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Friday, 02 June 2023 04:57

How FG prepared Nigerians for fuel subsidy crisis

Clearly, the passage of the Petroleum Industry Bill, PIB, into the Petroleum Industry Act, PIA in 2021, remains one of the most outstanding accomplishments of President Muhammadu Buhari-led administration in the oil and gas industry.

Before then, several administrations, including former President Olusegun Obasanjo, Umaru Musa Yar’Adua, and Goodluck Jonathan, had made immense contributions but were unable to evolve from PIB to PIA, due mainly to politics, suspicion, and disagreement over issues such as provisions for host communities and fears of non-oil states.

It is on record that the government established the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, to regulate activities in the upstream, midstream, and downstream sectors, respectively.

The government also appointed Engr. Gbenga Komolafe as the commission’s Chief Executive for the NUPRC, and Engr. Farouk Ahmed as Authority Chief Executive, as well as transferred old staff and engaged additional staff for the agencies. It went further to collapse the defunct Department of Petroleum Resources, DPR, and Petroleum Products Pricing Regulatory Agency, PPPRA, into the two agencies.

But the Buhari-led administration did not demonstrate commitment to its implementation. It was at best very selective in the implementation of the new law and left behind many unfinished issues, especially the deregulation that appears to be very dear to operators and other stakeholders, who expect the comprehensive legislation to lead to structuring, enhanced operations, increased efficiency, transparency, and accountability in the industry.

Surprisingly, relevant government officials and the NMDPRA, which lack presence in the sector, also failed woefully to champion the course of the sector by guiding the old and even new governments to embrace PIA.

This culminated in the provocative announcement by President Tinubu that the fuel subsidy was gone. He said: “We commend the decision of the outgoing administration in phasing out the gasoline subsidy regime, which has increasingly favoured the rich more than the poor. The subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions.”

Instantly, the market responded as operators shut down depots, apparently because of uncertainty, leading to high prices at retail outlets nationwide on May 29, 2023.

The following day, specifically on May 31, 2023, the government emerged with a new template, stating different prices for different states in the nation. The document communicating details of the new pricing regime also indicated that with N557 per liter, Borno and Yobe states have the highest price of petrol in Nigeria, while Lagos has the lowest price of N488 per liter.

It also showed that petrol will sell for N537 per litre in Abuja, Nasarawa, Plateau, Kogi, Benue, and Niger states, while the product will sell for N515 in Kwara State. Under the new price regime, the product will sell at N550 per litre in Adamawa, Taraba, Bauchi, and Gombe states, while it will cost N540 per litre in Kano, Kaduna, Katsina, Sokoto, and Jigawa. The document further showed that the product will cost N545, N540, and N515 per litre in Kebbi, Zamfara, and Abia, respectively.

This culminated in high transport fares that rose by more than 100 per cent in different parts of the nation. For instance, it now costs about N1, 000 to move from Maryland to Mile 2 in Lagos, a distance that used to cost about N500. This is expected to lead to high prices for food, basic goods, and services, as well as inflation. It may also lead to a high rate of crime.

However, the way forward is for the government and relevant agencies to go for orderly implementation of the PIA, which preaches deregulation, not fuel subsidy withdrawal. This will lead to increased domestic and foreign investment in the sector, resulting in the creation of many multiplier effects, including growth, contracts, and employment opportunities.

Later, the government and the National Assembly can go further to work toward the amendment of the legislation in order to correct some anomalies, especially the collapse of NUPRC and NMDPRA into one single commission like the current Nigerian Communications Commission, NCC, in the communication sector.

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