AGAIN, THE NIGHTMARE RETURNS – by Frank Ofili

Twenty years ago fuel scarcity almost truncated my traditional marriage. Some invited guests from far and near could not attend the ceremony at Asaba. Those who could make it had one story or another to tell. One particular guest left Lagos for Asaba three days ahead of time and still spent two whole days on the road from Lagos to Asaba. There was no vehicle going on a long journey. Those who could, charged exorbitant fares. So in order to pay lower fare to Asaba she decided to break the journey in bits because according to her, she could not forgive herself if she did not attend the marriage ceremony.

My co-workers who were coming to the ceremony from Warri arrived when the whole thing was almost over. Why? Their driver spent a good amount of time searching for fuel. Ditto another lady from Aba. One invited guest coming from Ibadan could not make it at all. The crisis then was that bad.

Twenty years later, we are still facing the nightmare called fuel scarcity. The situation today is getting worse. I bought 20 litres black market fuel yesterday along MMIA road for N5,000. The situation will certainly get worst unless the National Assembly approves the N413 billion request which President Buhari has sent to them for approval so as to enable him pay marketers.

But for me this is not the way to go. For how long will we continue with this recurring decimal? President Muhammadu Buhari must summon the political will to remove fuel subsidy completely, and the National Assembly must look beyond politics to the economically illogic of continuing with the subsidy regime. The subsidy regime is unsustainable. Besides, we cannot say we are deregulating our economy and at the same time fixing prices. It runs contra to the logic of Adam Smith’s Invisible Hand economics.

Not that the idea of subsidy is bad in itself. Under a regime of sincerity of purpose, the money saved from subsidy removal would go into providing things that would cushion the effects expected from rise in costs, especially in a mono-cultural oil economy like ours.  But sincerity of purpose has always been the bane of the subsidy regime in our country.

As far as fuel subsidy is concerned in Nigeria, there has never been transparency and sincerity of purpose by government, hence every government that attempted to remove it met with stiff resistance. Government response to the resistance has always been reactionary and at best poorly planned and executed policies which themselves end up being discontinued soon after another government comes on board.

When Babangida attempted to remove fuel subsidy, he met with stiff resistance; in the end he settled for partial removal and a palliative in the name of Directorate of Foods, Roads and Rural Infrastructure (DFRRI) headed by Larry Koinyan. DFRRI’s cardinal objective on paper was to provide roads, water, electricity, healthcare and other social amenities in the rural communities so that the effect of rising costs associated with subsidy removal would be ameliorated.

When Babangida left and Abacha came on board, he too removed fuel subsidy, but instead of continuing with DFRRI, he put in its place Petroleum (Special) Trust Fund (PTF) and appointed Muhammadu Buhari to head it. PTF had essentially the same objective as DFRRI. Abacha of course did not live long enough to continue with PTF. He died in office, and the rest is history.

Then enter General Abdulsalam Abubakar who was too preoccupied with returning the country to democratic rule to bother with the politics and economics of fuel subsidy. Abubakar spent six months as military head of state. Within that six months, he freed political prisoners including General Olusegun Obasanjo (retired). Abdulsalam Abubakar also saw to the promulgation of the country’s 1999 Constitution and organised a general election that produced the same General Olusegun Obasanjo as democratically-elected president under the People’s Democratic Party (PDP) in 1999. Thus, Obasanjo moved swiftly from prison to the Presidential Palace in Aso Rock when he was sworn-in as elected President on 29th May 1999. Abdulsalam then, is the true hero of democracy.

In 2004, Obasanjo removed fuel subsidy, and pump-head price of fuel price, along with price of other goods and services, went up. Again, Nigerians, mobilized by the Nigeria Labour Congress reacted. The country was crippled for weeks. Obasanjo responded by breaking the ranks and file of the NLC, got the National Assembly to enact the Trade Union (Amendment) Act 2005 which substantially whittled down the power of the NLC and promulgated a parallel body known as the Trade Union Congress (TUC). Obasanjo justified his action by arguing that the NLC should have limited itself to its statutory role of agitating for good condition of service for its members instead of delving into politico-economic issues such as removal of fuel subsidy.

The Trade Union (Amendment) Act 2005 removed the clause in the substantive Trade Union Act which made membership of trade unions automatic and substituted it with optional membership. This is how two developments came to be in the trade union movement in Nigeria since Obasanjo’s years in Aso Rock.

The first development was that instead of one central body of trade unions (NLC), we now have two central bodies of trade unions. These are NLC and TUC. The second development was that membership of trade unions is no longer automatic; it is now optional. All thanks to Obasanjo, the hidden objective of the Trade Union (Amendment) Act 2005 which was to undermine the capacity of the NLC to call out its members to strike action has been achieved.

