day throughput for meeting domestic refinery products demands. These volumes are not for export. They are public goods reserved for internal consumption. We will limit our analysis to this volume of crude oil. At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding /development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel.Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official prices are too high. Let us continue with some basic energy economics.The government claims we are currently operating our refineries at 38.2% efficiency. When we refine a barrel of crude oil, we get more than just petrol. If we refine 1 barrel (42 gallons) of crude oil, we will get 45 gallons of petroleum products. The 45 gallons of petroleum products consist of 4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of refining capacity, we have about 170000 bbls of throughput refined for about 13.26 million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet fuel.This is not enough to meet internal national demand. So, we send the remaining of our non-export crude oil volume (275000 barrels per day) to be refined abroad and import the petroleum product back into the country. We will just pay for shipping and refining. The Nigerian government exchanges the 275000 barrels per day with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR) in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal. The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49 according to the government. The cost of a litre is therefore (N123.32+N15.49) or N138.81 . This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms, one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline, 9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is refined.Using a netback calculation method, we can easily calculate the true cost of a litre of imported petrol from swapped oil. The gross product revenue of a refined barrel of crude oil is the sum of the volume of each refined product multiplied by its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel would be (174.48*0.066 +148.54*0.207+172.22*0.306+ 53.5*0.095+129.68*0.326) or $142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products to Nigerian consumers. The net cost of swapped petroleum products would therefore be $142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of $36.86 per barrel of petrol or N34.45 per litre.This is the true cost of a litre of imported swapped petrol and not the landing cost of N138 per litre claimed by the government. The pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel (N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre). The government therefore argues that the “subsidy” is N138.81-N65 or N73.81 per litre. But, if landing cost of the petroleum products is at international price ($148.54 per barrel), then the take-off price of the swapped crude oil should be at international price ($107 per barrel). This is basic economic logic outside the ideological prisms of the World Bank. The traders/petroleum products importers and the Nigerian government are charging Nigerians for the crude oil while they are getting it free.So let us conclude this basic economic exercise. If the true price of 38.2% of our petrol supply from our local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre, then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official price is N65 per litre and the true price with government figures is about N34 per litre (even with our moribund refineries).There is therefore no petrol subsidy. Rather, there is a high sales tax of 91.2% at current prices of N65 per litre. The labor leaders meeting the President should go with their economists. They should send economists and political scientists as representatives to the Senate Committee investigating the petroleum subsidy issue. There are many expert economists and political scientists in ASUU who will gladly represent the view of the majority. The labor leaders should not let anyone get away with the economic fallacy that the swapped oil is free while its refined products must be sold at international prices in the Nigerian domestic market.