Subsidy and profits from crude oil by-products

By Victor Emejuiwe

The recent increase in the cost of petrol from N680 per liter to N1000 per liter has further deepened the cost-of-living crisis in Nigeria. Nigerians had expected that with the kick off production of the Dangote Refinery, the prices of petrol will drop, but this has not been the case. Rather what we are currently witnessing is a back and forth between NNPCL and Dangote refinery on the modalities for petroleum off take and price fixing. While this is ongoing, several appeals have been made by various stakeholders to the president and NNPCL to revert to the old price of petrol. The president had rather insisted that there is no going back on the new pump price.
The reasons given for the hike in the cost of petrol is as a result of the high cost of production and the landing cost of the refined product which brings it to the current price or a little higher. Some circles of persons in the society may understand this position and align with the government’s decision but this is not so for 133 million poor Nigerians who would not be able to cope with further sufferings associated with full deregulation of the downstream sector. To reduce the sufferings of the masses, the federal government must continue to find solutions to reduce the price of PMS.
One of such effective solutions is for government through the NNPCL and Dangote refineries to consider divesting a good part of its profits from all other by-products of crude oil as subsidy relief on petrol. It is a known fact that there are other commercial products that could be gotten from crude oil. Beyond Petroleum Motor Spirit, Wikipedia reports that up to 6000 products can be gotten from crude oil. Five major products beyond PMS are jet oil, diesel, liquified natural gas, petroleum lubricants used for engine oil, grease, petroleum jelly, etc. The profits made from the sales of these crude oil by-products should be ploughed back to PMS as subsidy. The target should be to reduce the current PMS price to at least 50 per cent while maintaining profit from other by-products. Available research shows that some companies like Saudi Aramco in Saudi Arabia and Kuwait National Petroleum Company are already implementing this subsidy measure on PMS.
Rather than Mr. President maintaining a tough stance on the increase in the price of petrol, the above measure should be given due consideration. Nigerians have also placed so much expectations on Dangote Refinery to reduce the burden of high fuel cost, the DRL should be magnanimous enough to fit into the expectation of Nigerians just like its counterpart in the aviation industry, Allen Onyema, who magnanimously crashed the price of international flight. The DRL should consider subsidising the cost of PMS by leveraging on profits generated from the other by-products of crude oil. By doing so, the company would continue to earn the good will and massive support it has been getting from Nigerians. This company could regard this as its own corporate social responsibility to Nigerians.
For any subsidy regime to thrive, the government must take practical measures to ensure that the independent petroleum marketers sell PMS at the approved subsidy rate, irrespective of where they source their products from. The Independent petroleum marketers have taken advantage of the situation to manipulate the supply and price of PMS. The clamour for subsidy removal in the past was as a result of diversion of subsidised petroleum products to neighbouring countries where these products were sold at higher rates to the detriment of the product availability in Nigeria. Under a renewed subsidy regime, the sharp practices of the independent petroleum marketers must be curtailed by the government and where necessary the licenses of errant marketers should be revoked.
In conclusion, the primary objective and responsibility of the government is to guarantee the welfare of its citizens, this is enshrined in our constitution. The President Bola Ahmed Tinubu administration should do more to address the hardship in the country. The government must consider the fact that Nigerians have not recovered from the hardship experienced under President Muhammadu Buhari. President Tinubu must make efforts to reverse the trend.
The president should also consider the fact that the demands of Nigerians to end hunger and return petrol subsidy is justifiable given that the national minimum wage in Nigeria is one of the lowest in the world. Nigeria is also experiencing a low or under-employment crisis coupled with hyper-inflation which the majority of the population do not have the earning capacity to deal with. Hence subsidy on PMS is imperative!

Victor Emejuiwe is the M&E/Strategic Communication Manager, Centre for Social Justice, Abuja