HIGHER AND HIGHER
THE TRAUMA OF FUEL PRICES AND HIKES
Yet again, the Nigerian
nation has been roused into protest mode. The reason for
this is the recently publicised increase in the pump
price of petroleum products. Petrol and diesel
previously sold for approximately N51 per litre. The
price increase adds at least 20% to that price. For the
ninth time in the last six years, Government has sought
to and increased these prices. The Government’s position
is predicated upon what it asserts to be the huge demand
of fuel subsidy on cash flow. Although major Government
sources are unable to agree, the suggestion is that the
subsidy is somewhere in the region of N400-N600 billion
in the last 6 months, approximately N200 million, per
day. The pro-increase argument which, typically, has not
been canvassed with the requisite transparency, is that
monies raised from the price increase will be used to
develop other sectors of the economy so as to promote or
contain the consequences of poverty and in the short
term, to ease the pressure of cash demands in the
running of various other aspects of the economy. The
other aspect of the argument is probably disingenuously
framed around using the price increases to raise the
necessary revenue required to meet the terms of the debt
cancellation negotiated with the Paris Club of
Creditors. The increase in the subsidy, it is further
argued, has come about principally because the higher
prices of refined petroleum in the international markets
have led to an increase in the subsidy. In effect, the
subsidy has increased because the price at which Nigeria
is purchasing petroleum products has significantly
increased whilst the purchased product is being sold
within the country at a lower, fixed price.
Many Nigerians will
wonder, audibly, how this situation has come to be. The
explanation for this situation is simple. Nigeria is the
seventh biggest oil exporter in the world and the source
of over 1/5 of oil imports to the United States. Our
country produces 2.5 million barrels of oil a day which,
following the price increases is now being sold at an
average price of $65 per barrel. There, it appears, the
picture now becomes somewhat distorted. Given the lack
of capacity to refine the products in-country, Nigeria
is forced to buy back petrol, diesel and other refined
fuels from non-oil producing countries to whom we have
sold these products who are selling them back to us at a
significantly higher price. As the end result is now
sold back to Nigerians at a controlled, subsidised
price, there is, it is argued, no commercial reflection
of the increase in these prices in the end product. It
is, ostensibly, upon this premise, that Government is
now seeking to anchor this increase.
The target of Government
in this respect is twofold. The first, plainly obvious
commercial consideration is to contain the consequence
of importing petroleum products at a higher price. The
second is to serve as a source of funding for the $12
billion dollars required to satisfy the Paris Club
arrangement. Government’s only other argument is a long
term one, namely its liberalisation policy.
The case against price
increases is unquestionably sound and, as NAS has
observed on previous occasions, markedly more compelling
and irresistible. On every occasion when prices have
been successfully increased in the past, it has led to
devastating consequences on every aspect of the economy
as a whole. Price increases that have destroyed
confidence in the nation have occurred. Inflation has
jumped. The purchase power of money in the hands of the
populace has diminishes with unparalleled, irretrievable
rapidity. Over the same period that has seen these price
increases, the cost of goods and services have risen by
more than 200%, a development that is wholly
disproportionate to the percentage increases in the
price of petroleum products. Within this same
environment, poverty and adverse conditions continue to
deteriorate, seemingly unabated. The graphic statistics
about Nigerian social circumstances worsen the overall
picture. 91% of our population live on less than $2 a
day namely less than N300 for food, clothing and basic
daily needs! In 2005, only 62% of the population have
access to clean drinking water. Average life expectancy,
is at an all time low, induced principally by the
harshness of living conditions, at a mere 52 years. Yet
the same country has produced over $300 billion worth of
oil since 1958.
Like many concerned
individuals and organisations, our organisation is
gravely disturbed by the current developments. Our
anxiety is predicated on three premises. The first is
that organisational structure seemingly put in place to
deal with the thorny question of eliciting a consensual
new products pricing regime appears to be hopelessly
ineffective and presently, in disarray. Information in
the public domain suggests that on 23 August 2005, the
Petroleum Products Pricing Regulatory Agency had
adjourned its meeting amidst confusion following a
failure to reach any agreement. The meeting was
rescheduled for this month and the sole subject on the
agenda was the issue of upward review of fuel prices.
Further information in the public domain appears to
suggest that the reason for the inconclusive outcome was
that it had decided that there would be an upward review
but was unable to agree as to whether or not the
increase should be introduced before the palliative
measures proposed by the Senator Ibrahim Mantu-chaired
Independent Consolidating Committee on Cushioning
Measures Report - submitted since April 2005 - would be
acted upon and implemented. If information in this
regard is correct, this is tantamount to dismal
bureaucratic ineptitude on probably one of the most
important issues in the day to day life of ordinary
Nigerians today. The second is the arbitrary, again
unilateral announcement of the increase in the price and
effective date of commencement. It is this latter
development that has led to the quite audible complaints
that have been made across the length and breadth of
Nigeria. The third is historical, depressing but sadly
subsisting. Those who have, over the many years, managed
the country’s refineries especially in the last 20 years
are chiefly responsible for the devastation that these
price increases have brought about as staggering levels
of corrupt management of over-inflated and poorly
executed contracts for their refurbishment has seen to
it that Nigeria will remain imprisoned by the sentence
of continuing importation of petroleum products for
years to come.
Our view is that this
current increase is unjustified and insensitive. Our
position is predicated both on the commercial and the
sentimental. With regard to the former, surely the
benefit of the increases in price should make it easier
for the country to pay for the increase in the price of
imported end products. Second, it seems logically
inexplicable that the average Nigerian should be
penalised for an increase in world oil prices in
circumstances that, ordinarily and commercially, he is
expected to profit from. The average Nigerian is not
responsible for the nation’s inability to manage the
opportunity to refine its oil products. Low fuel prices
has been the only way in which the average Nigerian has
benefited from the country’s quite prominent role in the
production and marketing of oil all over the world.
Whilst there may be commercially sound views upon which
increase may be justified, the apparent insensitivity to
the trickle down effect of this decision is one of
disturbing alarm. Ordinary Nigerians, we suggest, would
be entitled to consider themselves grossly
under-represented in the decision making process that
led to this outcome. It cannot go without notice that
the legislature has expressed reservations about the
increase recommending, uniquely for a change, a
different, probably even more stable, price modulating
mechanism. In October 2004, on the occasion of the last
attempted increase and National strikes, we wrote:-
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“NAS calls on the Government to reconsider its
position and even if this is to be done, must
speak to the people. Clearly, there was no
consultation. Both houses of the legislature have
distanced themselves from these decisions. Who, we
must ask, was the Government consulting in acting
on behalf of the people? There must be a return to
discussion in order to eke out a policy and a
response for the future that is both durable and
has a human face”. |
That position remains as
germane then as it is now. The sad reality of the
circumstances is that the position has not changed since
then, nearly one year ago.
Signed:
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ANDREW OBINNA ONYEARU
NAS Capone
National Association of Seadogs (NAS)
20th September 2005 |
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