The Fuel Subsidy Conundrum (Part II) – Chido Onumah

Published:30 Nov, 2012

The Fuel Subsidy Conundrum (Part II) – Chido Onumah

I ended the first part of this piece last week by asking on whose side President Goodluck Jonathan was on the fuel subsidy debacle: the Nigerian masses or his oil-marketers friends? I had barely finished sending out the piece when I read the troubling headline in The PUNCH, “Unpaid subsidy: Diezani, NNPC report Okonjo-Iweala to Jonathan”. I shall return to the sordid details of what is gradually turning into an albatross around the president’s neck.

Two weeks ago, President Jonathan had said that: “Total fuel subsidy removal is a must”. A few days after that statement, he reversed himself, when he was reported to have said, “Subsidy stays in 2013,” while remaining silent about the prospect of an increase in the price of petrol. There are lots of issues arising from the fuel subsidy imbroglio and there is no better place to start than the President’s own argument.

The thrust of President Jonathan’s argument is that we need to attract investors to the oil sector and the only way to do it is for government to end the so-called subsidy and privatise our refineries before they can become functional. Of course, the President’s argument falls flat in the light of current reality. As one commentator noted, “It is not the removal of subsidy on petroleum products that will attract investors to the oil sector; it is the government having zero tolerance for corruption, fraud, waste and abuse; prosecuting and jailing anyone found guilty of any crime”.

There is very little to add here, except to note that it is not enough for the government to wish for investors; it has to create the enabling environment for investments to thrive. In the last one week, Nigeria has moved from the most fraudulent country in Africa to the worst place for a baby to be born. KPMG, the global audit and financial advisory firm, recently rated Nigeria as “the most fraudulent country in Africa, with the cost of fraud during the first half of 2012 estimated at N225bn ($1.5bn). According to reports, the firm’s Africa Fraud Barometer, instituted this year, measures fraud on the continent and assesses the fraud risk that confronts companies (emphasis mine) in their operations. A few days before that not-too-shocking revelation, it was reported that “Nigeria came last of 80 countries researched in a recent study by the Economist Intelligence Unit, as the worst place for a baby born in 2013”.

Do we really need these meddlers to define us? We know Nigeria is one of the worst places on earth to do business. As the Halliburton bribery scandal revealed, even our leaders are not left out of official bribery and the wheeling and dealing when it comes to doing business in the country. So, what investors are we really hoping to attract under the prevailing business environment?

The President referenced Canada as having 16 functional refineries because they are privately owned. It appears when it is convenient for our rulers they make reference to other countries. While the President was on the issue of Canada, he should have talked about Canada’s public health system which provides near universal coverage to all Canadians and is a reference point around the world. He should have also mentioned Canada’s infrastructural advances, social security system, and the fact that working parents are entitled to a  full year of maternity leave. Perhaps, the President needs to be informed that at the height of the US invasion of Iraq after the 9/11 terror attacks, Canadian taxpayers received bonus cheques from their government because the country earned extra oil revenue from the rise of oil prices occasioned by the 2003 invasion.

Let’s forget the Canadian diversion for a minute and come back to our own reality. The President says our refineries are struggling to refine at 30 per cent of installed capacity because they are publicly owned. Since we can’t manage our refineries, the way out is to sell them off. But, if there is one thing that has failed woefully in more than five decades of independence, it is the Presidency.  I have yet to hear our rulers make a case for outsourcing the Presidency.

There are four African countries, including Nigeria, that are members of the Organisation of Petroleum Exporting Countries. Almost all the refineries in these countries are state-owned. Algeria has five refineries. One is run by the China National Petroleum Corporation, while four are run by Sonatrach, a state-owned company. Angola has two. One is run by Chevron Corporation, while the other run by Sonangol Group is state-owned.  Libya has five refineries. All five are state-owned. Three are run by the National Oil Corporation while the other two are run by the Arabian Gulf Oil Company.

It seems that the corruption which permeates the oil industry for which some people are making the asinine argument for the privatisation of our refineries is the issue here. Just last week, The Nation newspaper reported of “disquiet in the Presidency over a ‘close’ relationship between a serving minister and Pinnacle Contractors Limited, an unregistered  firm, which was indicted for N2.7bn ($18m) phony oil subsidy deals”.

