New Telegraph

Coping with controversial fuel subsidy removal

The approach adopted by President Bola Tinubu in removing subsidy on PMS otherwise called petrol has elicited different interpretations and responses from stakeholders including the Nigeria Labour Congress, which has issued a notice of strike from Wednesday, June 7, 2023.
While a school of thought opined that Tinubu should have consulted widely and provided incentives and palliatives to cushion the lacerating aftermaths of the subsidy removal, another school of thought said Nigerians had been alerted of the urgency of subsidy removal.
President Bola Tinubu, during his May 29, 2023, inaugural speech declared that petrol subsidy was ‘gone.’
The Nigerian National Petroleum Company Limited, two days after, upwardly adjusted its pump price template across Nigeria.
According to the new template, the petrol pump price was adjusted in North East to N557, Northwest, N540; North Central, N537; South East, N520; South-South, N511; South West N500; and Lagos N488.
The new template also showed that petrol pump price was adjusted in South West from N184 to N488 in Lagos; N189 to N500 in Ogun (Abeokuta), Oyo (Ibadan), Osogbo (Osun), Akure (Ondo) and Ado Ekiti (Ekiti).
In South-South, it was from N189 to N511 in Asana (Delta) and Benin, Edo State; N194 to N515 in Uyo, Akwa Ibom; N189 to N515in Yenagoa (Bayelsa); and N189 to N511 in Port Harcourt, Rivers State.
In South East, it was adjusted from N189 to N520 in Abakiliki (Ebonyi); Enugu (Enugu), and Awka, (Anambra State) as well as from N189 to N515 in Owerri (Imo) and Umuahia (Abia).
In North Central, it increased from N189 to N537 in Minna (Niger), Makurdi (Benue), Lokoja (Benue), Jos (Plateau), and Lafia (Nassarawa), Ilorin from N189 to N515; while Abuja (FCT) has been adjusted from N194 to N537.
In North-West, it increased from N194 to N540 in Gusau (Zamfara), Dutse (Jigawa), Sokoto (Sokoto), Katsina (Katsina), Kaduna (Kaduna), and Kano (Kano). It was adjusted from N190 to N545 in Birnin Kebbi (Kebbi).
It was adjusted in North East from N199 to N557 in Damaturu (Yobe) and Maiduguri (Borno State) while it was increased from N199 to N550 in Gombe (Gombe), Bauchi (Bauchi), Jalingo (Taraba), and Yola (Adamawa).

CEPAR
Director, Centre for Economic Policy Analysis and Research, a research centre of the University of Lagos, Prof. Ndubuisi Nwokeoma, said it was untactical for President Tinubu to have announced the subsidy removal on his inauguration day.
CEPAR is a centre involved in economic and business policy engagement with both the public and private sectors of the economy.
In an interview with New Telegraph over the weekend, he stated that the President should have consulted widely with major stakeholders and adopted a conciliatory strategy.
Nwokeoma, who is a professor of economics, stated that while subsidy removal is inevitable, the administration should have settled down and marshalled out programmes that will cushion the effects of the subsidy removal.
He said: “Nobody is saying that the petrol subsidy should not be removed but the issue is the approach and the approach is that before you begin to announce, you must have done your homework. I do not think they did any homework before the announcement. When you want to do something, you must have prepared. You prepare for any possibility because you know that people’s lives will be affected.
“For him to have just come and said ‘it is gone’, maybe he is learning on the job. As president, you do not talk anyhow. So if you want to have the subsidy removed, which is a good thing, you need to engage the stakeholders. You begin to talk to labour. That pronouncement in his speech was not necessary at all.
“He could have on the first day started talking to labour that ‘we have this on the table, but we do not have money for it. How do we go about it?’ There will be ideas. You must have seen the implication on the economy and you do some kind of a framework or special accounting metrics. You take a look at: ‘How will it affect the country, industry, and foreign exchange?’ You may not be perfect, you have an idea of what changing one particular variable in the economy will affect other things. How it will affect transportation, education etc? That would have been the approach.
“The approach is important. You do not do it as someone who is an emperor. You just say, “Subsidy is gone. You need to do more engagement and consultation.”
He opined that NNPCL missed fired by its price cap new template but is not owning up.
According to him, Tinubu’s statement actually triggered all that.
He said that NNPCL is not owned by people from the moon and that the Federal Government is still a majority shareholder and so NNPCL is not disconnected from the FG and Tinubu can call the company to order.
He opined that for NNPCL to have come out the following day to alter the template after Tinubu had clarified his statement showed that there ws some misstep somewhere.
Nwokeoma said: “They did not handle this issue properly. There is a disconnect between NNPCL and the Presidency and that is why they are trying to walk themselves backwards to work out of the crisis which is a bit difficult for them. The prices will be difficult to come down in the short term. They ran into the problem on their own accord and they want to see how to come out of it.
“You do not have to follow the template of the immediate President, Muhammadu Buhari. The subsidy was planned to expire by the end of June. You can extend it. After all, Buhari extended it up till the time he left office.
“You should be able to carry everyone along and put a cushion. Then it can be removed from now till September. People will now have confidence in you. He said it is gone based on the information available to him. He can set a supplementary budget for the National Assembly. Laws are not cast in iron. If there was a law approved by the National Assembly and signed by Buhari, you can have your own. You can take that document back to the NASS, a new arrangement will be made and they will sign it again.
“The approach is the issue. People are still in court against his assumption of office. So he needed to take a more conciliatory approach than saying the subsidy is gone.
“The government should have a conciliatory approach and engagement with all stakeholders. He should engage, if he needs to backtrack in one or two things, he should do that. There is still time to correct it. If you make a mistake and you correct it within one minute, it is better than to allow it to prolonge because of ego.
“He should engage. Now they are discussing with the union. That is a good thing. It would have been done before making the announcement. Engage with unions. They can make the government ungovernable for him as he did for Jonathan. That is what he did. They can make the country ungovernable for him. What he did to Jonathan in 2012, they can do it for him. They should do more engagement and be conciliatory.”

