*NNPC says subsidy to end February 2022 *Price hike unacceptable – Labour *Deregulation based on imports not welcome – TUC
Chuks Isiwu & Mkpoikana Udoma
Lagos — In what appears to be a gathering storm, organised labour, the civil society and some other stakeholders have expressed strong opposition to the planned hike in the pump price of petrol from the current N160 to about N340 per litre. In rejecting the price hike, the Nigerian Labour Congress, NLC, said “Nigerian workers refuse to take the bait” and that “the contemplation by the government to increase the price of petrol by more than 200 per cent was a perfect recipe for an aggravated pile of hyper-inflation”. The association has, therefore, vowed to resist any hike in the price of the petrol, also known as the premium motor spirit, PMS.
Industry operators and some analysts though support the plan with a business and financial analyst, Mr Ignatius Chukwu, saying the fuel market must be deregulated and that government must stop fixing fuel prices. “If Nigeria does not kill subsidy, subsidy will kill the country,” he said.
Subsidy to end February 2022 – NNPC
Group Managing Director and Chief Executive Officer of the Nigerian National Petroleum Corporation Limited, NNPC, Mallam Mele Kyari, had recently dropped hints on the planned hike in the price of the product when he disclosed that the nation would finally exit the fuel subsidy regime in February next year and that with that, the pump price of petrol would range between N320 and N340 per litre.
Speaking at the presentation of the World Bank Nigeria Development Update, November 2021 edition titled “Time for Business Unusual”, Kyari stated that subsidy would have been eliminated in 2020 but certain factors prevented it. He, however, said the law provides that by the end of February 2022, the nation should be out of the subsidy regime.
“There will be no provision for it legally in our system, but I am also sure you will appreciate that government has a bigger social responsibility to cater for the ordinary and therefore engage in a process that will ensure that we exit in the most subtle and easy manner,” he said.
Kyari stressed that fuel subsidy removal would definitely be achieved in 2022 as it was now fully backed by law and that the price of the product may range between N320 and N340 per litre.
The presentation of the World Bank Nigeria Development Update turned into a forum to drive the campaign for fuel subsidy removal as both the Kaduna State governor, Nasir El-Rufai, and the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, at the event, spoke up extensively in support of the plan. The World Bank Lead Economist for Nigeria, Mr Marco Hernandez, also learnt his voice to the campaign, urging Nigeria to choose between continuing “to pursue a business-as-usual policy” or taking bold measures that would put Nigeria on a robust and sustainable long-run growth trajectory.”
El-Rufai, during the event, expressed backing for the move, saying that if the regime of fuel subsidy was not eliminated, 35 out of the 36 states of the federation may not be able to pay salaries in 2022.
According to him, kerosene which matters most to the masses had been regulated without any hitches, while diesel which was most important to transporters had also been regulated for a long time.
“This hullabaloo about petrol is something that we must as a country have a conversation and agree that it has to end.
“We cannot continue to provide petroleum to our neighbouring countries, which is what we are doing.
“Why are we doing this? For whom are we doing it? Who is the beneficiary? Which is the cabal that is the beneficiary of this and why should they hold this country to ransom and bankrupt the Nigerian economy?” El-Rufai queried.
He continued: “Right now, we are losing N250 billion a month and this has to end. State governments are committed to supporting the Federal Government on this.
“We do our bit, engage stakeholders and put the facts on the table so that everyone understands the danger the country is in if the subsidy continues, as well as the benefits that will accrue.
“Not only to the budgets of the states and their capacity to deliver social services, but also what will go directly to the pockets of the poorest Nigerians that will bear the brunt of any withdrawal of subsidy.
“This is the position of the state governments and we met just a few days ago to take this position.”
The governor maintained that the governors saw the dangers in continuing on the path of petroleum subsidy and support policy measures needed to improve the fiscal situation, such as price stability.
This, he said, was by ensuring that there was alignment of the exchange rate and good coordination between fiscal and monetary policy.
Ahmed, on her part, spoke on what the Federal Government was planning ahead of the subsidy removal that would orchestrate the increase in fuel prices. She stated that ahead the mid-2022 targeted period for the complete elimination of fuel subsidies, the government planned to introduce a N5,000 palliative to cushion the effect of the price hike for some Nigerians,’
The minister said: “We are working with our partners on measures to cushion potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40 per cent of the population.