Before this latest revelation, we had been alerted on how subsidy claims shot up from N300bn ($2bn) to N2.3tn ($15bn) under President Jonathan. Many of the culprits in that unprecedented pillage are currently trying to plea-bargain their way out of jail. That corruption has rendered the oil sector comatose shouldn’t, for any reason, be a case against public sector-driven oil industry.

But it is not just corruption that has dogged the oil sector and the subsidy business. The confusion and incompetence is mind-boggling. On November 22, The PUNCH reported that “the Nigerian National Petroleum Corporation had alerted President Jonathan  to  a looming acute  fuel shortage  if the Federal Government failed to pay N1.13trn ($7.5 billion) subsidy  owed it (NNPC). “The NNPC top management, led by the Minister of Petroleum Resources, Diezani Alison-Madueke, and the corporation’s Group Managing Director, Mr. Andrew Yakubu, reportedly made this known to Jonathan at a recent meeting,” the newspaper said, adding that the team told the President  that  the Minister of Finance, Mrs. Ngozi Okonjo-Iweala,  had  failed to pay the  debt. Alison-Madueke and her cash cow, the NNPC, hinged their “capacity to continue the importation of fuel on the payment of the debt which had accumulated over the months”.

Interestingly, three days later, on November 25, The Guardian reported that “the FG is apparently set to recover about N1.3tn ($8.6bn) owed it by the NNPC and other multinational oil companies”. The newspaper quoted the President at the retreat for new members of the NEITI Board as saying the recovery task team would comprise high-ranking government officials as well as government agencies that are saddled with either the responsibility of collecting or managing Nigeria’s oil and gas revenue. If you are confused, so am I!

So, what really is the subsidy argument? The government’s position which is self-indicting is that the country cannot refine enough petrol for local consumption because our refineries are not functional. The government has to export crude oil and import refined petroleum products. In an attempt to address the problem, the government set up the Kalu Idika Kalu led National Refineries Special Task Force.

The committee’s report says that Nigeria, with Africa’s third largest refining capacity with its 445,000 barrel per day installed capacity, has only 18 per cent capacity utilisation and efficiency. This contradicts President Jonathan’s claim that the country’s refineries are operating at 30 per cent of installed capacity. What really is the exact figure? According to the committee, Egypt (Africa’s largest refiner of petroleum) with 774,900bd capacity has 81 per cent efficiency level.

It is heartwarming that civil society has fired the warning shots against any increase in the price of petrol as we head into the first anniversary of the Occupy Nigeria protests. President Jonathan has a choice: either to allow dubious private businessmen hold him hostage or govern in the interest of the people.

 

– Chido Onumah (conumah@hotmail.com)

Related Posts

Recent Posts

Buhari Assures Children Of Better Nigeria

President Muhammadu Buhari has felicitated with all Nigerian children on the occasion of this year’s Children’s Day celebration, reassuring them his administration remained fully committed to fulfilling its promise of a better Nigeria. The president, in his Children's Day message to the nation yesterday, said it was a thing of joy that on the occasion, the country could also celebrate the safe return of one of the abducted Chibok schoolgirls, Amina Ali Nkeki and many other abducted...

Metuh Wrote EFCC, Ready To Return N400m – Counsel

The immediate past National Publicity Secretary of the Peoples Democratic Party, Mr. Olisa Metuh’s lead defence counsel, Dr. Onyechi Ikpeazu (SAN), has said his client has told the Economic and Financial Crimes Commission that he is willing to return the N400m he allegedly received from the Office of the National Security Adviser in November, 2014. Metuh is currently being prosecuted by the EFCC for allegedly receiving the money, which the prosecution alleged was collected from the...

No Group Will Illegally Occupy Nigerian Communities Under My Watch- Arase

Solomon Arase, the Inspector-General of Police, on Thursday assured that no group will overrun the country or illegally occupy any part of it under his watch as the chief police officer. Mr. Arase gave the assurance in Abuja at a public hearing on the influx of herdsmen to Benue, organised by the House of Representatives’ Committee on Police Affairs. He said the Nigeria Police Force have so far arrested 18 people in connection with the...

CAF Bans Giwa, 4 Others For 5 Years

Confederation of African Football, CAF, has slammed a five-year ban on embattled Chris Giwa and four four of his disciples thereby confirming and extending the same five-year ban placed on them by the Amaju Pinnick- led Nigeria Football Federation. The four others affected by the continental ban are Muazu Suleyman, Yahaya Adama, Sani Fema and Johnson Effiong. In a letter signed by CAF’s Secretary-General, Hicham El Amrani and dated May 27th 2016 and copied to NFF’s...

