With the price of crude inching up slightly in the last few
weeks, it should add no more than a few nairas to the price if indeed we want
to let market fluctuations modulate the pump price. This increase has
everything to do with government’s last ditch effort to end the scarcity, which
is caused by the inability of fuel importers to secure foreign exchange, a
problem that was in turn caused by the government’s rigid restrictions on
access to foreign exchange.
It was unrealistic to expect fuel importers without access
to Forex at the official rate to continue to import fuel with Forex sourced
from the parallel market ($1=N320) and then sell the same fuel at N86. They
would have lost money. The Forex policy was a disincentive to fuel importation
business and many importers simply stopped importing, especially since the
government announced that it would no longer pay subsidy; subsidy being the
difference between the total cost of importing fuel plus a small profit margin
and the pump price. Now, with the deregulated regime, fuel importers can source
Forex from the parallel market, import fuel, and sell at a price that would
allow them to recoup their cost and make a small margin.
In other words, the government wittingly or unwittingly
created a problem, which caused many fuel importers to quit the business, and
the same government is now deregulating the sector fully so that it does not
have to (1) pay subsidy, and (2) subsidise Forex for fuel importers. The
government also desperately wants to end the fuel scarcity, which has eroded
its political goodwill. In plain language, the government wants to kill three
birds with one stone.
Another appropriate proverbial metaphor is that the
government wants to eat its cake and have it too. It wants to subsidise neither
Forex nor the difference between the cost of fuel importation and the pump
price, but at the same time it wants fuel to become widely available. The
government wants to transfer the burden of solving a fuel scarcity problem
caused by its Forex restriction policy to Nigerians. The government is throwing
Nigerians to the jaws of fuel marketers in the hope that, as long as fuel
becomes widely available through improved supply, Nigerians will forgive the
insensitivity of the policy, especially since this will also mean the end of
the fraudulent subsidy regime that Nigerians universally despise.
It is a risky political calculation. Theoretically, once
fuel importation becomes attractive again, the resulting competition should not
only make supply abundant but should also eventually drive down the pump price.
That is theory though, which hardly conduces to reality in Nigeria. In Nigeria,
many things, including the pump price of fuel, often defy the law of gravity.
Things that go up hardly come down in Nigeria. Instead they tend to keep
climbing up.
The main problem still remains the absence of significant
local refining capacity. Along with the president, the NNPC boss, Ibe Kachikwu,
promised to fix the local refineries to enable them meet the domestic fuel
demand for petrol. Despite many proclamations of turnaround maintenance and
repairs and of purported resumption of domestic refining, it is clear that the
bulk of our fuel is till being imported and that this will continue until
Dangote’s refinery bails the government (and Nigerians) out.
Yesterday’s announcement is thus a complete surrender on the
failed promise of revamping the refineries. Had the government been able to
turn the refineries around, the questions of fuel scarcity, pricing, and Forex
restrictions would not have arisen in the first place, let alone forcing the
government to take this drastic measure.
The president will get a pass on this policy because most
Nigerian’s still trust his intentions if not his policies, and because he is
still seen as a man of integrity who does not waste or steal public money and
is not beholden to a cabal of subsidy fraudsters like his predecessor was.
However, if the scarcity does not abate and/or marketers find dubious ways to
further mark up the price, this trust will quickly vanish.
Many of those who participated in the 2012 #OccupyNigeria
movement to protest the hike in fuel price are now on the defensive, spewing
both valid and unconvincing alibis for their present indifference. There is no
need to be too defensive. I agree that the times are different. Buhari’s
personal integrity and the public trust that it engenders have erected a wall
of difference between 2016 and 2012. Moreover, in 2012, the massive subsidy
fraud had just been exposed, along with other corruption scandals, eroding public
trust in the Jonathan administration. In other words, there was an ongoing
narrative of waste and corruption that the protests mapped onto and derived
oxygen from.
That said, many of those who are only invoking circumstance,
time, and leadership as factors that make reaction to this price hike different
from that of 2012 are a tad disingenuous and are only being half-honest. If
they are completely honest they will cite another important factor that made
the protest of 2012 possible but that is absent today. In 2012, the Save
Nigeria Group (SNG), a motley crowd of ambitious politicians and activists
struck a convenient activist marriage consummated on their common opposition to
Jonathan. The activists had a different motive than the politicians but, lacking
resources of their own, they welcomed the sponsorship of the politicians, some
of them (nasir el-Rufai and Bola Tinubu) neoliberal fanatics and supporters of
fuel price increase who are now, in 2016, vehement supporters of the announced
deregulation.
