RECENT moves by the Federal Government to deregulate the downstream sector is already causing ripples among Nigerians with players in the oil and gas sector as well as the labour movements spoiling for a showdown.
While labour is arguing that the move to deregulate the downstream sector would bring untold hardship on Nigerians, others have posited that the claim by labour is misplaced and would not necessarily inflict pains on Nigeria.
With over N1 trillion spent on petrol subsidy, coupled with the dwindling price of crude oil in the international market, government has said it would no longer provide funding for subsidy, which it claimed only enriched a few without the impact being felt by the masses.
And to display its seriousness to do way with subsidy, the Federal Government has introduced subtle moves to remove subsidy by introducing a price modulation mechanism, which would see petrol sell at N86 at all Nigerian National Petroleum Corporation (NNPC) retail outlets and N86.50 for other marketers.
Commenting on the planned deregulation, Director, Centre for Petroleum, Energy Economics and Law (CPEEL), a MacArthur Foundation Regional Centre of Excellence at the University of Ibadan that provides training, research and consultancy on all aspects of energy, Prof. Adeola Adenikinju, dispelled insinuations that deregulation would bring untold hardship on Nigerians.
Adenikinju said at the moment petrol is being sold for as much as N120 to N140, depending on the location as against the official price of N87. He said with deregulation, the price of a litre of petrol may not sell up to that, arguing that deregulation does not necessarily translate to hike in the cost of goods or services.
His view was further corroborated by the Director General, Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuff, who said that putting an end to subsidy regime would likely result in improved market efficiency and profitability as downstream sector players explore pricing dynamics to boost investment. “The expected deregulation in the downstream sub-sector will be a game changer,’’ he assured.
But the Nigeria Labour Congress (NLC) has accused the Federal Government of removing subsidy through the back door. General Secretary of NLC, Dr. Peter Ozo-Eson, has, however, warned that the union would resist such moves. The union urged the Federal Government to promote domestic refining before embarking on subsidy removal.
“The fact of the matter is that as long as we continue to depend on imported refined products, deregulation and the abandonment of a subsidy scheme will unleash hardship on Nigerians. These vacillations and flip flops are, in our view, designed to confuse Nigerians and pave the way for deregulation of petrol prices through the back door,’’ the union alleged.
Adenikinju explained that government should rather be subsidising kerosene because that is the fuel available to the common man and not petrol, saying there was not much noise about kerosene because it is fuel for the low income class.
He wondered why government should be subsidising petrol for people that have up to eight cars and can afford to buy petrol at whatever price it is fixed.
Rather, he said government should use the subsidy to open up the rural areas to allow farmers bring their produce to town, thereby improving their standard of living because lack of access roads remained an inhibiting factor to growth in rural communities.
National Vice President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Mr. Billy Harry, supported the scrapping of subsidy on petroleum products, saying subsidy has failed to benefit ordinary Nigerians over the years.
Speaking in the same vein, Dr. Godwin Ichimi, a Research Fellow at the Nigerian Institute of International Affairs (NIIA), disclosed that fuel subsidy was not economically sustainable, especially with the activities of a “callous cartel.”
According to him, in the analysis of fuel subsidy removal, the question that should be asked is: how will the removal impact the average Nigerian and what will be the benefit to Nigerians?
He said: “What are the social safety nets that would be put in place to cushion the attendant hike in the standard of living of Nigerians? To me, if the government removes subsidy and tinkers with some of the country’s macro-economic indices, this will ensure a win-win for everyone.
“However, with President Buhari’s credentials, I am hopeful that in removing the subsidy, he will ensure that the revenues saved are ploughed back into growing the economy and ensuring that citizens benefit.
“It is also hoped that the Buhari administration will block all the leakages while a myriad of safety nets should be put in place to cushion the effect of the increase in petroleum products’ prices and other commodities on the lives of ordinary Nigerians.”
According to Harry, who is also the Chairman, National Oil and Gas Trade Group, the subsidy regime had served as a hidden agenda by some unscrupulous individuals to further enrich themselves.
He said: “Let us clearly define what the petroleum product in Nigeria should be, how much it should be sold, refined and how much it should be sold to the ordinary Nigerians on the streets. This clearly will define where we are.”
Harry further said: “There is no need for subsidy to stay; it should be removed. Let petroleum marketers import products genuinely or go into refining agreement with the Federal Government with clearly defined transparent cost of crude oil sold, transportation and logistics for refining and actual landing price that will be affordable to Nigerians.
“I am not saying they should regulate the price but I am saying that the process by which crude oil is exported or sold or refined or product imported should be put on a very clear platter of transparency.”
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