Entering Second Year, Buhari Faces Economic Turbulence

Nigeria’s President Muhammadu Buhari marks one year in office on Sunday, after 12 months dominated by efforts to end the brutal Boko Haram conflict and tackle endemic corruption. But as he enters his second year, the fallout from the nearly two-year slump in global oil prices has left the country facing economic meltdown, as potentially dangerous new security threats emerge. “There is a major challenge to get the economy reactivated, stimulated and boosted,” economist Bismarck...

Ese Oruru, Alleged Abducted Girl, Delivered Of Baby Girl

Ese Oruru, the teenager who was allegedly abducted and impregnated by Yunusa Dahiru, a Kano indigene, has been delivered of a baby girl in Yenagoa, Bayelsa State. Her baby came on Thursday about 10.15 am at the Government House Clinic in the state capital. Her elated father, Charles Oruru, confirmed yesterday that the girl, who was in Junior Secondary School...

Herdsmen Attack: Police To Train Neighbourhood Watch Outfits In Enugu

The Enugu State Police Command has concluded arrangements to train neighbourhood watch security outfits in communities in the state. The plan is a fallout of the attack on Ukpabi Nimbo community by suspected Fulani herdsmen on April 25. Although some communities in the state already had neighbourhood watch units, a decision to set up the outfit in all the towns in the state was the major outcome of a stakeholders meeting convened by Governor Ifeanyi Ugwuanyi after the Ukpabi Nimbo attack. The...

EFCC Re-Arraigns Ajudua For $8.4m Fraud

The Economic and Financial Crimes Commission on Thursday re-arraigned an alleged serial fraudster, Fred Ajudua, for an alleged fraud of $8.4m.   Ajudua was accused of swindling the complainant, a former Chief of Army, Staff Lt Col. Ishaya Bamaiyi, of the sum sometime in 2004 at Kirikiri Prisons in Lagos.His re-arraignment on Thursday followed the transfer of his case from Justice Oluwatoyin Ipaye of a Lagos State High Court in Ikeja to Justice Kudirat Jose of the same court. The amended charge...

FG To Assist Communities Reclaim Lands Damaged By Mining Activities

The Federal Government says it has made provisions in the 2016 budget to help communities reclaim lands damaged through open cast mining. The Minister of Solid Minerals Development, Dr Kayode Fayemi, said this at the News Agency of Nigeria (NAN) Forum in Abuja. According to him, the ministry has a law that gives conditions for environmental complaints.   ``Talking specifically about the conditions in places like Jos and Enugu if you look our budget this year, you will see specific allocation for reclamation...

Military Pensions Board To Complete Payment Of 33% Increment Arrears To Pensioners By 2017

The Military Pensions Board (MPB) says payment of 33 per cent increment arrears owed military pensioners since 2010 will be completed by the end of 2017. The Chairman of the Board, Air Vice-Marshal Muhammad Dabo, disclosed this in an interview with the News Agency of Nigeria (NAN) in Abuja on Wednesday. He said the administration of Muhammadu Buhari was committed to the welfare of Nigerian military pensioners and had been fully supportive of the board’s activities in the past one year.   ``There...

Army Acquires Vehicles To Enhance Communication

The Nigerian Army has acquired six vehicles to enhance communication in its fight against insurgency in the North-East. The News Agency of Nigeria (NAN), reports that the vehicles were inaugurated by the Chief of Army Staff (COAS), Lt.-Gen. Tukur Buratai, during his visit to Lagos on Wednesday. Buratai said the vehicles, procured by the Army Signal Corps, would be deployed to help in prosecuting the fight against insurgency in the North- East. ``We are still pursuing the terrorists and we will continue...

FG Constitutes Committee To Address Demands Of Organised Labour

The Federal Government on Wednesday constituted a 16-man committee to address issues that necessitated the three-day strike called by the Nigerian Labour Congress (NLC) after the fuel pump price hike. Mr Babachir Lawal, the Secretary to the Government of the Federation (SGF), stated this in Abuja after a meeting of the Federal Government delegation with the organised labour. He said that the meeting was called to work out modalities on ways to resolve the issues raised by the organised labour. ``I am...

