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Beyond fuel, electricity rates hike

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By Segun Ayobolu

It should now be obvious that within the context of the logic of our post-independence development policy trajectory, the incessant increases in the unit rates of critical commodities like fuel and electricity, with serious bearing on the welfare of the vast majority of Nigerians, is well nigh inevitable. During its intense campaign to unseat the then incumbent Peoples Democratic Party (PDP) in the run up to the 2015 general elections, the key elements of the then nascent All Progressives Congress (APC), vehemently opposed the fuel price hike announced in 2012 by the former President Goodluck Jonathan administration and supported labour and civil society groups in their massive demonstrations against the removal of the fuel subsidy. Now that it is in power, the ruling APC has also found it imperative to remove the controversial subsidies not just on fuel but also on electricity citing the same reasons that previous administrations have given for doing so.

Understandably, the APC has not found it funny that the opposition PDP and several vocal individuals and groups within labour and civil society have vigorously condemned the decision of the Buhari administration in this regard and demanded a reversion of the policy. The administration has not only congratulated itself on what it regards as its courage in taking a decision that is in the best interest of the country no matter how unpopular. Of course, it is a familiar story; a route well travelled severally. Over three decades ago, as a university undergraduate, I recall that I participated in demonstrations against the then military President, General Ibrahim Babangida regime’s decision to remove the notorious subsidy and increase the pump price of fuel.

That was indeed one of the key conditionalities of the International Financial Institutions for supporting the country financially to weather the serious economic crisis that necessitated the imposition of the Structural Adjustment Programme (SAP). Successive governments – military and civilian – have toed the same line, opposing the removal of the subsidy when seeking power but also unhesitatingly announcing its removal once comfortably ensconced in office. It has been no different with the PMB administration.

The Minister of Information and Culture, Alhaji Lai Mohammed, has just like spokesmen of previous governments rigorously advanced reasons why the new price regimes in the fuel and electricity sectors are inevitable. It is always a basically economic argument. If the cost price of producing or making these commodities available are far below the price at which they are sold to the consumer, a subsidy necessarily arises which government must bridge. This short fall between production cost and supply prices, which government fills is not just a drain on the parlous revenues of government, it is also a disincentive against fresh investment in these sectors as the potential investor is not a philanthropist but a hardnosed businessman.

Matters have been worsened by the discovery particularly under the Jonathan administration that the so called fuel subsidy was nothing but substantially a huge scam through which unscrupulous fuel importers smiled to the banks without importing any fuel. The retort of those opposed to subsidy removal is that government has all the powers and resources to detect and bring to book dubious and fraudulent fuel importers who feed fat on criminal subsidy payments if it is minded to do so.

Alhaji Lai Mohammed argues that over N10 trillion have been expended in purported subsidy payments between 2006 and 2019. This particularly in this gruesome period of the rampaging coronavirus pandemic, he contends, is absolutely unaffordable and unsustainable. President Muhammadu Buhari in his address at the retreat to mark one year of his Ministers in office this week, stressed that there has been a shortfall of about 60% in revenues accruing to government in the wake of the pandemic. This means that the funds to pay humongous subsidies on fuel and electricity consumption are simply no more there.

To be fair to the administration, as I pointed out last week, it has committed huge amounts of resources to offer palliatives to the poor and vulnerable, cushion and strengthen critical sectors of the economy to tide through the pandemic-induced stormy economic weather while also expending huge sums particularly on our practically comatose and long neglected health sector in response to the health emergency. Much of these expenditures were unanticipated. Even then, it is, in my view wrong of the President and his Information Minister to characterize those activists and groups opposed to the hike in the unit prices of these commodities as being actuated by mischief and needless confrontation.

It is important that the administration does not underestimate the gross negative implications of these critical price increases for the cost of living particularly as regards food and transport costs, accommodation, health care, education among others for the majority of the people. And this is especially at a time when large numbers of people have been rendered jobless. What it needs more than ever before now is compassionate rather than adversarial government public relations.

I believe that the response of majority of Nigerians to the hike in fuel and electricity rates has been rather tame in comparison to under previous administrations because the PMB administration has been relatively more restrained, disciplined and responsible in the husbandry and utilization of public resources particularly in contrast to the preceding Goodluck administration. The ascetic and austere disposition of PMB himself is a major factor in this regard. Even then, embarrassing revelations of industrial scale fraud at the Niger Delta Development Commission (NDDC) or the National Social Insurance Trust Fund (NSITF); the humongous and opaque allowances which our legislators continue to draw or the still unwieldy number of aircraft in the presidential fleet contrary to the APC’s electoral promises in 2015 show that there is a still a long way to go as regards government cutting costs and tightening its belt as it requires Nigerians to do.

In any case, this administration cannot be spared the allegation against its predecessors that when they trumpet the inevitability of removal of subsidies and hike in the rates of critical commodities like fuel and electricity, they are really punishing millions of Nigerians for the incompetence and irresponsibility of the governing or political class. This case was made most pungently by a former General Secretary of the Nigeria Labour Congress (NLC), Mr. Owei Lakemfa in his reaction to the current fuel price increase. As he put it, “When you import fuel and you pay at international price, you pay for refining abroad, they will add their profit as well, and you pay for freight to move the product to Nigeria. When the product arrives Nigeria, you pay for discharge, a lot of time, the ships are out there in the ocean and they call them mother vessels”.

He continues, “It takes days for smaller vessels to go bring the product. All these things cost money. Then you store them in tank farms. The freight has demurrage; there is cost for the movement to Atlas Cove and tank farm. A lot of them would then be moved by road from the tanks to all parts of the country, including Maiduguri. Of course, the prices are likely to be very high…What we are witnessing in the name of subsidy is transferring government incompetence to the people”.

The question, which has been asked over and over again, and to which there has been no satisfactory answer over the years is why should we export our crude oil and import refined petroleum with all the attendant costs? Is building local refineries to process our crude oil for the internal market such rocket science? Is it normal for a whole country to be waiting on the take off of the Dangote refineries for its crude oil to be refined locally? Is Dangote a philanthropist or a businessman? Now that the Buhari administration has decided that the pump price of fuel will be determined by the vagaries of the market, we seem to be faced with a fait accompli and it should ensure that more refineries come on stream to allow for competitive and affordable pricing of fuel.

Again, the shady and shoddy privatization of the Power Holding Company of Nigeria (PHCN) to the extant Distribution and Generating Companies is another manifestation of ruling class venality and irresponsibility. Despite government pumping in humongous amounts of public resources to shore up these outfits, which are clearly ill-equipped to meet their legal responsibilities, the sector remains as epileptic as ever. It is amazing that it is after approving the hike in electricity tariff that the government announced that mass metering of consumers will commence. Government at least has a responsibility to ensure that, with the new tariff the period of continued resort to estimated billing is as short lived as possible.

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