Nigeria: Oil Marketers Say Subsidy Not Sustainable, Want Gradual Removal to Minimise Shock

With the federal government and Nigerians grappling with ballooning subsidy spending, unabating petrol scarcity and queues in the country, petroleum products marketers under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) have advised the government to end the subsidy regime by adopting a gradual removal approach.

Insisting that petrol subsidy payment was no longer sustainable and was killing marketers’ business, MOMAN explained that adopting a phased removal approach, which would require adjusting upward, the price of petrol little by little, would ensure that consumers were protected against the attendant shocks.

The Chairman of MOMAN and Managing Director of Ardova Plc, Mr. Olumide Adeosun, relayed the association’s suggestion Wednesday, during a virtual capacity building workshop organised by the Federal Competition and Consumer Protection Commission (FCCPC) for oil marketers and journalists.

In the last few months, Nigerians have been grappling with the challenge of getting petrol to fuel their cars, to power their generators, among others, and Abuja, Lagos and other cities have been the most hit in the fuel crisis due to the closure of some filling stations.

While government’s approved pump price is N165, some marketers, who said they could no longer continue to cope with that fixed price have resorted to either hiking the price as high as over N180 or hoarding the product.

Many industry players, economic policy analysts as well as multilateral organisations like the World Bank and the International Monetary Fund (IMF) had advised the government to jettison the subsidy regime and channel the money into other critical sectors.

Against the provision of the Petroleum Industry Act (PIA), which okayed the deregulation of downstream petroleum sector, the federal government had suspended that provision, citing the fear of possible hardship it would bring upon vulnerable Nigerians.

However, the price of petrol just like other commodity prices has been on the rise owing to the cold war between Russia and Ukraine in addition to the oil price rally.

However, presenting MOMAN’s position, Adeosun said gradual removal was the only way to address the subsidy challenge which has compounded the bleeding of the already ailing economy.

He said, “So looking forward, what do we say? We are saying that we need government to work assiduously to gradually phasing out the subsidy by allowing the prices to increase gradually.

“Doing it slowly really means that at no point are we shocking the system to the point of collapse because the farther down the line we kick the can, the deeper and greater the shock will be.

“So, they say the most humane way to cook a frog is to boil it slowly. So we should really be looking at that because I believe, for people, it’s much more palatable to have the product at a slightly increased price than to not have any product at all and you will not be able to get on with life at a price that is not a sustainable price at all.

“And I think that is the general mood of the country. So, we are saying that, let’s see the prices for this product get reduced on the one hand, and let’s inject subsidy into things like mass transportation, areas where people are actually at the point of need. We’re saying, let’s look at how we can increase productivity in the agricultural sector by targeting some investments there.”

Noting that the answers to Nigeria’s situation arising from the global energy crisis was to look inward, Adeosun argued that the country’s case could be likened to someone who refused to save for the rainy day.

According to him, Nigeria has had subsidy for so long and had not saved for the proverbial rainy day, adding that the country had been subsidising through good and bad times that the institutions now have reduced capacity to deal with the problem even with the best will.

Adeosun added, “Now, we have the subsidy bill that keeps increasing: N1 trillion, N3 trillion, N4 trillion, N8 trillion. If we look at that money and we think about what we could have done with it around education, around health, around infrastructure, we might be able to have businesses that are more resilient to deal with it. But we are where we are today and the reality is really before us.

“So, what we are saying, what we stand for, is for a phased deregulation of this sector. You cannot realistically begrudge somebody, a business, set up to run cash flow and make profit to land a product at a depot, for the same price that is recommended in the country, to then move this product to maybe 500 kilometers up country and still sell it for that same price, with the increased cost of diesel to run for transportation, with the increased cost of diesel to run the filling stations, to run the depots, all of these assets are powered by diesel.

“And we all know what happens along the journey as well. We may not have tollgates on our highways, but we do have collection points along those highways and these all add up.

“So, we cannot realistically expect a business to deal with that. Because what’s happening right now is that the outages that we’re seeing is causing businesses such as my members’ businesses to really think about their business and how they will survive.”

He further explained that marketers were now managing to be in business just to provide services to consumers without really making profits due to the costs they had to incur such as the high diesel price, to make the product available.

According to him, those who could no longer cope with the cost of doing business had no other choice than to quit, adding that, as marketers, they were also consumers facing the same challenge like other consumers.

The MOMAN boss, however, urged the government to work towards reducing the national petrol consumption so that Nigerians would be aware of the true consumption figure rather than the fictional consumption or consumption that allows the country to extend its subsidy into neighboring countries.

Peter Uzoho

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