“One of such measures would be to institute a monthly transport subsidy in the form of cash transfer of N5,000 to between 30 to 40 million deserving Nigerians”.
She also said: “We intend to accelerate our structural reforms, particularly in the power sector, in governance, in business environment to unlock the huge potentials of the economy, scale up social safety net and deepen financial inclusion to reduce poverty and inequality gaps.”
Labour says price hike unacceptable
The Kyari revelation, El-Rufai’s comments and Ahmed’s explanations have potentially ignited fire on the matter. Responses from organised labour, the civil society and some other stakeholders have been largely that of opposition.
The Nigeria Labour Congress, NLC, has, in its reaction, rejected the plan. Ayuba Wabba, the NLC president, in a statement entitled “Nigerian workers refuse to take the bait’’, said the contemplation by the government to increase the price of petrol by more than 200 per cent was a perfect recipe for an aggravated pile of hyper-inflation and astronomical increase in the price of goods and services.
According to him, “this will open a wide door to social consequences such as degeneration of the current insecurity crises”.
Wabba described as “comical” the bait by the government to pay N5,000 to 40 million Nigerians as palliative, to cushion the effect of astronomical increase in the price of petrol.
He pointed out that the amount involved in the “queer initiative” was far more than the money government claimed to spend currently on fuel subsidy.
According to him, the disclosures by the NNPC group managing director and the minister were in symphony with the positions of the World Bank and the International Monetary Fund, IMF, which urged the Federal Government to do away with fuel subsidy.
“The response of the NLC is that what we are hearing is the conversation of the Federal Government with neo-liberal international monetary institutions,” he said.
He informed that “the conversation between the government and the people of Nigeria, especially workers under the auspices of the trade union movement on the matter of fuel subsidy, was adjourned sine die so many months ago,” wondering how the government could suddenly wake up with talks of removing subsidy in February 2022.
He added: “Given the nationwide panic that has trailed the disclosure of the monologue within the corridors of government and foreign interests, the NLC wishes to maintain its rejection of deregulation based on import-driven model.
“We wish to reiterate our persuasion that the only benefit of deregulation based on import-driven model is that Nigerian consumers will infinitely continue to pay high prices for refined petroleum products.
“This situation will definitely be compounded by the astronomical devaluation of the naira which currently goes for N560 to one U.S. dollar in the parallel market.”.
A religious group, the Pentecostal Fellowship of Nigeria, PFN, called for a suspension of the subsidy removal. In a statement on the issue, the fellowship held that the move would worsen the plight of the majority of Nigerians already impoverished by the harsh economy.
Bishop Wale Oke, the president of PFN, said the development could trigger crisis in the country as it would lead to an increase in the price of fuel, which would have a ripple effect on prices of goods and services.
“The cost of transportation for human and goods across the country will skyrocket and other things connected which will have a spiral effect on general living standard of the populace; the suffering will be multi-dimensional. Please let all stakeholders be sensitive to this avoidable path and do the needful.
“By whatever means, let the Federal Government put its heart into ensuring that our refineries are back to life. In addition, in order to stem the rising cost of living, farmers and others connected to them should be encouraged. This is what can help our economy,” he asserted.
On the government plan to introduce N5,000 palliative for 40 million poor Nigerians, he said the move “is to create a cesspool of corruption”. “How do you define the poor? They, mostly, don’t use telephones. They, mostly, don’t have bank accounts. How will the money get to them?” he asked.
Fix, commercialise NNPC refineries – TUC
Other labour leaders and some analysts wondered how the government wanted to keep regulating the price of what it does not produce. They also expressed wonder that the government, which hitherto said fuel subsidy was a fraud, had kept the scheme going and is still discussing the issue more than six years after coming into office.
They maintain that the nation’s four refineries in Warri, Kaduna and Port Harcourt must be made to operate optimally, and local refining capacities must be increased, to avoid crashing the naira and making it less valuable than a tissue paper.
The Trade Union Congress, TUC, in Rivers State, said the government must commercialise the four national refineries to operate optimally, using the Nigeria LNG, NLNG, model.