#OccupyNigeria was bankrolled mostly by Malam Nasir
el-Rufai, Bola Tinubu, and other opposition politicians who provided
organisational and logistical leadership to the protests in an opportunistic
quest to discredit Jonathan and give themselves political leverage. The
movement and its opposition supporters also had the Lagos-Ibadan press, the
primary agenda-setting organ of Nigerian politics, behind them. Today, many
members of the SNG have been co-opted into the ruling APC government, and the
Lagos-Ibadan press is still upholding the Tinubu-led Southwestern elite
political consensus that brought Buhari to power.
So, even if Nigerians are as angry today as they were in
2012 over the hike in the price of petrol, they lack the financial, media, and
organisational leverage necessary to coalesce into a coherent protest movement
in the mould of #OccupyNigeria2012. Theoretically, the opposition PDP could
organise an SNC-like oppositional movement to capitalise on the popular
discontent and suffering that will trail this policy. This is however unlikely
to happen because most of the PDP politicians are busy with their EFCC troubles
and those who are not would be foolish to draw the EFCC’s attention to
themselves by funding an anti-Buhari fuel price hike mass protest.
When you strip away the big grammar and the esoteric
explanations, a few important issues remain and can be distilled into fairly
straightforward points and questions.
1. Wherever you stand on the fuel price increase, at least
we can all agree on one thing: the root of the problem is Nigeria’s
embarrassing reliance on imported fuel. No other major oil-producing country to
my knowledge has this shameful profile;
2. The Buhari administration has broken a key electoral
promise to revamp the refineries and wean Nigeria off this destructive reliance
on fuel imports. This deregulation/fuel price increase is effectively a
declaration that they’ve given up on restoring our refining capacity;
3. With crude oil being so cheap, Nigerians should be paying
dirt cheap prices for petrol, not having to pay almost twice what they had been
paying pre-scarcity. Falling crude prices should NOT result in rising petrol
prices. This defies the law of the market, and it is because we import petrol.
As things stand, the only people benefiting from our cheap crude are foreign
buyers, not Nigerians;
4. Subsidy has become a bad word in our neoliberal world,
but it is not subsidy per se that is the problem but rather how it is
administered, what product is being subsidised, how much the subsidy costs,
whether it is sustainable and for how long, and its multiplier effect on the
economy. If you can afford it, you can use a temporary, transparent subsidy
regime to support the affordable supply of a strategic national product while
you work on a permanent solution. If there is any product worth subsidising in
Nigeria it is oil.
Oil, pardon the pun, fuels the Nigerian economy and connects
to all facets of our national life, so making it affordable and available is a
national priority that should be secured even it takes subsidy to do so.
Nigerians are not opposed to subsidy per se. Rather, they are opposed to its
corruption and abuse. If there is no transparency in the subsidy regime, the
answer is not to simply throw up your hands and walk way while stiffing
Nigerians with the bill through the backdoor of deregulation. If there is
anyone in Nigeria that Nigerians believe has the integrity quotient to tackle
the rot in subsidy administration, it is Buhari. Nigerians expect him to
sanitise the subsidy regime with a combination of courage and personal moral
capital until domestic refining fully recovers and makes importation and
subsidy unnecessary;
5. Deregulation is only a short term, knee-jerk
half-solution. The real, permanent solution for providing affordable petrol to
Nigerians is to revamp our domestic refining capacity so that 100 percent of
Nigerian fuel consumption is supplied from domestic refineries, as used to be
the case. Unlike in the past, this will now be achieved through a symbiotic mix
of state and private refineries. Taking easy shortcuts will not solve the
problem at its root. On this score, one thing that may come to the government’s
rescue is Dangote’s refinery, which will begin operation in two years;
6. The loss of refining capacity is a twenty-year old
problem, so Buhari should not be blamed for it. However, he promised to reverse
it and Nigerians voted for him on that premise. Not only that, his junior oil
minister, Ibe Kachikwu, has been running upandan (I like that Nigerian word!)
excitedly telling the country that domestic refining was being restored only to
basically throw in the towel;
7. The government has essentially fobbed off the subsidy to
Nigerians. It is a pattern. If the government can’t fix a problem, it dumps it
on Nigerians.
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