12th November, 2012
Nigerians appear to be ending the year the grim way they started it, with nationwide fuel woes. Many see it as President Jonathan Goodluck’s year end gift for the people who voted him to be their leader
Nigerians might as well be looking forward to end the year with the nagging fuel headache with which they started it. The fuel crisis that was triggered by the partial removal of fuel subsidy in January this year resurfaced in early September and has yet to abate more than nine weeks later. Queues remain at many filling stations across the country, with some not selling at all, and black market fuel hawkers making brisk business.
Against the official pump price of N97, fuel now goes for between N100 and N110 a litre in some parts of Lagos and the southwest states. It is worse in the South-east, South-south, the North and the nation’s capital, Abuja, where a litre sells for between N120 and N180, while a four-litre gallon sells for as much as N2,500 on the black market.
Critics, holding President Goodluck Jonathan responsible for the crisis, say government is creating an artificial scarcity of the product with a view to finally achieving its intention of increasing prices to as high as N150 per litre. In a shock decision on 1 January this year, the federal government had announced the removal of fuel subsidy, which caused a litre of premium motor spirit, PMS, better known as petrol, to sell for N141/litre against the old price of N65. But the backlash from the controversial decision – in the form of days of nationwide mass street protests and industrial action by organised labour – forced the government to backtrack. After days of heated negotiations between government and labour, government reviewed the pump price downward to N97/litre.
The subsidy scheme, which the government had cited was no longer sustainable, was partially restored and calm gradually returned to the sector. But the let-off that it brought only lasted a while. Two months after the chaotic opening to the year, supply issues resurfaced after petroleum marketers began hoarding petroleum products. They acted over speculations the government planned to resume the full implementation of the fuel subsidy removal policy, a fear government quickly dismissed.
But the supply issues remained as fuel marketers had since then acted with caution. Series of probe by the committees of the National Assembly and those set up by the Presidency, which unearthed massive fraud in the management of the fuel subsidy scheme, further worsened matters.
A House of Representatives committee in April found that $6.8bn had been lost to fraud and mismanagement of the fuel subsidy scheme between 2009 and 2011. “The committee believes that if the fuel subsidy scheme was properly managed, the sum of N1.070trn, or $6.8bn would have been available to the three tiers of government,” read the report of the Farouk Lawan-led panel. It added: “We found that the subsidy regime, as operated between the period 2009 and 2011, was fraught with endemic corruption and entrenched inefficiency.”
Given the damning revelations, the Finance ministry decided to scrutinise fuel subsidy payments to marketers during the 2011 financial year. It found that despite paying N1.7trn in subsidy by December 2011 and another N450bn in 2012 to clear the 2011 arrears, outstanding claims still remained from the previous year. For that, the ministry tightened subsequent verification and payment of subsidy claims by marketers, while some oil importers indicted in the fraud are now facing charges.
The measures became necessary, given that the probes revealed that scores of marketers benefitted fraudulently from the subsidy by receiving payments for fuel not imported, or receiving more subsidy claims than were due to them. The stringent measures subsequently brought headaches for marketers seeking to get subsidy payments. That momentarily led to backlog of unpaid subsidy claims, which forced the marketers to suspend fuel importation. But the Finance ministry quickly waded in to settle outstanding arrears to the marketers.
Yet, marketers have since shown an unwillingness to embark on large importation of petroleum products as they were earlier doing, due to uncertainty over the subsidy claims payment. This has partly contributed to the fuel shortage that has been experienced for weeks across the country.
But the Minister of Finance, Dr. Ngozi Okonjo-Iweala, had assured that the N888bn allocated for subsidy payments in the 2012 budget would suffice to settle the importers. “We’ve not exhausted the fund and there may not be a need for a supplementary budget,” Okonjo-Iweala had said. The FG has set aside N971bn for petroleum subsidy in the 2013 budget estimates presented to the National Assembly by the President.
Aside from the apathy shown by importers to fuel importation due to the bottlenecks of subsidy payment, the current scarcity has also been blamed on the diminutive supply capacity of the Nigerian National Petroleum Corporation, NNPC. The agency is currently the largest importer of petrol but its inadequate storage and distribution capacity has meant that the product can’t be effectively distributed to the end-users to meet the daily national supply requirement of 40mn litres. The supply problem has additionally been blamed on the NNPC’s System 2B Pipeline in Arepo area of Ogun State which was vandalised last August, and is still out of service.
The Action Congress of Nigeria, ACN, accused the PDP-led government of resorting to “underhand tactics” to increase the price of petrol. “By failing to clamp down on the filling stations selling at prices higher than the official rate, and by not ensuring the availability of the product nationwide, the administration of President Goodluck Jonathan has simply rammed a price increase down the throats of Nigerians,” read a statement by the ACN. The party accused the government of plotting “to make life more difficult for Nigerians, most of whom provide their own electricity through generators that are powered by petrol. The high fuel cost is also having a bandwagon effect on the cost of goods and services”.
Government’s pledge in the wake of the January subsidy crisis to revive the comatose refineries has seen little steam. The government claims to have earmarked about $1.6bn for their turnaround maintenance. The country’s estimated 445,000-barrel per day crude oil refining capacity, which has been left unutilised, has condemned the nation to an astoundingly expensive dependence on the importation of petroleum products for local consumption.
The labour movement too slammed the government for failing to tackle the crisis by not checking marketers selling above the official pump price. “The Department of Petroleum Resources, DPR, under the Federal Ministry of Petroleum Resources, is responsible for inspection and control of fuel stations and has not acted in any way against unilateral price increases by marketers. For us, this indicates a clear conspiracy on the part of government to force another price hike on Nigerians,” the NLC said in a statement. The labour body warned the government not to contemplate another fuel price increase, as it would worsen the hardship currently being faced by Nigerians. “The NLC will never accept any further price increase. And we will mobilise workers and their allies against any such increase.” it warned.
—TOKUNBO OLAJIDE/TheNEWS magazine