Subsidy of petroleum products has not stopped after all, evident in the revelation that the country used $1 billion to subsidise kerosene last year. The intention of government to subsidise was to make the product affordable to the poor masses. But we are alarmed that the obverse is the case. This means that the N310 billion (official value in local currency) involved has gone down the drain. As a litre of kerosene is being sold at over N300 in the open market, more than the N145 a litre of petrol costs, President Muhammadu Buhari should pause and ask the officials purportedly implementing the subsidy policy some vital questions.
The Vice-President, Yemi Osinbajo, who disclosed the subsidy expenditure, lamented the low consumption of gas, which has given rise to the use of alternative fuels in kerosene and firewood, despite their environmental hazards. Nigeria’s consumption of gas is considered low when compared to its peers on the continent. And this is in spite of growth in domestic Liquefied Petroleum Gas production, from 50,000 metric tons per annum, to 400,000 metric tons per annum. Thus, with local consumption at 40 per cent, it has turned the country into a major exporter of the product.
Scarcity of kerosene has been a perennial concern due to declining local production, scarcity of foreign exchange to import and fraud that defines the subsidy regime. This reached new heights under the Goodluck Jonathan administration. Queues of rubber kegs that stretch metres away from petrol stations and disorderly crowd, mostly children and women, have become common sights. As always, middlemen in the chain of transaction take advantage of the situation to fleece consumers, deepen scarcity and escalate prices.
The Umaru Yar’Adua administration saw this disorder and waste, and took the bull by the horns. The policy was scrapped. His Principal Private Secretary, in a memo dated July 10, 2009 to his boss, invited him to direct the then Minister of Petroleum Resources, Rilwanu Lukman, to “eliminate existing subsidy on the consumption of kerosene, taking into account that subsidy payments by Government on kerosene do not reach the intended beneficiaries.”
But the Jonathan administration that succeeded Yar’Adua had a different plan. It continued to mess up with the policy. At a point, subsidy claims filed by the Nigerian National Petroleum Corporation, the sole importer of the product, were declared as a farce by the then Governor of Central Bank of Nigeria, Lamido Sanusi, in one of his numerous spats with the authorities over corruption and the management of our oil revenue.
At a Senate public hearing on the NNPC remittances, Sanusi argued that since kerosene had been deregulated through a presidential fiat, any subsidy claim on it was illegal. Besides, the NNPC rendered nil returns on kerosene subsidy claim between April 2012 and December 2013. The product, which had a landing cost of N150 per litre, was purportedly sold at N50 per litre, while N100 per litre was claimed as subsidy. For the product to reach the targeted masses, the NNPC launched what it called, the Kero Correct Scheme, with 37 mega-stations, 524 affiliate stations and 12 floating stations as the vehicles. But it was anything but a success. It is the same farce that is playing out now.
However, on the face value, government’s intention is laudable. But a subsidy regime cannot work here since the NNPC does not have direct control over oil marketers or distributors. Besides, corruption has become a celebrated code of conduct for many in either public or private life.
Therefore, the Federal Government should stop the use of tokenistic, populist templates to deal with a national crisis of over two decades that requires an enduring remedy. The lucrative, fraud-driven market of importing kerosene can only effectively be checked by responding to the challenge posed by the country’s four moribund refineries located at Port Harcourt, Warri and Kaduna. The scarcity that importation sometimes creates, leads to racketeering in the use of kerosene as aviation fuel (Jet A1). Government’s resounding failure to fix the refineries has ineluctably paved the way for their privatisation. More delay will compound the crisis.
Nigeria imported 1.25 million barrels of kerosene from the United States in 2015. This makes it the second largest importer of the product from that country globally, according to reports from the US Energy Information Administration. Apart from frittering away our scarce forex on kerosene imports, its scarcity and cost beyond the reach of the poor, go with heavy price: deforestation and a high death toll. Trees are indiscriminately felled for firewood, used not only by rural dwellers, but by the urban population too. Over 95.76 metric tons of firewood was used in 2015, says Osinbajo.
Ironically, many are oblivious of the fact that 95,000 Nigerians die annually from inhalation complications from bio-fuel, according to the World Health Organisation. This ranks as the third highest killer in the country, next to malaria and HIV/AIDs. Reversing this ugly tide, therefore, is a challenge the government must face squarely through the provision of clean and affordable energy to every home.
