Removal Of Fuel Subsidy —Lateef Ajunwon

The controversy surrounding the plan to remove oil subsidy has continued to gain ground, particularly among the governors. The myopic thought of some of governors is that, only the removal of the oil subsidy could bring more revenue for them from the Federation Account, as a saving grace to bail them out of the increasing overhead burden brought about by the new minimum wage. To them, the N18,000 minimum wage cannot be paid unless their share of the national cake is substantially increased through removal of oil subsidy.

It is therefore an economic blunder for any government in Nigeria of today, to remove the so-called subsidy on petroleum products. This is not the best of time to think in that way. Such resolve would only lead Nigeria to economic suicide, which would neither favour all levels of governments, the private sector, which clamours for subsidy removal, or the common man, who is bound to bear the burden for the following reasons:-

1. Prices of goods produced in the country would automatically increase.
2. Transportation fares would sky rocket to the extent that the common man would be forced to make most of his trips around his vicinity on foot.
3. Health care delivery would also be affected adversely since the common man may find it difficult to raise money to treat himself.
4. The notion that the money accruing from subsidy removal would be used to provide infrastructure to accelerate  economic development would be a mirage.
5. It is the common man, whose interest, the government is claiming to protect that would suffer most.
6. In the final analysis, the federal government would realise that removal of oil subsidy would be counter-productive as it would not be the best option to improve our economy.

The best panacea to all our petroleum problems is the provision of indigenous mini-refineries.

It is unfortunate that the main issue that has occupied the Federal Government’s agenda since the era of Obasanjo, is the so-called removal of subsidy from petroleum products. Nigerians expected Obasanjo Government, since May 29, 2003 to have brought economic succour and prosperity to them. In his second coming, three square meals were expected to be on the table of Nigerians, employment opportunities for the jobless, integration and development of rural areas, and make life more abundant for all-apology to the great sage, Oyeniyi Obafemi Awolowo. But these expectations were dashed. After he took  over the mantle of leadership on May 29, 1999, he increased the pump price of petroleum products eleven times throughout his 8-year tenure, leading to nationwide strike on six occasions. This means that something is wrong somewhere, particularly when Nigeria could not produce adequate refined petroleum products for domestic consumption. It had to resort to heavy dependence on importation of the products. The idea of mini-refinery was first mooted some years ago to complement the output of bigger refineries in the country, but was quickly swept under the carpet by the president because it would obstruct importation of petroleum products, thereby putting some cronies of the government, who imported the products out of their lucrative business. So, the selfish interest of certain individuals in government was allowed to prevail over national interest.

That is why this cartel makes sure our refineries are not maintained properly so that they could continue to import petroleum products permanently for their own gains. When government talks of removing subsidy from petroleum products, is it not to shore up the gains of this same cartel in charge of importation of the petroleum products which we could easily produce at home at cheaper price, if the four refineries were made to function at optimum capacity? The same cartel is behind the illegal bunkering and smuggling, which results in government losing more than $3.5 billion every year according to Central Bank Report.

PERMANENT SOLUTION TO REMOVAL OF OIL SUBSIDY
The Federal Government has the solution at its finger tips. It is not jacking up prices of oil products every time, or mass  importation of the oil products, which has turned to be a soft landing pad for emergency millionaires, as being  done at  present, it is not by removing the so-called subsidy in order to have what our president called “marginal gain”. But by re-ordering our system of local production of the petroleum products. In doing this, we have to be in-ward looking. It should be by establishing mini-refineries in the 6 geo-political zones of the country to start with, preferably near cement manufacturing centres, which will make  use of most of the by-products of the petroleum products.

Nigeria has the manpower with adequate technical know-how to design, construct, fabricate and construct mini-refineries. The little inputs from the foreign experts can be readily made available by Malaysia, Indonesia, India or any other developing country that depends mainly on mini-refineries for the energy supply of their domestic needs. Malaysia alone has about 28 mini-refineries as at 2000 to provide for the required energy supply for transportation and manufacturing industries. Most of the developing countries don’t depend solely on the type of gigantic refineries that we have in Nigeria and which are difficult to maintain. They have failed to provide adequate premium gas for our domestic needs because of lack of effective turn around maintenance (TAM).

It is a tragedy that for the better part of our existence as an independent nation, particularly since the military rule of Ibrahim Babangida, Nigerians have been facing one form of fuel scarcity or the other. The situation refuses to abate. Instead, it continues to linger due to poor maintenance of the four refineries.

In the words of Larry King, “Nigerians import what they have and export what they don’t have.” What a parody!

Nigeria can solve this problem, which has become seemingly intractable. During the military era, the junta preferred to import fuel for local consumption in order that their immediate families and cronies could largely benefit. Therefore, they preferred importation to the maintenance of these refineries. When the civilians took over, they continued to import the needed premium gas as temporary measure, thinking that, as soon as the ‘Turn-Around Maintenance’ (TAM) of the refineries was carried out, importation of the petroleum products would stop. But this was not to be. Two weeks after the TAM was carried out on Kaduna refinery, it was gutted by a mysterious fire, the cause of which has not been discovered up till today. Because of one problem or the other, the four refineries could not be adequately maintained. The civilian government of Obasanjo and Umaru Yar’Adua has no alternative but to continue to import.