But I digress. When Umaru Yar Adua became President in 2007 following expiration of Obasanjo’s second term, he reduced fuel price from N75.00 per litre to N65.00. This earned him wide acclaim. But he did not live long enough to enjoy the encomium. The man died in office. And then entered Goodluck Jonathan under the doctrine of necessity.

Jonathan’s first official decision on fuel price was somewhat like a coup d’ grace. Obviously borrowing from Obasanjo’s style, who was his political godfather at the time, President Jonathan announced fuel price hike from N65.00 per litre to N141.00 in his new year broadcast on 1st January 2012. Labour strike and pressure from civil society coalition in the name of the famous Occupy Nigeria protests forced him to reduce it to N97.00 per litre. The N97.00 per litre held until January 2015, when he announced a reduction from N97 per litre to N87 per litre. The reduction which was generally considered a Greek gift was obviously to curry the favour of Nigerians in the (then) coming March 2015 presidential election in which he was a candidate.

Worthy of note however was that the January 2012 fuel price hike was against the promise of President Jonathan’s subsidy withdrawal sensitization team comprising then CBN governor Sanusi Lamido Sanusi, Finance minister Ngozi Okonjo-Iweala amongst others. In a widely orchestrated media campaign, the team had promised Nigerians that the withdrawal of subsidy would be phased.

But they behaved like typical accountants during the public enlightenment campaigns. Instead of educating Nigerians on what they stood to gain from subsidy removal, they focused on how much government stood to save. It was no surprise therefore that Nigerians once again resisted the increase. The resistance was hinged on three main planks, viz:

–    Government failed to fulfil its promise of a phased withdrawal

–     Nigeria’s four refineries should be repaired first and made to refine petroleum products locally before subsidy should be removed;

–     Government should eliminate the supply-side corrupt regime whereby imported petroleum products that had already landed our shores, were transported inland and the cost added to the import price and subsidy still claimed on it; and

–    Government should explain what the savings from subsidy removal should be used for

In effect, the removal was like putting cart before the horse. Nevertheless, the resultant tripartite negotiation between Government and Labour and Civil Society Coalition led to the establishment of SURE-P.

The lesson learnt here was that SURE-P should have been put in place first before the fuel price hike.  The second lesson was that Nigerians were not so much opposed or concerned to fuel subsidy removal as they were about transparency, sincerity of purpose and the elimination of leakages/corruption in the system.

That being so, President Muhammadu Buhari must now summon the political will to do the following:

–    Fully remove fuel subsidy once and for all and scrap the Petroleum Products Pricing Regulatory Agency (PPPRA). This will finally put an end to the recurrence of fuel scarcity.

–    The money to be saved from subsidy removal should be used to commence building smaller modern refineries with high refining capacity. I believe the seed capital for the new refinery can sourced with relative ease if the government is serious. Then as money is saved from subsidy removal, it should be put into the project until its completion. Nigerians must see this happening in order for them to have assurance that their sacrifice would bring relief in the long run. Having been elected president on the strength of his personal integrity vis-a-viz the Change mantra, President Buhari stands better chance than any other to execute this, especially at this time. He must be courageous enough to own up to Nigerians that our existing(?) four refineries are old and obsolete and should be scrapped, or sold if any buyer comes forward. The cost of repairing them far outweighs any possible gains from it.I remember few months after he was sworn-in, government spokesmen told Nigerians that Warri and Port-Harcourt refineries had commenced operation, although not yet refining at full capacity. Now we are hearing that the same refineries are no longer refining. What happened between then and now? Sabotage, or did the government spokesmen told a lie? I opine that our existing four refineries may never work optimally again no matter how much money we pump into them in the name of repairs. They are old and obsolete; so instead of perpetually pumping money to repair them, we should rather use the money to build new ones. Even in our private lives, sometimes we are so emotionally attached to some of our personal belongings such that we are reluctant to do away with them even when it is obvious that they have outlived their usefulness. Perhaps that is what is happening to Nigeria with regard to the four refineries.

–    Government should further liberalize the downstream sector such that more indigenous operators are licensed. This will bring more competition and in the long run force down prices of petroleum products as did happen in the telecoms sector. It will also create more employment opportunities in the sector as well as sound the death knell of subsidy cabals.

–    Finally, government should increase/strengthen the regulatory capacity of the Department of Petroleum Resources (DPR) and the Nigerian Customs Service so as to avoid the kind of situation that happened during Abacha regime when black, smelly and leaded petroleum products were imported into the country

I am confident that if the government takes these steps, we would begin to bid bye-bye to the recurring issue of fuel scarcity.