WEDNESDAY COLUMN BY USSIJU MEDANER
info@medaner.com, justme4justice@yahoo.com
The non-ending controversy over the removal of government subsidy on PMS pump price has resurfaced again and the street cum political biased discussion and disagreement is again on the rise. Some of us think it is high time we ended this once and for all; it is about time the government acts decisively to bring the gains of the oil industry to Nigeria.
I had written on this topical issue some years ago and it is quite unfortunate that the country has not since then been able to muster the will to end its non-performing subsidy regime on PMS consumption in the country. Our failure, across the board, to align with the global and economic reality of a market-led PMS pump price and to stimulate local production capacity has continued to negatively affect our economy. Opposition to every planned attempt to end the subsidy regime has always been more political as against the wellness of the nation.
The economic and developmental prospects of this natural endowment would easily be understood when we recognise what has become of the UAE and others; what has become of Dubai over the same period of oil exploration as Nigeria, as a result of possession of a similar petroleum prospect as our country. These are nations that, unlike ours, have risen from the status of backward states to a masterpiece of global development; a unique enviable state of masterclass in infrastructure and social development across the board of national essentials.
These are nations that altogether and effectively have engaged their critical industries to develop their nations’ economies, infrastructural and even social engagements. These are nations that do not allow individuals and groups within their system to hijack the benefits of any industry for personal usages, unlike what has become the norm with us in Nigeria.
In Nigeria, altogether, the oil industry hasn’t been engaged to really benefit the country. While we have gloomy records of huge daily crude productions, and on paper, the accounting record of huge income from daily sales of the product, the real net accrued income to the country from the product has never been at par with what it ought to be. Corrupt practices, including individuals and organised conglomerates have continued to take advantage of the country and through many malign setups, inclusive of the subsidy regime to milk the country.
In the past, these people with vested interest had, on behalf of the country, gone into very poorly designed oil-for-product-swap deals at about the same time when NNPC started – unilaterally – taking part of the crude oil proceeds and without reflecting it on the Federation Account or providing accountability for its retirement. In the oil boom period between 2011 through 2014, we were selling our crude for as high as $110 per barrel but our treasury receipt kept falling significantly. The balance and unaccounted revenues we lost to oil thefts by a few Nigerians. Then we played the Domestic Crude Allocation (DCA) card, originally designed to feed the nation’s four refineries but as the refineries were utterly non-functioning, NNPC unilaterally exported 75% of the DCA crude allocations without any proper retirement of the payments. It is assumed that the unremitted balances were discretionarily spent by NNPC all through to 2015; this amounts to a sum of about $6 billion yearly. The DCA became like others a node of waste and misappropriation of the national revenue from oil sales. In only 2013, the Federation Account was shortchanged by as much as $7.056 billion having received only $9.744 billion of the total $16.8 billion of the worth of the sales of the DCA crude.
Then they designed the revenue retention principle of NNPC and its subsidiaries; through the NNPC five oil trading subsidiaries, while acting as middlemen on large sales volume platform of close to 144,000 barrels per day worth of $6 billion in 2012 and raking in commission on those sales throughout the period that was never disclosed to the public or remitted any to appropriate government coffer.
The countries mentioned earlier and almost all others that are benefiting from ownership of petroleum resources are known to literally operate a deregulated petroleum industry. Here in Nigeria, we took away the country’s refinery power, and turned the blessing of the resource to a curse in disguise. Deregulating the product translates to opening up the sector totally for the free market principle to operate and thereby turning off all opportunities to rob the country of derivable proceeds while encouraging all comers’ participation that would eventually bring down prices to favour Nigerians. How do we expect the Dangotes to effectively commit to the industry and others coming in when they would not have the freedom to decide prices that encourage business? How do we expect to enjoy a replay of what we have seen happening in the telecommunication industry over the years?
While the academia has repeatedly concluded that the country would have to totally deregulate its oil and gas industry to bring home the real benefits of crude oil local value chain to the country; and government after government since the days of Abacha have been advised to go the way of deregulation by economic advisers, for political reasons, we have up till now remain glued to the unfavourable subsidy regime.
In the UAE, Dubai specifically, deregulation of the industry has since been taken and today’s pump price of PMS is 2.58 AED per litre, an equivalent of N287.93 in Nigerian currency. In Saudi Arabia with similar experience with the oil production and prospect, the pump price is 0.62 USD per liter currently, being an equivalent of N254.132 at the current exchange rate. The same is applicable in the developed western states.
These countries mostly have national oil corporations that are wholly business oriented. Saudi Arabia’s Aramco is engaged in exploration, production, refining, distribution and marketing of oil and gas. Though owned by a country, it is the world’s largest oil and gas producer. The company operates the Kingdom’s proven reserves of 332.9 billion barrels of oil equivalent, and earned an annual revenue of $465.4bn. The same is applicable to China’s Sinopec Group, China National Petroleum Corporation (CNPC), Kuwait Petroleum Corporation, Petróleos de Venezuela (PDVSA), Mexican Pemex, National Iranian Oil Company, Malaysian Petronas and others.
The summary is, the industry has stopped benefiting Nigerians; hijacked by jackals who would use any route to exploit the industry for personal gains; and obviously, the corruption embedded cum economic damaging oil subsidy regime is perhaps the most potent avenue that has been used and is still being used to swindle the country. Originally the subsidy policy was designed to pass on benefits to the poor but has since been hijacked by a few who rearranged the scheme such that the benefits started going to these few individuals.
The Federal Government paid subsidies on products that are mostly subsequently transported to neighbouring nations at the detriment of the Nigerian citizens. Currently we spent as much as N250 billion monthly to finance the fuel subsidy regime that had minimal economic impact on the common man. This was the same way we spent about N409 billion on subsidies in 2009, N667 billion in 2010 and then skyrocketed to N2.105 trillion in 2011 and spent, between 2012 and 2015, N971 billion on fuel subsidies.
Though we had expected that the President Muhammad Buhari-led Administration would have followed through with his decision to totally deregulate the industry before now, but it is never too late to do what is right. We cannot afford to, in the name of politically oriented rhetoric of the effects of subsidy removal on the citizens, continue to play into the hands of those few elements who are the real benefactors of the subsidy regime.
One after the other, inbuilt corruption in the sector must be taken care of, brought to its end; the economic sabotage via the fuel subsidy regime must also become a thing of the past – put to an end.
GOD BLESS THE FEDERAL REPUBLIC OF NIGERIA
