Fuel Importation and Subsidy

MaTaZ ArIsInG
Texas

Fuel Importation and Subsidy

1. NNPC told the whole world that it gave out our crude oil (460,000 barrels daily) to some international refineries who would then give us refined petroleum products in a pre-agreed ratio that would make both sides happy. It was called the Direct Sales-Direct Purchase (DSDP) arrangement, a glorified name for Trade By Barter.
   Apart from the 460,000 barrels for internal consumption, Nigeria had an OPEC quota to sell 1.8m barrels of oil daily. The same NNPC is in charge of making the sale and the same guy would turn around to be deducting money from Nigeria’s oil sale proceeds and pay it to itself in the name of Fuel Subsidy. Fuel Subsidy for whom and by what calculation. How did NNPC arrive at the Subsidy figures and what is its calculation of the landing cost of a litre of petrol into Nigeria. NNPC is not explaining the sense in all of this to us. The same NNPC is fixing petrol prices for us with no transparency around the composition of the price. And our government is obviously not interested in investigating all of the above. Rather, they would prefer to load that opaque figure dictated by NNPC on Nigerians and beat their chest they’ve removed petrol subsidy. Is that the way things should be done??
2. For about the last 18 months, the big chunk of our oil output could not be accounted for though it was pumped out. It got to a point where about 1m out of the 1.8m barrels were being stolen daily, yet you couldn’t see any sense of alarm or urgency on that government about what should be an emergency situation. To rub salt on injury, NNPC then took out the sizable portion of the remaining revenue and claimed it had used it to service Fuel Subsidy. At a point, Nigeria made absolutely no revenues since the oil had been stolen and the rest had been used on subsidy, by the same NNPC. See below:

NNPC is the organization saddled with the responsibility to manage Nigeria’s oil resources and production and should be the one with the responsibility to ensure its safety and should be the one to bear the consequence of whatever went wrong. I’m from the banking background and I know for sure no management would be excused for losing money bcs of the activities of fraudsters. It must do all to protect the bank or lose its job if it cannot, but that is not our experience with NNPC. And some would be telling us the fable that NNPC is now a limited liability company. How??? What is the meaning of that limited?? If NNPC was indeed a limited liability company, and government was its biggest shareholder, the money it was taking from the government as subsidy in one hand, shouldn’t it be returning it to the same government with the other hand as profit?? Does NNPC record any profit compared to our “Fuel Subsidy” bills?
Now if we make little or no dollar revenues, why should we be surprised that our currency is going downhill?? Do we have the reserves to give it a decent fighting chance in the exchange market and yet we’re talking about “floating”? Do you float a currency with only one supplier contributing 90% to the market and that supplier’s finances are limping too?

3. High corruption and deliberate waste. Buhari and his obscenely corrupt Minister of Oil decided, against all logic and exigency, that they wanted to throw $1.5bn into the so called “Turn Around Maintenance” of moribund Port-Harcourt “refinery” which produces nothing. People begged and protested, yet they stubbornly went ahead. We’ve not heard anything since then on any production from the “refinery”. Instead, the same government desperately anchored its dream of local refining of petroleum on Dangote’s private business and even poured public funds into it and did a premature “opening” of the refinery when it was not yet complete and we don’t know for sure when it would be.
   Is that how a broke and highly indebted country should spend borrowed $1.5bn in the midst of abject poverty and misery of its majority millions of people??
   Have you also considered the huge amounts leaving our shores in foreign exchange from politicians stealing our Naira? Only recently, Ibori was said to have left remnants of £100m (N110bn) in the UK. It was money stolen from Delta State. Now Delta doesn’t make Dollars, its revenues are in Naira. And the conversion of that Naira is from our reserves. And remember we have 36 Governors, a President, 469 National Assembly members, a few hundreds of commissioners and ministers, and a plethora of thieving government officials. Those few people (a few thousands of them) constitute a big/disproportionate pressure on our exchange rate.
4. Most importantly, Nigeria is not productive and our economy is not growing enough to match our population growth. The foreign exchange earning capacity of our economy/country is not sustainable for a population of 200m people with a sizable elite population with sophisticated worldview and tastes. It’s like a messenger who earns a pittance but has several wives and children all living in a small apartment. And more children keep coming, yet the income flow in the family is not commensurate to their number. They will try all tactics but they can’t solve the problem until they reduce their population growth and look for ways to expand the earning of the family.
   This is Nigeria’s huge problem. We need to focus on boosting productivity massively in Nigeria. Our huge population should be put to productive work through entrepreneurship and government deliberately building the enabling environment. E.g insecurity, electricity and transportation should be focused upon.
   If we don’t address the problem of low productivity, we ain’t going nowhere and would just be hitting our heads against the wall as to why $1 should not be N1,000 or even N2,000 a few months down the road. The pittance that we (200m people) make from oil, a small 18m population of Netherlands earns more than it on agricultural exports alone. They make over €100bn from agricultural exports annually and they even come after France (69m population), Germany (84m population) and UK (69m population) as the agricultural powerhouses of Europe. For these guys, agriculture represents only about 2 to 5 percent of their GDP o. So, what is the problem for us with 200m population and with agriculture representing the backbone (almost 30 percent) of our economy? Why are we not making money from agriculture with our teeming youth population that we can galvanize and empower?? Why can’t we start a tech revolution and begin to earn big in tech like India too?? India makes multiples of our oil revenue in tech and they’re the second biggest agricultural nation on earth. When Nigeria’s economy is mentioned, it’s only about oil, which we don’t work for as it’s the gift of nature. And the oil, our inept and corrupt NNPC is mismanaging with all of us looking on helplessly. How can we put Nigeria’s teeming population to work? That is the key to our economic problem, especially in the area exchange rate stability that we’re talking about now. That is the problem we should be trying to solve. If a tyre tube has suffered over a thousand punctures, you’d be advised to change it. Any talk about managing our exchange rate without a thorough and comprehensive plan of action to boost productivity will be like debating where the next stitch on the punctured tyre tube (with 1000 holes) should be placed. It cannot endure, wherever you place it. Can you fly a 747 jumbo jet with a Volkswagen Beetle engine? Nigeria’s foreign reserves cannot cater for 200m people, especially with an elite class with exotic tastes. That is our reality. The earlier we come to that realisation and muster the disciplined leadership to galvanize us into addressing it, the better for us.
   My humble opinion.
   -Segun Sanni.

MaTaZ ArIsInG

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