By Majeed Dahiru
Purporting to remove subsidy on refined petroleum products and deregulate the downstream sector of Nigeria’s petroleum and gas industry, President Muhammadu Buhari’s administration has recently increased the pump price of petrol from N145 to about N162 per litre, the second significant increase in four years, following a similar price hike from N87 to N145 in 2016. Going forward, the people of Nigeria, a major oil producing country, are now to pay for the refined petroleum products they consume at home at a rate to be determined by the price of crude oil in the international market. By this latest decision to remove subsidy from petrol and raise the price arbitrarily, President Buhari has shattered whatever was left unbroken in the ruling APC’s promise of “change” in the last five years of his administration.
With an about two million barrels per day production capacity, Nigeria is the 15th largest oil producer in the world and currently the first in Africa. Beginning from 1957, when oil was first discovered in commercial quantity in the Niger Delta region, Nigeria made modest but steady progress as an emerging oil and gas power house within the first three decades as an oil producer. Between 1965 and 1989, Nigeria rapidly expanded its oil and gas value chain enabling infrastructure with the establishment of four refineries linked to 19 depots and pump stations through a massive network of 3000 kilometres of pipelines across the country.
This level of infrastructural development in its oil and gas industry at the time, though not adequate, nevertheless allowed Nigeria to substantially maximise the gains of a major oil producing country. The challenges of the inadequacy of Nigeria’s modest efforts at developing a oil and gas value chain enabling infrastructure was to become aggravated and more manifest in the subsequent three decades, between 1990 and 2020, as a result of acute leadership failure, gross mismanagement and grand corruption of the Nigerian state.
Nowhere have these ills of the Nigerian government manifested itself more in Nigeria’s oil and gas industry than in its inability to refine adequate petrol for the domestic consumption of its inhabitants. Between 1990 and 1999, successive military regimes in Nigeria invested very little or nothing in the
expansion of Nigeria’s oil and gas value chain enabling infrastructure to meet the emerging challenges of a growing population’s energy needs. No new refineries where built and just as the turnaround maintenance of two of these installations in Port Harcourt and one each in Warri and Kaduna, with a combined refining capacity of 455,000 barrels of crude oil per day, gulped billions of naira, the desired result was not achieved. With refineries not working at their full installed capacities, the government resorted to the importation of refined products to augment the short fall in domestic supply. As though in acknowledgement of its fundamental responsibility of providing energy security for its citizens, the government of Nigeria introduced a subsidy regime on imported petroleum products in order to reduce the financial burden of the consequences of their incompetence on the Nigerian people.
By 1999 when Nigeria transited from military to civil democratic rule, guided by a clique of “Washington Consensus” ideologues, the ruling Peoples Democratic Party (PDP) in its sixteen years in government washed its hands off the means of economic production under the pretext that “government has no business in business” and transferred some of the most fundamental responsibilities of government to the organised private sector. Through its privatisation, commercialisation and liberalisation policies, previous PDP administrations opted for a deregulated downstream sector and the removal of all forms of subsidies on refined products; the sale of critical national oil and gas infrastructure, such as refineries, to private entities; and invited investors to establish private refineries that were guaranteed a pricing regime in Nigeria that will be determined by the international price of crude oil. However, the attempt to implement this toxic policy was stoutly resisted by Nigerians, the organised labour led by a former NLC president, now a chieftain of the ruling All Progressives Congress (APC), Adams Oshiomhole, and a coalition of opposition parties and civil society organisation led by a former opposition leader and current president of Nigeria, Muhammadu Buhari. Unfortunately, while the former PDP administrations grudgingly continued to pay subsidies on imported refined petroleum products, they neglected Nigeria’s refineries and allowed them to rot away, while allowing for private sector investors to take up their responsibility of providing energy security to Nigerians.
In the absence of adequate power supply to homes and industries, as well as an efficient and affordable public transport system in Nigeria, Nigerians have come to rely on petrol-powered sources of alternative energy and general logistics for their daily economic activities. Any increase in the price of what is undoubtedly Nigeria’s economic live wire is bound to have a hydra-headed effect on the prices of goods and services across board, which would experience huge increases as consequence of cost-driven inflation. For every kobo that is added to the price of petrol, Nigerians are further pushed into deprivation, want and hunger, because the resultant inflation erodes whatever is left of their purchasing power, and pushes more people below the poverty line. Therefore, Nigerians have over the years resisted increases in the price of the most important source of their socio-economic sustenance.