WHY THE REFINERIES COULD NOT BE MAINTAINED
The terms on maintenance were not sufficient enough to keep the refineries in good shape for a longer period before breaking down.

Whenever the TAM is to be carried out periodically, foreign experts are brought into the country but they have to wait endlessly to do the work, whereas our local experts in this field have not been adequately trained to effectively take over the TAM from the foreign experts who installed the refineries.

It follows that there should have been local workshops where the needed spare parts for TAM should be fabricated and manufactured, instead of waiting endlessly for the arrival of such imported components for repairs. Such workshop would have provided more jobs for our jobless technicians and engineers in that field;

The authorities of these refineries have failed to make use of certain government parastatals, such as: Scientific Equipment Development Centre, Enugu which was responsible for the fabrication and production of some essential components for the refinery in Port Harcourt in the past and Engineering Material Development Centre, Akure. These two Federal Government parastatals, under the aegis of National Agency for Science and Engineering Infrastructure (NASENI), have the capacity and technical know-how to produce needed spare parts  and complementary expert support to contribute to TAM of the refineries;

Whereas, if a good maintenance culture had been put in place, it would have led to massive job creation with small and medium enterprises, springing up everywhere, paving way for jobless youths who are roaming aimlessly on our streets, looking for jobs that are not there. Naira will naturally appreciate in value. Our external  reserves are definitely going to increase, leading to real stability and increase in the value of our local currency, which at present, is nothing to write home about. If we were to consider the volume of our trade in crude oil, high inflationary trend will be checkmated and Nigerians will have value for money in their hands.

NEED FOR ESTABLISHMENT OF INDIGENOUS MINI-REFINERIES
The better alternative to importation of petroleum products is to establish mini-refineries all over the country. In October 2000, when the report of the special committee on review of Petroleum Products Supply and Distribution was released, the opinion of NASENI was sought.

The Agency came up with very beautiful recommendations, which we are sure the Presidency has not seen up till now.

An aspect of that recommendation deals with establishment of mini-refineries across the length and breath of the country as the best panacea to checkmate the incessant fuel scarcity in the country.

SOLUTION THEREFORE IS INDIGENOUS MINI-REFINERIES
Nigeria could escape the vicious cycle of fuel scarcity and jacking up the prices of petroleum products and there will be no talk about the removal of the so-called fuel subsidy. There is an urgent need to ensure the internal development of delivery system for oil refining and pipe line technologies to be developed along side the existing imported ones. It is therefore recommended that:-

i. Government should adopt a policy of home-grown  development of refining of crude oil and processing of petroleum products and by-products;
ii. To this end, government should commission the conceptualisation, design, manufacture and installation and test-running of a prototype mini-refinery within a specified period of time, to be fully funded and the right manpower deployed to ensure its success;
iii. Government should ensure the proliferation of mini-refineries across the length and breath of the country, and preferably around cement plant locations in the first instance, which needs certain by-products of petroleum in the manufacture of cement, based on the developed technology.
iv. In the mean time, government should ensure that all future TAM contracts of the nation’s refineries and pipeline must have a clause which requires the foreign contractors to establish workshops locally for the manufacture of certain percentage of the spare parts and components to be used in the maintenance contract:
v. All these should be tied to the NASENI mandate as part of its programmes already approved by the government. We assure the government that by the grace of Jehovah, it will be able to actualise this fit within 6 months of its existence through NASENI, which has the capacity to source for the needed manpower with the required technical –know-how, both within and outside its existing parastatals.

ADVANTAGES OF BUILDING MINI-REFINERIES
It is my candid belief that several advantages will accrue to the country if mini-refineries are established:
i. Refineries will be built at more affordable cost because it is indigenous technology;
ii. The strategy will constitute a driving force for the rapid development of all aspects of engineering, science and technology, locally in the petroleum sector;
iii. It will generate a large pool of engineering design and manufacturing industry in human resources in support of oil refining and pipeline industry that will emerge;
iv. A great number of these firms will be in the small and medium enterprises cadre;
v. An indigenous capability in maintenance will follow as a natural cause, with workshops turning out spare-parts, locally fabricated and manufactured, for maintenance of the mini-refineries;
vi. Most of the inputs into the operations of the mini-refineries will be obtained locally;
vii. Mini-refineries, suitably and strategically located  across the country, will develop their own local captive markets which they will serve more effectively, thus doing away with the problems of long supply lines and bridging issues;
viii. Prices of petroleum products will drastically reduced; and industries using petroleum products and energy to propel their equipment will become more  vibrant and have  capacity to produce up  to their maximum level because of cheap petroleum products;
ix. In future, exportation of our crude oil will be reviewed. Nigeria will prefer to export more of the refined products overseas, since its by-products will largely serve our emerging industries as avenue for attracting more foreign exchange earnings, through exportation of such capital goods.

Finally, such a strategy will help the Nigeria Economy and enhance the welfare of the citizens. In essence, it means that establishing mini-refineries all over the country, is synonymous with establishing avenues for job creation.
Perhaps, if Mr. President, and Commander in Chief of the Armed Forces, Ebele Goodluck Jonathan, can accede to the laudable project for the benefit of all today, Nigeria can be a better place for us to live tomorrow.

•Ajunwon wrties from Lagos.