Subsidy removal is best parting gift Jonathan could give Buhari – Akabogu

By Akoma Chinweoke

We are in the middle of the longest fuel crisis in  five years. In many places, it mirrors the dark days of the 1990s when fuel queues were routine, together with their many accessories – jerry cans, hoses and plastic bottles cut in half  as  funnels. Coupled with poor electricity supply, Nigerians frustration and anger are largely justified. Yet the problem has a simple, plug-and-play solution. Emeka Akabogu is the Chairman, OTL Africa Downstream. He speaks on why he thinks subsidy removal is the right thing to do now to put an end to the fuel crisis in the country. Excerpts:

It has not been an easy road  for the country’s oil sector. What do you think is the way forward?
The best parting gift President Jonathan could leave for President-Elect Buhari will be to formally scrap petroleum subsidies. While it may be interpreted as a Greek gift, the truth is that it affords a soft-landing for the incoming President as he will not be burdened by the perceived betrayal such a decision by him could induce. His challenge will be to simply live up to his promise by ensuring savings from the subsidies are not frittered away.

Can poor Nigerians  afford deregulated fuel?
Removing subsidies is simply the right thing to do. It is pragmatic, cost-saving, and best of all, does no one any harm. It is not true that Nigerians cannot afford the real cost of fuel if the price is deregulated. The empirical fact is that apart from NNPC Retail stations, the eastern part of Nigeria has for years seen fuel for between N120 and N150, and everyone is used to it including the poor. I was in Awka last week and easily drove into a NIPCO station where I bought fuel for N120/litre. No queue, no story. The price at which fuel is bought conditions the usage and consumption pattern towards it increased discipline and reduction of waste, which no one will argue the country badly needs now.

Don’t you think major oil marketers are holding the country to ransome?
It is hypocritical to suggest that marketers are not being patriotic by insisting that they will not import until they are paid their outstanding reimbursements. Do they fetch the fuel for free from the ocean? As long as we are dealing with international supplies and shipping the choices are limited. Neither the international suppliers nor the banks are interested in stories relating to indebtedness by government or foreign exchange variation. These are companies not charities – they employ thousands of Nigerians, invest in the economy, have shareholders and are in business for profit. The incoming government has not defined a clear-cut, bankable policy on subsidies so it is better to be safe than sorry. The same Nigerians will be the first to demonise the marketers if creditors proceed against them in liquidation, so we need to get real.

Can’t our  local refineries be revived to serve as  a solution to the lingering problem?
Not exactly. Self-sufficiency in refining will solve the problem of capital flight and bottom-line erosion arising from foreign exchange fluctuations. It will exponentially boost GDP, create multiplier value in the economy, eliminate most of the freight cost and potentially drive the development of a West Africa pricing benchmark for petroleum products. To that extent, self-sufficiency in refining is great. But if subsidies remain, refining will not solve the problem of availability or scarcity of products. Refiners too are businessmen, and will expectedly buy crude at international prices. They will sell for profit, even if with a primary focus on the Nigerian market. If government attempts a pricing dichotomy – one for crude oil to be used locally and another for international sales, such a scheme will spectacularly backfire. Round-tripping of crude oil will become the new fad and the levels of sleaze will simply multiply. They should not try it.

Where do you think we should go from here?
Scrap the Petroleum Support Fund (subsidy scheme). Undertake major infrastructure projects in mass transit – interstate rail, inland waterway ports, inland container depots/dry ports, road renewal and maintenance. Finally, let there be light! -widen and deepen options for access to electricity using competitive tariffs and ensuring people pay only for what they consume.


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