Secretary of TUC in Rivers State, Engr Fortune Obi, maintained that fixing the price of imported commodity was not a welcome development.
According to him: “It is not a welcome development. There is nothing good about deregulating an import-based commodity. The way forward is for the government to rehabilitate the refineries and fully commercialise them using the NLNG model.”
Meanwhile, the Youths and Environmental Advocacy Centre, YEAC, advocated for development of local refining capacities, including issuance of licenses for genuine investors for the establishment of modular refineries, especially for artisanal crude oil refiners, maintaining that increased local refining will crash fuel prices.
Executive Director of YEAC, Fyneface Dumnamene Fyneface, expressed shock that the government was still paying subsidy on fuel, after Presidential spokesman, Garba Shehu, announced in July 2020 that there was no more subsidy on PMS, which, he said then, was why fuel was costing N162 per litre.
“The planned increment is unacceptable as it would expose Nigerians to more hardship. Nigerians are currently suffering following the country’s harsh economy coupled with inflationary trends. The citizens can’t afford to pay extra for PMS,” he stated.
Fuel market must be deregulated – Analyst
A business and financial analyst, Mr Ignatius Chukwu, however, said the fuel market must be deregulated, and that government must stop fixing fuel price.
Chukwu, who maintained that if Nigeria does not kill subsidy, subsidy will kill the country, explained that whether subsidy is removed or not, inflation will still occur, due to too much borrowing.
He asserted: “My position is that fuel market must be deregulated. Government should come out of deciding the price of fuel. I support that market forces should decide price per day. Doing deregulation and still fixing price is wrong.
“Pumping money to subsidy and borrowing to back it drives in inflation too. It also supports corruption. FG can maintain subsidy till Dangote refinery starts work. Then, you have government fuel and Dangote fuel. The buyers will choose.
“Then, government can announce full deregulation. What you gain in subsidy, you lose in many other ways. If Nigeria does not kill subsidy, subsidy will kill Nigeria.”
World Bank connection
Many observers say the Federal Government, in deciding to end fuel subsidy in February next year, is merely dancing to the tune of the World Bank and the International Monetary Fund, IMF. Wabba, the NLC president alluded to this when he described the plan as “the conversation of the Federal Government with neo-liberal international monetary institutions”.
Indeed, this assertion of connection with the Bretton Woods institutions might not be entirely out of place. The World Bank Nigeria Development Update, November 2021 edition presented in Abuja actually recommended subsidy removal for Nigeria by the middle of next year.
Moreover, the Minister of Finance, Budget and National Planning, Zainab Ahmed, in making her case for subsidy removal, had expressed agreement with the recommendations of the World Bak on the matter, saying: “We are working with our partners on measures to cushion potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40 per cent of the population.”
She added: “I agree with the report that with the expansion of social protection policies during the pandemic, the government has an opportunity to phase out subsidies such as the petroleum subsidy while utilising cash transfers to safeguard the welfare of poor and middle-class households”.
Mr Hernandez, the World Bank Lead Economist for Nigeria and co-author of the report, had, in his submissions on the subsidy removal, argued that while the Federal Government plans to spend about N3,000 per person for health in 2022, it could spend as much as N13,000 per person on fuel subsidy during the year.
He maintained that the issue was not only that petrol subsidy was costly, but that it majorly benefits richer households.
He further argued: “Nigeria has the opportunity to establish a contract with citizens that eliminates the subsidy and uses the savings to provide targeted cash transfers to lower-income-households, invest in job-creating programmes, and improve its fiscal position.”
He added: Nigeria faces a critical choice: it can continue to pursue a business-as-usual policy approach while its economy and job market deteriorates, or it can undertake bold measures that put Nigeria on a robust and sustainable long-run growth trajectory.”
The report itself describes subsidy removal as one of the urgent policy priorities that could be implemented over the next three to six months “put Nigeria on a robust and sustainable long-run growth trajectory.”
It suggests eliminating petrol subsidy while protecting poor and vulnerable households from any inflationary impact and reducing inflation through a coordinated mix of exchange rate, trade, monetary and fiscal policies.
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