One of the greatest problems of governance in Nigeria is the simplification of issues. Here, most of those in government treat critical issues with levity. These government functionaries, most often, look at issues from one prism, without taking time to examine the prospects and constraints in order to be in a position to make an informed decision. The consequence has always been that policies and programmes do not yield the desired result.
Over the years, the tale bandied about by those in government had been that whenever fuel subsidy regime stopped, the haemorrhage in the economy arising from it would end and that government would have enough funds to fulfil its obligations. It was also said that removal of fuel subsidy would end the smuggling of petrol from Nigeria to neighbouring countries. Also, those in government had, at some point, made a case for the floating of the naira, which would subject the national currency to the forces of demand and supply. Their argument was that such a fiscal policy would bring about stability in the foreign exchange regime.
True to type, the President Bola Tinubu government also simplified these matters. The government removed fuel subsidy and floated the naira soon after coming to power. Indeed, President Tinubu, on his first day in office, simply declared: “subsidy is gone.” In his reckoning, ‘removing’ fuel subsidy was what the country needed to stop the enrichment of members of an oil cartel milking the country dry as well as address the inherent corruption in the oil industry. The government also made the floating of the naira a major thrust in its fiscal policy. For it, leaving the naira to the forces of demand and supply of forex would address the volatility in the system.
Since these decisions were made, things have gone bad. The government has found itself in an economic mess. The country is, also, in an economic difficulty. Prices of goods and services have gone up. The cost of living has gone astronomically high. The standard of living has gone down abysmally. There is hardship in the land, with fears that Nunc Dimittis for the economy is near.
With the way things are in the country, Nigerians now know better. Nigerians know the difference between night and day. The government also knows better, even though it would not accept its mistakes. The government knows that the way the chewing of bitter kola sounds is not how it tastes, as Igbo people say. The reality that stares everybody in the face is that the twin policies of fuel subsidy removal and floating the naira were not well-thought before being implemented. They were a gamble and trial-and-error, which have backfired badly.
Before President Tinubu removed fuel subsidy, there were contentions as to whether there was subsidy in the first place, since previous governments, like the Tinubu administration, never gave the accurate daily petrol consumption in the country. Soon after removing fuel subsidy, there was an allegation that the government had resumed paying subsidy on petrol through the back door. While government has not owned up to this, it appears that the wind has blown and the rump of the hen has been exposed, as Nigerians say. The Nigerian National Petroleum Company Limited (NNPCL), this week, indirectly hinted at subsidy payment. According to the oil company, while the landing cost of petrol is N1,200, the product is sold at the official price of N600, with it bearing the differential.
NNPCL’s chief financial officer (CFO), Umar Ajiya, while speaking at the presentation of the company’s audited report, explained that the company has been bearing the cost of the differential between fuel landing price and pump price. He said that NNPCL has a reconciliation arrangement with government to settle accounts. The CFO stated: “The deal is between the federation and ourselves to reconcile. Sometimes, they give us money, sometimes we do net off. So, there is no money changing hands to any marketer or to anybody in the name of subsidy.”
One’s deduction from the above is that the federal government pays back money the NNPCL spends in making up whatever difference between landing cost and pump price. Ajiya said that money is not paid to marketers. One’s take is this: Whether money is paid to NNPCL by the government or there is a net off, in relation to the landing cost and pump price differential, it follows that subsidy is paid, no matter what name it is called. The equation is simple: Offsetting landing cost by NNPCL plus reconciliation with government and getting reimbursement, by payment or net-off, equals to subsidy (OLC + R = Subsidy).
It is really unbelievable that a government, which boasted that subsidy was gone, has indirectly gone back to its vomit, camouflaging it with other names. What going back to subsidy tells one is that there was no good plan put in place by government to ensure that subsidy does not return. Since fuel landing cost determines, more or less, the price of petrol in the local market, one had thought that the government would know that the best way to handle the effects of fluctuation in oil prices globally was to make concerted efforts to fix the refineries so that the country would refine fuel in Nigeria and sell at the local market. In the absence of quick fix of government refineries, one also expected the government to know that another way to forestall the return of subsidy was to support and encourage private refineries in the country.
The refining of oil in the country would cut off freight and import duty costs, which could cause fair price and stability. This is where the Dangote Petroleum Refinery and Petrochemicals Limited comes in. Yes, Nigeria should thump its chest that a refinery touted as the biggest in the world rests on its soil. From what has been said, when this refinery is in full production, it not only has the capacity to meet local demand but also to export to other countries. The exporting of locally produced petrol from Nigeria, nay Dangote Refinery, to other countries would earn Nigeria forex.
Dangote Refinery would, therefore, make positive economic impact in the country, as it has the potential to reduce reliance on imported fuel, create jobs and stimulate growth, which would boost Nigeria’s economy. Also, a local refinery like Dangote’s would reduce the risk of fuel shortages and price volatility, thereby ensuring energy security for Nigeria. The Dangote Refinery, primed to reduce dependence on oil imports and to ensure and increase domestic production, would be a key part of the country’s efforts to diversify the economy.
In the area of technology, the Dangote Refinery brings in new technologies and expertise, which can help transfer skills and knowledge to Nigerian professionals. The fact that young men and women were sent abroad for training and are now firmly in charge, as against the reliance on expatriates, adds impetus to the fortification of the country’s technology pool.
Those conversant with the topography of the area Dangote Refinery is situated will testify that the company has contributed to infrastructure development there. From a marshland, the refinery now sits comfortably on a high ground, reclaimed and sand-filled. The company has also provided roads, bridges, housing and utilities in the area. It has created and continues to create thousands of direct and indirect jobs as its operation expands.
The Dangote Refinery is in a position to serve as a catalyst for sub-regional oil trade, and the propensity to support economic growth in the West African subregion as well as reduce smuggling of petroleum products from Nigeria to neighbouring countries. By producing fuel domestically, Dangote Refinery would help Nigeria reduce its import bill, saving foreign exchange and strengthening the naira.
The directive by President Tinubu that crude oil should be sold to Dangote Refinery in naira is a kind gesture and a show of good faith. The directive should be followed through with action. The refinery also needs more support, like wholesome government policies, financial support from investors and lenders, infrastructure development and logistics, as well as technical expertise and partnerships.
For Dangote Refinery, there is need to disabuse the minds of those who think that it would become a monopoly and thereby sell petrol at high price. While profit is a motivation for business, love for country and its citizens have a place also. Therefore, in fixing price, the refinery should think Nigeria first, before out-of-the-world profit.