Former PDP NWC Members Endorse Constitution of Makarfi-led Caretaker Committee

Members of the immediate past National Working Committee (NWC) of the Peoples Democratic Party (PDP) have endorsed their dissolution and other decisions taken at the party’s National Convention held in Port Harcourt. This is contained in a statement jointly signed by the immediate past Deputy National Chairman of the party, Uche Secondus and six others. The statement stated that in the absence of the then National Chairman of the Party, Sen. Ali Modu Sheriff, Secondus presided over the...

Agunloye Advises FG To Fight Corruption In Power Sector

Former Minister of Power and Steel, Dr Olu Agunloye, on Wednesday advised the Federal Government to address corruption in the power sector. Agunloye gave the advice during a chat with newsmen in Abuja. He had purchased Expression of Interest and Nomination forms for the Ondo gubernatorial election on the platform of Social Democratic Party (SDP). According to him, electricity generation is not rocket science and tackling corruption in the sector will ensure stable power supply across the country. ``When I was minister of...

FAAC: FG Recovers N1.5 bn, Shares N281.5bn To 3 Tiers Of Government

The Minister of Finance, Mrs Kemi Adeosun, said in Abuja on Wednesday that N1.5 billion, being excess bank charges, was recovered and paid into the Federation Account. Adeosun announced this while addressing newsmen on the outcome of the Federation Accounts Allocation Committee (FAAC) meeting. She said this was done by a consortium of consultants for the Federation Account and that the money was proposed for distribution. She also said that N281.5 billion was shared among the federal, states and local governments as...

Army Renews Call On Boko Haram Fighters To Surrender

The Nigerian Army on Wednesday renewed calls on repentant Boko Haram fighters wishing to surrender to do so without wasting more time. Maj.-Gen. Lucky Irabor, the Theater Commander, Operation Lafiya Dole, made the call while speaking at the foundation laying ceremony of the Nigerian Army Officers Wives Association (NAOWA) Nursery School and a Day Care Centre at the Maimalari Barracks, Maiduguri. Irabor said that those who failed to surrender would pay the price for being stubborn. He added that ``I will like...

5 Herdsmen Arrested Over Enugu Massacre

The Police Force Head­quarters in Abuja, have announced the arrest of the masterminds and perpetrators of Nimbo community in Uzo-Uwani Local Government Area of Enugu State on April, 25, 2016. The attack led to the death of several persons and destruction of prop­erty valued at millions of naira The attackers compris­ing a five-member-gang were arrested by op­eratives of the Inspector General of Police (IGP) Intelligence Response Team (IRT). The suspects were found with one...

Economy In Volatile Situation- Buhari

Nigeria’s economy is currently in a volatile situation due to the crash in oil prices, President Muhammadu Buhari has said. The president’s remark came at a time when oil price yesterday rose to nearly $50 a barrel, even though Nigerian will earn less from the boom due to drop in production in recent times.  Buhari spoke yesterday at the Aso Rock Villa in Abuja at a farewell audience with Iranian Ambassador to Nigeria,...

Reps Order Halt Of Refineries Privatization

The House of Representatives Committee on Privatization and Commercialization has directed the Nigerian National Petroleum Corporation (NNPC) to stop its planned privatization of the nation’s refineries or joint investment ventures with some multinationals. The committee’s chairman, Hon. Ahmed Yerima (APC, Bauchi), who gave the order yesterday in Abuja during an interactive session with the managements of the NNPC and Bureau of Public Enterprises (BPE) on the planned privatization of three  refineries in the country, said the...

$200 Billion Loot: EFCC Raids Dubai Firm’s Office In Abuja

As part of the ongoing probe of the laundering of over $200billion loot in the United Arab Emirates (UAE) by former political office holders, operatives of the Economic and Financial Crimes Commission ( EFCC) yesterday stormed the office of a Dubai property firm, The First Group Company,  in Abuja. The company is also being investigated for allegedly defrauding unsuspecting Nigerians by luring them to invest in real estate in Dubai. A prominent Nigerian lost about...

Dana Air Pilots Go On Strike, Passengers Stranded

Dana Air pilots have gone on strike in protest of the non-payment of their salaries, grounding the airline’s operations and leaving hundreds of passengers stranded nationwide. “The strike started this morning and passengers that were supposed to travel this morning are stranded,” a source at the airport said. According to the source, the airline had continued to sell tickets to passengers earlier today in the hope that the dispute would be resolved.