A Review of the Nigerian Energy Industry

Fuel subsidy: Don’t burn down this house

18 November 2011, Sweetcrude, ABUJA – THE Labour of our heroes past shall never be in vain”. The ongoing exchanges (not yet a debate) in Nigeria about removal of subsidy on petrol can be likened to a dialogue of the deaf and the dumb. The two opposing sides are so intransigently pitched and do not understand themselves.

Only vision and wisdom can intervene and avert what could erupt in a conflagration, the magnitude of which this nation has not yet seen. The arguments have so far been emotive and completely non-rational.

Due to the pitiable low level of general education of the polity, informed debate is in very short supply and this applies to every spectrum of our society. This contributor together with others in parliament are bringing a bill for a radical reform of mandatory enforceable minimum education standards which we hope will address this national decline in illiteracy. Details of this will be for other fora.

Volumes have been written for and against the removal of government subsidy on petrol. Subsidy on kerosene, Petroleum Minister, Diezani Alison-Madueke says, will stay. Diesel of course is currently deregulated. In a country where the reading population is a miniscule minority operating on a short fuse, it seems to me futile to rehash these now hackneyed arguments. There are, however, few basic ground data we have to contend with. The economics of producing and marketing petrol under the current arrangements for Nigeria show that it costs more than N65 to deliver a litre of petrol at the pumps. Again one is not delving into the underlying contributory factors some of which are questionable.

The second fact is that nobody goes into business to pile up losses and debts, otherwise that enterprise will eventually run into bankruptcy. A follow up is that government has no business producing and selling petrol as it just can’t handle it. Hard evidence from across the globe has established that GOVERNMENTS HAVE NO BUSINESS BEING IN BUSINESS. Governments provide the infrastructure and the private sector runs business.

The terrible state in which Nigeria is currently mired as a result of bunkering, smuggling, porous borders, malfeasance, plain dishonesty and stealing at all levels of operation make it easy to get our heavily subsidised fuel across our borders. So, Nigeria is literally supplying our subsidised, cheap fuel to our African neighbouring countries. It is only a matter of time before the Nigeria’petrol cow’dies.

A majority of Nigerians see cheap petrol as their natural entitlement and their share of the proverbial national cake. This argument is buttressed by the fact that a number of countries in OPEC such as Iran, Kuwait, Qatar, Saudi Arabia, UAE, Libya, and Venezuela still sell petrol at less than N65/litre. The difference, however, is that these countries have functional refineries which supply their domestic needs whereas Nigeria has crippled and limping ones and we must therefore import to satisfy 150 million Nigerians. This has huge security implications for us as a nation.

The Petrol Minister tells us the subsidy on kerosene will remain as majority of the population depend on kerosene for domestic fuel. Kerosene by her reasoning should sell for N50/litre but we are all happy to pay N90 when we see kerosene. The price differential we are told is because racketeers smuggle and sell kerosene to airline operators for N165/litre. Crude refining as every chemist knows is basically fractional distillation of crude. Biafra had so many cooking pots scattered in many locations, so petrol was readily available. One question one would like answered is: “Is it not possible to ‘CONTAMINATE’ the condensate collected as kerosene so that it is safe for the kitchen but dangerous as aviation fuel? Some scientists working in this area have suggested possible introduction of a dye as a deterrent.

Maybe we should pause again and ask rhetorically why some experts and civil society groups oppose the removal of fuel subsidy. Our experience in the management of our resources stands tall as one major obstacle.

Positions continue to harden on both sides of the fuel divide with the government insisting that subsidy will go in 2012. Organised labour which has co-opted students is smarting for a major fight and total paralysis of the system. The nation can ill afford this level of disruption. Trust between government and the governed is at an all time low and that is why we have this discussion between the deaf and the dumb. It is a common but true cliche that “where there is no vision the people perish”. And with that the entire edifice could come down. Let us always have at the back of our minds that government is about people’s well being.

In this developing conundrum, is there still a window of opportunity? The answer is a big YES. Any drastic full removal of subsidy in 2012 could ignite a conflagration. That is almost a given, as golfers say. Is it possible to plan subsidy removal over a period of two to five years? Again the answer is YES. In the interim, it is the view of this contributor that the government immediately sells the refineries to SERIOUS FOREIGN INVESTORS FOR A SONG (capitals mine). I can hear all manner of people hauling unprintable invective at me for suggesting foreign investors. I say foreign with all sense of patriotism because the Nigerian investors who bought factories (too many to name) during the Obasanjo Bureau of Public Enterprises sale have not been able to get these working and in the process generate wealth for themselves and more importantly jobs for the rest of us.

This is a major cause of current unemployment in the country. The fact is there is excess crude refining capacity worldwide and nobody is interested in buying a lame duck refinery which will cost billions of dollars to become functional. It makes more business sense for the oil companies to buy our crude, buy refined products abroad, and resale to us. They make more money with less stress. The oil companies are frightened by the monumental cesspit of corruption they must navigate through before being allowed to pay for the refineries. All this may sound unpalatable but it is about time Nigerians started telling ourselves the HARD TRUTH.

These foreign companies having bought these refineries for a token must be charged to refurbish and produce not only to meet our domestic needs but to also export and make profit. They may have to operate a two-tier pricing structure. Nigeria may in fact have to pay some subsidy directly to these companies initially to maintain domestic price equilibrium. The Armed Forces must be mobilized to secure our borders.

The summation of this contribution which should stimulate debate is that importation of refined petroleum must stop not only from the point of view of our national security and independence, but also of business profitability.

Let me conclude by reminding all Nigerians once again of Section 14(2) (b) of our Constitution which declares that: “The security and welfare of the people shall be the primary purpose of government”. Any government that ignores the emotions of the moment does so at its peril.

*Dr. EDDIE MBADIWE, a commentator on national issues, wrote from Abuja.

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