On Monday, January 19, the Federal Government announced a reduction in the pump price of Premium Motor Spirit (PMS or petrol) from N97 to N87 per litre. The Minister of Petroleum Resources, Mrs. Diezani Allison-Madueke, directed the Petroleum Products’ Price Regulatory Agency (PPPRA) to implement the pump price reduction with immediate effect; and at present, most major marketers of the product are selling at the new rate.
Before the latest development, there had been calls by civil society groups, including the Nigeria Labour Congress (NLC), Trade Union Congress (TUC) and a lot of other stakeholders on the FG to reduce the pump price of fuel in view of the slump in the price of crude oil in the international market. The main logic behind the agitation was the conservative projection that with the Brent crude, the equivalence of Nigeria’s Bonny Light, selling at below $50 per barrel, the FG was making close to N19 per litre of petrol sold in Nigeria. The true arithmetic may, however, not be as simplistic as premised. But the major point remains that with the price of oil dropping from $108 to $47.23, as was recorded on January 16, 2015, about 60% reduction in oil price was reflected. But the pump price of oil doesn’t have to drop in a linear relationship pattern. Crude oil price is not all the cost component that goes into determining the actual pump price of fuel; as was argued by the Executive Secretary of PPRA, Mr. Farouk Ahmed. We concur!
But what we don’t agree to is Ahmed’s convoluted argument that “even at the lowest crude oil price of $47.23 per barrel recorded on Jan. 16, 2015, the open market price of petrol was about the same as the former price of N97 per litre. What this means is that at the new price of N87 per litre, government is still subsidizing the pump price .” With this logic, the PPPRA boss apparently stood logic on its head; and attempted to stupefy Nigerians the more by his inference that “when the price of crude-oil reached the peak of $114.26 per barrel on June 18, 2014, the open market price of petrol was N157, but government still maintained the regulated price of N97 per litre and subsidized the difference of N59.51 per litre”.
We believe that in an election year, PPPRA should have steered clear of this massive oil subsidy bogey, which by its jaundiced mathematics, amounted to 61% of the price of petrol at the filling station. Nigerians never agreed to such configurations of subsidy with all the opacity in the mechanics of its determination, the incongruence of its implementation, and the scheme’s fat-cats’ beneficiaries, who were previously indicted but shielded, courtesy of the culture of impunity in the land. Ahmed should also be reminded that as a rule, it is PPPRA that should have worked out the correct pricing of petroleum products, including what kerosene and even deregulated diesel prices should be; and not the Presidency through the Petroleum Ministry. The PPPRA helmsman must be aware that constituent members of the agency, who statutorily sit on its board, especially the NLC, TUC, NUPENG, PENGASSAN and NURTW, have all described the price reduction as having been made by fiat or expressed in other words as diktat.
President of the Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, said the cut was too small. General Secretary of the NLC, Dr. Peter Ozo-Eson, also said although the price reduction was a welcome development, it did not reflect the expectations of the people. Ozo-Eson said the 10.3% reduction did not compare with the 33% reduction most countries, including the United States, have effected. Comrade Bobboi B. Kaigama, the TUC President; and Secretary General, Comrade Musa Lawal, described the reduction as insignificant and not commensurate with the fall in the price of oil in the international market. All the above functionaries and or their organizations are supposed to be on the board of PPPRA. We do know, however, that the figure, in the step-down format of reduction in China is something close.
Nonetheless, the gesture is a welcome one, though inadequate. But it could be remedied in the future. The FG should, henceforth, stop its reliance on voodoo subsidy calculations in explaining away reduction or increase in the pump price of fuel. It is provocative. Let’s allow sleeping ‘subsidies’ lie. We have had enough of subsidy; and it had been publicly exposed for what exactly it is – daylight fraud.
