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Fuel Scarcity And The Subsidy Question

Once again, the problems associated with petroleum import subsidy payments which have always been the bane of the oil industry in Nigeria have crept back with disastrous consequences on the supply of petroleum products. For several weeks now, the supply of petroleum products has been very epileptic, resulting in panic buying. Long queues of motor vehicles and huge gatherings of people pushing and shoving have also become regular features at petrol stations across the country. Most fuel stations do not receive their normal supplies of products, hence the shortage.

The shortfall in supply of petroleum products is the direct fallout of the bigger and familiar problem of subsidy payments. Fuel subsidy has been a nagging problem since 2012 when its planned removal led to a major nationwide crisis. There are several reasons why subsidy for petroleum products imported into the country has remained a huge controversy. The exact figures of the subsidy paid by the government are usually cloaked in a shroud of secrecy. It has also been recently established that for a long time, some Nigerian individuals and companies have received subsidy payments without actually importing petroleum products. Some of these cases are currently being tried in court.

The present fuel scarcity of petroleum products was fuelled by delayed payment of subsidy and the fear that the in-coming government of General Muhammadu Buhari may not only refuse to do business with petroleum products importers but even disown outstanding debts owed the Major Oil Marketers Association of Nigeria. The association recently embarked on strike to press the out-going government of President Goodluck Jonathan whose very robust relationship with members had assured un-interrupted fuel supply for several years to pay all money outstanding in their favour. But issues arising from conflicting figures of what government actually owe marketers, how much is left after N156 Billion was remitted recently and when the balance would be paid, have prolonged the resolution of the current nationwide scarcity of petroleum products. Importers had insisted on the suspension of further import of products to drive home their demand.

A meeting held between Dr Ngozi Okonjo- Iweala, minister of Finance and Coordinating Minister of the Economy and representatives of the major markers led by their chairman, Mr. Thomas Olawore had raised the hope that fuel scarcity would abate soon. Unfortunately, this has not happened almost two weeks after. The obstacle against the resolution of the crisis is the balance   of subsidy debts owed the marketers. They are claiming that N200.2 Billion is still outstanding in their favour but Okonjo-Iweala has disputed that figure and insisted that N131 billion is the correct outstanding balance. While this argument was still raging, the fuel stations remained   dry in most parts of the country while a few that have the products are witnessing huge crowds of buyers. In some places, petrol is being sold for as high as N200 per litre instead of N87.00.

The scarcity has brought untold hardship for the people who have had to spend long hours at the petrol stations. In some cases, people sleep at petrol stations or wake at unholy hours to secure a place on the queues. Those who have no such time and patience to spare go to where petrol is sold for almost thrice the approved price. Governments and other employers of labour are also losers in terms of man hours as most of their employees spend more time at the fuel stations than in the offices working. The overall effect of the scarcity on cost of goods and services are also enormous and unbearable for a citizenry that has also had to cope with high rates of inflation for long. The suffering is further complicated by large scale un-employment, job losses and several months of unpaid workers’ salaries, all of which are products of the country’s dwindling economic fortunes.

Fuel scarcity usually comes with a multitude of other associated problems. This one is no exception and so must not be allowed to linger. This particular case has lasted too long and taken a huge toll on economic activities and the lives of the people. It should be tackled now and comprehensively too. What is required is not just the settlement of outstanding fuel subsidy arrears which is also a necessary step in the process but paying adequate attention to the resolution of the riddle surrounding local refining of petroleum products.

Our failure to take full advantage of local oil refining facilities is the reason the nation is subsidizing fuel importation. Latest statistics shows that 40 million litres of Premium Motor Spirits, PMS, otherwise known as petrol, is consumed daily in Nigeria. Most of this quantity is imported. Government also pays N45.21 subsidy on every litre of fuel imported. At that rate, daily subsidy bill for petrol alone is N1.81 Billion.

These statistics point to one very important fact. That is, the country’s economy cannot survive with this huge amount of subsidy payments for too long. At the same, it will be unfair for Nigerians to be made to pay more than a fair price for petrol that God has given their country in abundance. Therefore, the only reasonable way out of the subsidy quagmire is increased local refining of petroleum products. Government must, therefore, pay more attention to the development of an efficient policy on local refineries. Existing local refineries must be made to work at full refining capacity. In addition, local and foreign entrepreneurs willing to invest in refining activities in the country should be encouraged to do so. This policy can work if corruption and other regulatory encumbrances that had always crippled local refining activities are eliminated.

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