Showdown over Subsidy

Abdulwahab Omar

The plan by the Federal Government to remove fuel subsidy and jerk petroleum pump price to N150 per litre throws up dust in the polity and unearths a stranglehold by a faceless cartel amidst opposition by organised labour
By Oji Odu
Following the recent moves by the Federal Government to increase petroleum pump price from N65 to N150 per litre organised Labour comprising the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) have rejected an invitation to parley on the matter last week
TUC President General, Peter Esele, said the union was boycotted the talks because government had no new agenda to discuss. “They are not coming to the negotiation table with any new idea and therefore nothing new to discuss.
“I know that government is proposing N150 pump price per liter of petrol. We ask, how do you that? There is no infrastructure in place and the recurrent expenditure is as high as 70 per cent. Even a businessman does not run recurrent expenditure of more than 40 per cent talk less of the government of a country. They are quick to announce salary payment as reason for this jerk up. But I ask, how much is paid on salary yearly?” Esele explained.
The TUC boss alleged that the government is broke and desperately looking for where it can get easy money to fund its projects.
On its part, the NLC had rejected the talks because it shows an unrealistic posture of a government whose actions and policies are anti-people and provocative. In his reaction, Kiri Mohammed, one of the NLC Deputy Presidents said that before the move to increase the fuel pump prices, the Union had planned a rally in Abuja to protest the state- of the nation.
“In the midst of mass suffering despite our huge natural resources and income, it is provocative for the government to want to further increase the price of petrol. In fact, this will tantamount to cruel justice against the Nigerian people.
“The primary motive for this planned price increase is the insatiable greed of some politicians to get more money to squander. They see an increase in fuel prices as an easy way to access more of the country’s wealth. There is also the calculation to render the new minimum wage worthless by embarking on a hyper inflation inducing project like the astronomical increase in the price of petroleum products,” Mohammed said.
The Source’s finding reveal that the proposed new pump price of N150 per litre of petrol is based on the price template of the petroleum Product Pricing Regulatory Agency (PPRA) of August 15, 2011, which stated that the landing cost of a litre of petrol is N129.21. the margin for transporters and marketers is N15.49. the expected pump price is N144.70, while the official pump price is 65.
This infers that government pays N79.70 as subsidy on each litre of petrol , and with about 32 million litres of petrol consumed daily throughout the country, the Federal Government pays about N2.6 billion daily as subsidy.
Analysts argued that the inability of the Federal Government to creatively respond to the nations perennial energy crisis has culminated in comatose refineries, shortage of petroleum products, fraudulent implementation of subsidies, waste and high level corruption. However, the argument that government is no longer able to sustain the subsidies of between N500 billion and N600 billion annually is not acceptable by many Nigerians who view it as tighening the noose on the necks of the already suffocating Nigerians.
In a statement recently, the Minister of Finance and Co-ordinator of the Economic Team, Ngozi Okonjo-Iweala stated that government will continue to apply the same polices when she said that government “has completed plans to completely withdraw subsidy on petroleum products.” This is without first restructuring the downstream oil sector that has been held bound by greedy cartels.
In his first address to the state House Press Corps when he assumed office in 2009, former president Umaru Yar’Adua said that the racketeering in the oil sector by an unnamed mafia was the bane of the Nigerian nation and the bastion of the country’s institutional corruption. He said that this faceless mafia has continually sabotaged efforts at deregulating the downstream sector by the continued distortion of the supply chain.
Yar’Adua’s call was re-echoed by former Petroleum Minister, Rilwan Lukman who emphasised the need for the Nigeria National Petroleum Corporation (NNPC) to throw open its fuel import license process to qualified people and firms. His call was unfortunately faulted by some who alleged that his vested interests in some oil companies which may be NNPC’s present or future customers would not allow for transparency in the sector, especially in the award of contracts and licences.
Lukman, appeal unearthed a hidden truth that the award of licences was not an open and transparent business little wonder the House of Representatives on October 27, 2009 initiated a probe into the allegations of corruption involving a cartel in the NNPC and PPMC.
This cartel, The Source learnt, is said to have secured the exclusive right to import petroleum products into the country by offering a bribe of N500,00 daily to unnamed NNPC officials said to be in charge of issuing importation licences.
According to Aro Bamidele, Deputy Chairman, House of Representatives Committee on Petroleum Downstream, the investigation became necessary because of the gravity of the allegation and implications to the economy.
“We are alarmed over the allegation of monumental corruption leveled against the NNPC to the extent that a clique in the NNPC and PPMC has been receiving $500,000 (N75 million daily from a fuel importation cartel into the country to the determent of the Nigeria state," he said.
The committee had summoned the then Group Managing Director (GMD) of the NNPC Mohammed Bakindo, Managing Director, PPMC, PPPRA, representatives of Major Oil Marketers of Nigeria (MOMAN), NNPC’s major contractors, Transfigure, Vitol and Glencose.
However, the NNPC in a newspaper advertorial, denied the allegation saying “… without mincing words, the management of the NNPC make bold to state that there is no clique within the corporation that collects N75 million daily from international commodities traders to sustain fuel import contracts as alleged,”
The Source’s findings also reveal that the modus operandi of the oil cartel include funding political parties to win elections. According to Mohammed Tukur, Assistant Secretary General, Airlines Operators of Nigeria (AON),”these oil cartels are behind the successes of these politicians in power, and they cannot allow the ruling party to lose elections. They contribute a lot of money running into billions of Naira to make sure that their candidates win elections so that their interests are protected, and they recoup their money invested with interests.”
In 2008, when President Yar’Adua talked about removal of fuel subsidy, he was said to have soft-pedalled after he was reminded that most of the financial contributors to the cause and success of the People’s Democratic Party (PDP) were beneficiaries of government patronage through petroleum products allocation and subsidy.