Fuel Subsidy Debate: FG’s Panic Measures?

Is the Tinubu-led Federal Government responding in a state of wild panic to the continued rhetorical assaults of the presidential candidate of the African Democratic Congress, former Vice President Atiku Abubakar, who says he would ‘restore’ the fuel subsidy if elected president in 2027?

What exactly does the government mean by a 30-day margin discount on petrol sold to motorists through the Nigerian National Petroleum Company Limited, which is supposed to be a market-driven enterprise under the Petroleum Industry Act?

Taiwo Oyedele, Minister of Finance and Co-ordinating Minister of the Economy, is also not articulate enough about what he has described as a cost-reflexive arrangement whereby government will “coerce” NNPCL Retail to sell petrol at cost price in order to provide temporary relief to public transport operators.

President Bola Tinubu must get his communication team to come up with a plan to assist the minister to better explain how the discounted sale of petrol will be achieved. Oyedele’s claim that selling PMS at a lower cost without profit is neither a subsidy nor a price control raises more questions than answers.

A State House press release suggests that NNPCL will forgo profit margin to “cushion the impact of global crude oil price shocks and volatility on vulnerable households. NNPCL Retail, which already sells petrol at the lowest price in the market, will offer this new deal within the next 30 days. This means if NNPCL’s landing cost is N1,300, it will sell fuel to Nigerians, especially commercial vehicles, at the same price.”

This reminds us of a similarly unrealistic scheme of the regime of military President Ibrahim Babangida in the mid-1980s, whereby public transporters could buy petrol at a lower price at designated petrol stations, and private car owners bought more expensive petrol at other filling stations.

Expectedly, the scheme failed and was cancelled by the government, which had to revert to the old system of selling PMS at the same price to all motorists, whether public transporters or private car owners, at all petrol stations.

Currently, NNPCL cannot adequately supply the needs of Dangote Refinery alone. Apart from struggling with illegal bunkerers, the company must share its crude petroleum production with its joint venture partners and meet its commitment to service and repay creditors, like AFREXIM Bank, that agreed to crude petroleum as consideration.

It is important for the government to further expatiate on how a market-driven Dangote Refinery and other refiners can service and repay their loans and also pay dividends to their investors after the Federal Government leans on them to run without making profit.

The press release quoted Oyedele as saying that “he hoped other marketers (and local refineries too?) would take a cue from NNPCL, as the sharp rise in crude and petrol prices is not expected to last long.” What happens if the sharp rise in the price of crude petroleum continues for a long time?

Given the fact that NNPCL has no strategic petroleum reserves, and that whatever is produced is almost committed to third parties, the press statement that “Oyedele announced forward sales of crude to domestic refineries” is at best cynical and at worst an attempt to pull the wool over the eyes of the Nigerian consumers of petroleum products.

A country that does not have strategic petroleum reserves cannot talk about keeping petrol prices independent of crude oil price fluctuations. There are justifiable doubts that the government can achieve the stability of petrol pump prices as promised or proposed.

Many compatriots are utterly bewildered by the claim by the Finance Minister that the Federal Government’s temporary policy “is neither a subsidy nor a price control.” Are the proposals not euphemisms for the return of subsidy and re-introduction of price control?

It is important for the government to clarify if other marketers, or local refineries, that Oyedele expects to follow the lead of NNPCL, which is already violating the Petroleum Industry Act, would be carrying out this Corporate Social Responsibility initiative with the understanding that their forgone profit will be tax-deductible in the books of the Nigerian Revenue Service.

It is the prerogative of the Federal Government to review its policy at any time. It should not descend into a panic mode on account of “constructive criticisms” of the opposition, leading it to embark on a precipitate action such as the latest announcement. Besides, the anticipated reduction in petrol price is so marginal that it is unlikely to provide any meaningful relief from the cost-of-living crisis.

The Federal Government should take a second look at its ‘30-day fuel discount policy,’ which may end up as an academic exercise devoid of tangible benefits for the masses.

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