Nigerians previously alerted ­
– MOMAN
Executive Secretary of the Major Oil Marketers Association of Nigeria, (MOMAN), Mr Clement Isong, said though the initial challenges of the subsidy removal were painful, it was inevitable and overdue to remove the petrol subsidy.
He said the Federal Government of the All Progressives Congress, formerly under Buhari, had alerted Nigerians on the high debt the nation incurred because of petrol subsidies.
He also said the FG had given a long period of preparing Nigerians for the removal, adding that delaying the subsidy removal was further plunging Nigeria into a bigger debt trap and more economic catastrophe.
According to him, the removal is very unfortunate and very painful but the country would have been better off if the subsidy had been removed many years ago. He added that the psyche of Nigerians would have been in a better place too.
He stated that Nigerians would have appreciated that they needed to channel their resources, energies, and investments into more productive areas rather than into consumption that does not yield the required return on investment for future generations.
He said that it was indeed sad this day that Nigerians need to suffer such a situation but that it was already inevitable.
Isong said: “I do not call this a kneel-jerk approach. The former govenrment, which is the same political party, after the PIA was passed 18 months ago, gave the country a clear indication that in 18 months’ time, the subsidy will be removed.
“We have had 18 months to prepare ourselves for it. We knew the exact date that it will stop because they told us. They told us that they have not put subsidy money in the budget beyond now.
“That budget was based on 1.8m barrels per day production. So if you are producing 1.8mbpd, maybe the nation’s money would have lasted till the end of June. But we are not producing 1.8mbpd. In some months, we produce 1.2mbpd and in some months, it goes under 1mbpd. So you have not generated enough money to fund that budget.
“And when you run out of money, you stop. NNPCL has said that it is owed $ 2.7 trillion. The law says that you must pay them that money if they are doing a supplier of last resort to you. But the government does not have the money to pay them. So they have not been paid, they have a big debt they are owed, and states did not get the money that they should have gotten from NNPCL to pay salaries in the state.
“That is a very poor management of your resources and it has to stop one day. We need to be honest with ourselves. It is not easy, it is tough, but the longer we keep it, the more difficult it was going to be. By keeping that policy for so long, we have almost ruined ourselves as a country.”
He added: “I want to empathise with all Nigerians about the increase in the cost of petrol, with the increase the inflation will bring, with the new challenges that we would all face in a period in that life was already challenging enough. This day, however, was always inevitable because the longer we stayed without deregulating, the larger, the bigger the price differential we will pay.
“Even if the cost of refined products spikes, and goes up and down, currently it is lower than it has been in the recent past, the exchange rate has been getting worse and the worse. The more the exchange rate is, the bigger the subsidy is.
“So the longer we have stayed before doing this, the bigger the shock we will face when we do it. The truth of the matter is as a people, as a country, we have been living beyond our means. We have been plunging our country into debt as a result of our refusal to come to terms with this cost that we can do without. A lot of the product was smuggled across the borders, so we have been using the subsidy to fund cross-border smugglers and sharing our common wealth with our neighbouring countries.
“Now that there has been a reduction in the arbitrage between the cost in Nigeria and the cost across the border, it becomes less interesting for those who have been smuggling the country.”

Last line
Now that the price has gone up, it would force Nigerians to somewhat reduce their consumption, and cost. Instead of an “unknown govenrment” to pay the cost, Nigeria should pay it individually as it will reduce Nigerians’ consumption of petrol as they would have become accountable.

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