Crude oil price leisurely crossed the $90 mark on Thursday, January 27. That is good news to oil exporters except Nigeria, the only oil exporter that imports all the refined petroleum products it consumes.
The rulers of Nigeria are in dilemma. The recent surge in crude oil price will push the monthly cost of petrol subsidy perilously close to N300 billion.
Petrol subsidy is a thorn on the flesh of the rulers of Nigeria. No one knows how to swallow or vomit it. Nigeria Labour Congress (NLC) threatened to make the country ungovernable if petrol subsidy is withdrawn. Last week the federal government cowered and suspended its plan to end the necessary evil by February 2022.
Government will grudgingly bear the huge financial burden of the scandalous scheme for another 18 months as it toils to navigate its way out of it. As crude oil price heads for $100 per barrel, Nigeria may spend something close to N4 trillion on petrol subsidy in 2022.
Petrol subsidy is a catastrophic scam that no one in government is bold enough to tame. The presidency, state governors, ministers, the National Assembly and even labour leaders are convinced that Nigeria’s daily consumption of petrol is less than 35 million liters. Nigerian National Petroleum Corporation (NNPC) puts the figure at 65.5 million liters. There was a time it deducted subsidy at a daily consumption rate of 102 million liters.
The governors are angry, but they are spinelessly transferring their impotent rage to defenceless consumers rather than the scammers in NNPC. The governors want the federal government to peg the pump price of petrol at N411 per liter to make smuggling unattractive. NNPC blames smuggling for its spurious petrol consumption figures.
The governors believe that if the pump price of a liter of petrol is raised to N411, no one will smuggle the product any longer. Ironically, that hypothesis is as indefensible as the assumption that 42 million liters of petrol is smuggled daily into five impoverished countries with cumulative petrol consumption figures that is below seven million liters per day.
The number of vehicles in Benin Republic, Togo, Niger and Chad put together is less than the number of vehicles in Lagos alone. They have no facility to store 40 million liters of smuggled petrol in a day, talk less of consuming it. Niger Republic has a refinery that exports refined petroleum products to Nigeria. It has no business smuggling petrol from Nigeria because it cannot consume all what it produces in a day.
The governors are attacking the wrong target. The quantity of petrol imported by NNPC at any given time is the cheapest thing to verify from the internet. NNPC imports petrol from refineries that maintain open records of their exports.
The problem with figures available in Nigeria is that when one million liters of petrol leaves a refinery in Europe, it becomes 20 million liters when it lands the shores of Nigeria.
No one can get the truth from the books of NNPC. The true figures are in the books of the refineries that exported the product to Nigeria.
The House of Representatives has commissioned a panel to verify the daily petrol consumption figures flaunted by NNPC. The panel should beam its searchlight into the books of the exporters, rather than waste its time poring over cooked up figures in NNPC books.
The federal government’s decision to suspend petrol subsidy withdrawal has taken one burden from the cramped necks of Nigerians and replaced it with another burden that may be heavier than inflation from petrol subsidy withdrawal. NNPC is the greatest beneficiary from that decision. It will make more money from subsidy scam as crude oil price surges.
Nigerian people will get something of a heavier burden in replacement for petrol subsidy withdrawal as government imposes all forms of excruciating taxes and levies to beef up dwindling revenue. The N10 tax on every liter of carbonated drink consumed is a pointer to the direction the federal government would go in replacing the revenue lost to petrol subsidy.
Besides, Nigeria will be living on debts. Last year the federal government spent 76 per cent of its miserable revenue on debt service. Government revenue between January and November 2021 was a paltry N5.5 trillion. It spent N4.2 trillion on debt service. It means that even the N2.9 trillion spent on petrol subsidy last year was borrowed.
This year with petrol subsidy poised to consume something close to N4 trillion with the surge in crude oil price, government will borrow to the extent that it will spend 80 per cent of its revenue on debt service alone.
Nigeria is broke. Ironically, no one knows how to halt the journey down the financial abyss. The federal government can fend off the impending bankruptcy poised to set in through scandalous petrol subsidy claims by NNPC.
If subsidy is paid on the 35 million liters of petrol consumed daily, the money spent annually on petrol subsidy will drop by 60 per cent and leave a reasonable sum for sharing by the three tiers of government. Government must verify Nigeria’s daily petrol consumption figures.
Besides, government must raise Nigeria’s refining capacity to self-sufficiency level. The labour unions contend that the federal government has spent $10 billion on the four refineries that have been completely shut down for eternal repairs.
No sane person expects the idle refineries to bail Nigeria out of its scandalous petrol subsidy bills. With NNPC on the saddle, no one expects the refineries to end Nigeria’s shameful dependence on imported refined petroleum products which is at the root of the scandalous petrol subsidy.
The only solution is for the federal government to sell the crippled refineries, leave the downstream sector of the oil industry and restrict itself to that of a regulator.
Government can encourage private investors to build refineries that will supply all of Nigeria’s needs. The colossal failure of the four refineries is a convincing evidence that NNPC lacks the skill, management acumen and integrity to manage large refineries. The refineries should be sold before government is compelled to sell them as scrap.
The federal government is responsible for Nigeria’s inability to attain self-sufficiency in crude oil refining. It should shoulder the financial burden of petrol subsidy rather than punishing consumers for its colossal failure.
Government must resist the temptation to impose punitive taxes and levies on impoverished citizens.
To manage the huge financial burden of petrol subsidy, government must plug the horrendous leakages in NNPC and Nigeria Customs Service (NCS) and halt the indecent opulent life style of its officials.
