By VICTOR NZE
The current petrol scarcity which has pitched product marketers and the Nigerian National Petroleum Corporation (NNPC) on the one side against consumers with blames being traded off as the commodity swings back and forth in supply, has also brought to the fore issues of inconsistent and weak economic policies by government as regards the controversial fuel price subsidy debate.
It would be recalled that in May, last year, the Federal Government announced a price hike in the pump price of the premium motor spirit (PMS) to the present N145 per litre claiming that the decision was informed by the need to halt further subsidization of the landing costs of the product while allowing for market forces to dictate the actual price of the commodity.
“The Petroleum Products Pricing Regulatory Agency (PPPRA) will be announcing a new price band effective today, 11th May, 2016 and that the new price for PMS will not be above N145 per litre.
“We expect that this new policy will lead to improved supply and competition and eventually drive down pump prices, as we have experienced with diesel. In addition, this will also lead to increased product availability and encourage investments in refineries and other parts of the downstream sector. It will also prevent diversion of petroleum products and set a stable environment for the downstream sector in Nigeria. We believe in the long term, that improved supply and competition will drive down prices,” said Minister of State for Petroleum, Ibe Kachikwu in a statement in Abuja, in May.
However, Kachikwu while making a presentation in Abuja, last Thursday, before a joint committee on Petroleum (Downstream) of the Senate and the House of Representatives, said while the landing cost for petrol stood at N171 per litre, the current price of N145 per litre can no longer be sustained.
His statement was correctly inferred by analysts to mean an impending hike in the price of the commodity. This is just as the Director of Press in the ministry, the Idang Alibi, and the NNPC have since issued statements ruling out any such move on the card by the Federal Government.
According to Kachikwu, the Federal Government, through the NNPC has been bearing the cost of N26 per litre, representing the difference between N171 and the current official price of N145 per litre.
Kachikwu had told the public hearing at the National Assembly that the NNPC has incurred a cumulative loss of N85.5 billion in importing petrol and selling at the current retail price of N145 per litre, since October 2017.
He also said the price was fixed in the first quarter of 2016, when crude oil was selling for $49 and expressed fears that with crude price rising to 67 dollars a barrel, the pump price, may no longer be sustainable.
However, Chairman of the joint committee, Senator Kabiru Marafa raised questions of secret subsidy payments by the government, even as he asked who was making the payment to cover the calculated difference of the N26 in the landing cost of N171 against the pump price of N145.
“If there is subsidy payment, then who approved it and how much has been paid out as subsidy so far. If you want to provide the subsidy, it should come through the National Assembly but we have not received any request for subsidy payment from the Executive arm.”
Claiming that about N10 trillion has been paid out as the subsidy, Marafa had lamented that stakeholders in the industry, particularly the NNPC, have not been transparent in the running of the sector.
Invariably, what the development means is that the Federal Government has not halted the subsidy regime afterall as earlier claimed.
This issue of inconsistent policies has remained the major clog hampering the wheel of economic growth on the continent, with Nigeria, not an exception, as posited by some financial experts who spoke to Oracle Today Newspapers, as they also re-echoed a report earlier released in July by the World Bank.
The World Bank Country Policy and Institutional Assessment (CPIA) Africa Analysis which was released last July, scored the progress that Nigeria and some other African countries were making on strengthening the quality of their policies and institutions low, while also noting that the weakened trend was observed in 40 per cent of the region’s IDA countries, notably commodity exporters and fragile states.
The International Development Association (IDA) is an international financial institution which offers concessional loans and grants to the world’s poorest developing countries.
According to the report, a common pattern across countries that experienced a weakening in their overall policy and institutional quality was slippage in economic management including monetary and exchange rate, fiscal, and debt policies.
This, it said, can in part be explained by unfavorable economic conditions like deteriorating terms of trade, sluggish global growth, and difficult economic conditions, that continued to take a toll on countries across the region, deepening macroeconomic vulnerabilities. Weakening of fiscal and external buffers constrained the scope for macroeconomic policies to mitigate the effects of adverse shocks to economic activity.
“Governance underpins all sectors of World Bank Group engagement, and moving forward, despite these slight gains, it will remain critical that Sub-Saharan countries implement or expand governance and public-sector reforms that will upgrade financial management systems, increase transparency, reduce corruption, protect rights, and improve public services,” notes Albert Zeufack, World Bank Chief Economist for Africa.
Further reacting, Deputy General Manager at Access Bank Plc, Dr Chukwujekwu Ozoemena, said: “This is the sound of the inevitability of an impending fuel price increase. The N10 trillion in subsidy payments? That figure must either be wrong or the Joint Committee Chairman misquoted. Let’s recall that in May 2015, Buhari said; ‘I don’t know what fuel subsidy means. I can understand if Nigerians pay for those costs.’ But today, is saying he is subsidizing Nigerians. Who is subsidizing who?
For Seye Ogunrotimi, an IT Consultant based in South Africa, it is about sincerity of purpose on the country’s economy managers.
“When lies run around for twenty months, it takes just one single month like this for truth to catch up with it. They planted the ‘FG removed subsidies payments” story about 20 months ago as an achievement.’ We have now paid more than a national budget as subsidies.
A retired public servant, Ama Ochu: “It appears that NNPC has run out of ideas on how to assist the poor masses over this fuel crisis and on the chain reaction it has on the rising cost of other goods and services. How long will Nigeria continue to remain under a ‘curse?’”
“I think for the World Bank, they are actually looking at some of the statements as well as body language of our economic decision makers and it appears they are not convinced as to who is actually formulating these policies. The Finance ministry says one thing today; the CBN says another, while the Bureau of Statistics flattens everything with its own forecasts. And when our investors read these they are confused.
“Nobody knows for sure who is influencing fiscal policy decisions. A clear case is the date of exit from economic recession. You can see all the various projections. Another one is the multiplicity of exchange rates. It is things like these that signpost uncertainty especially for key investors,” said financial analyst and Bergen, Norway-based George Ikwuka.