The highpoint of this collective resistance of the Nigerian people against the injurious neo-liberal policies of the PDP in the oil and gas industry was in 2012, when the Goodluck Jonathan administration attempted to remove subsidy on refined petrol, which resulted in a hike in price from N65 to N129 per litre of petrol. The then opposition coalition and current ruling party, along with their civil society organisations partners in progress, mobilised Nigerians to occupy the streets of Lagos and Abuja in protest over the removal of subsidies and increase in price of petrol by the Jonathan administration. In bowing to the wishes of the Nigerian people, the Goodluck Jonathan administration restored subsidies on petrol and in exchange for a marginal increase from N65 to N97.
President Buhari who made huge political capital out of the subsidy removal misadventure of the Goodluck Jonathan administration in 2012, chided his predecessor for inflicting hardship on Nigerians through a non-existent, fraudulent subsidy regime and promised to revamp Nigeria’s moribund refineries and make petrol available at lower prices for the Nigerian people. Also, in reaction to the 2012 attempt to remove fuel subsidies by the Goodluck Jonathan administration, former opposition spokesman and current information minister, Lai Mohammed, roundly rejected the move as not in the interest of Nigerians and charged the then government to fix the existing refineries and build new ones before contemplating “fuel subsidy removal, if at all there is a subsidy”. And believing him to be a man of integrity with a pedigree of being part of the golden age of Nigeria’s oil and gas industry, having served as petroleum minister between 1977 and 1978, majority of Nigerians who were frustrated with the PDP-led federal government’s inability to provide energy security for them, voted in General Buhari (rtd.) of the opposing APC in 2015, to bring back the good old days of Nigeria’s oil and gas industry.
However, in what has become a familiar pattern of broken promises that are consistent with his character of dishonest integrity, President Buhari, without fulfilling his promise of revamping the country’s refineries, shocked Nigerians when he unilaterally removed subsidies from petrol, which sent the prices up from N85 to N145, within one year of his first term in 2016; the highest marginal increase in the history of the Fourth Republic. Within that brief period, President Buhari succeeded in shoving down the throat of Nigerians the bitter pills of the very neo-liberal oil and gas policies they loathed so much and resisted with their very lives for sixteen years. The recent upward review of the price of petrol from N145 to N162, which is a direct consequence of President Buhari’s deregulation and removal of the subsidy policy, reads like a tragic plot from the PDP economic doomsday playbook.
In the five years of the Buhari administration, Nigeria’s refineries have gone from moribund to billions of naira loss grossing comatose carcases, thereby aggravating the festering problem of energy insecurity in the country. And this problem can only be solved by rehabilitating Nigeria’s existing refineries to perform to their fully installed capacities, while building new ones to expand local refining to a level that meets domestic consumption demands. The responsibility of boosting local refining capabilities is not one the government of Nigeria can leave to the private sector alone. To do that will amount to government’s abdication of its constitutional duty of providing energy security for its citizens to profiteering private entities. Without heeding his own advice of 2012 on the need to rehabilitate existing refineries and build new ones, President Buhari’s deregulation move is one for the continuous importation of refined petroleum products into Nigeria, which will perpetually subject the energy security of Nigerians to the mercy of local oil marketing cartels, acting at the behest of international market forces of demand and supply.
Contrary to the assertions by some neo-liberal pundits, subsidising petrol, which is the livewire of Nigeria’s economy, is not subsidising consumption but actually subsidising production. Every serious country in the world, including the United States, China, Canada and Saudi Arabia spends billions of dollars in subsidies for oil and gas production in their respective countries for the purposes of energy security for their citizens under social economic frameworks in which deregulation and subsidies are not mutually exclusive.
By making already impoverished Nigerians to bear the financial burden of his acute failure of leadership, President Buhari’s change of promise from revamping Nigeria’s moribund refineries and construction of new ones to achieve self-sufficiency in access to refined products to the continuous importation of petrol at prices to be determined by international market forces, is a betrayal of the trust of millions of Nigeria’s working class, urban and rural poor masses who defied all odds to vote out the PDP and vote in him into power.
Majeed Dahiru, a public affairs analyst, writes from Abuja and can be reached through firstname.lastname@example.org.