From fuel subsidy to transport subsidy: Quo Vadis? By Jonas Odocha




Whatsapp News

Conventional wisdom teaches, as in management practice, that when you find yourself in a hole, you must not dig deeper. subsidy is bipedal; the amelioration landing cost of petroleum products by the government as well as the absorption of differential transportation costs to all parts of the country by the Petroleum Equalisation Fund [PEF]. The impact the national economy has remained monumental and any responsible government must rethink an approach to salvage the economy. This subsidy scenario would have been avoided if our four refineries 445,000bpd capacity were genuinely routinely maintained and functional. Come 2022 we are being hinted that petrol, a.k.a. premium motor spirit [PMS], a most essential energy commodity, would cost N340 per litre as opposed to the current N165 pump price, with the total removal of subsidy. But then if it will cost N340 on landing in Lagos and N340 in Enugu, Yola, or Sokoto, who then has absorbed the differential transportation cost? Nigerians must come to terms with some of these permutations by government. 

Again it appears a critical dimension is being overlooked. A local refinery, Dangote Refinery, of 650,000 bpd capacity is likely to come stream in 2022 and fortunately NNPC has considerable stake as being reported. Is the government basing this proposed N340 per litre still on imported PMS or is this the price being recommended for the private refinery? No subsidy and still price fixing?

If this private refinery of 650,000 bpd capacity, being owned and operated in Nigeria by a noble Nigerian entrepreneur like Aliko Dangote should take off in 2022, I think this government should consider a more plausible and realistic price for PMS for the Nigerian citizenry, as opposed to equating it to the price of imported PMS sans subsidy. 

Moreover Dangote Refinery does not have to buy offshore Nigerian crude oil but should be able to purchase crude oil from Nigeria in Nigerian shores. All these factors should help bring down the cost of refined products in Nigeria. It is important to recall that at some stage when our refineries were producing optimally, crude oil was being sold to NNPC at about 50% of the international cost, for local refining. That made sense.

Whatever we can do to reduce the financial burden the Nigerian citizenry come 2022, our government must think deeper and pursue such goals. Replacing subsidy with this subsidy of N5,000 per month to 40 million destitute Nigerians appears nebulous. 

A local refinery that has the obvious potential to be run efficiently should be a source of pride to our country, in PRODUCTS AVAILABILITY AND AFFORDABILITY, when viewed against the backdrop of our enormous endowment of petroleum natural resources. Yes we have!!!

Sir Jonas Odocha, a petroleum engineer, writes from