COMMENTARY

Resist Oil Subsidy Removal

By Chinedu Vincent Akuta

“The fate of the nation then lies in the hands of the faithful” Time Magazine, September 26, 2011. Page 27. By removing oil subsidy from 1st January 2012 contrary to the promised date of 1st April 2012, the government has proven once again never to be trusted. Please find below the reasons to resist oil subsidy removal.

 1. The first is fraudulent payment on phoney import of PMS. The product is fraudulently certified as imported into Nigeria but is actually diverted to other countries in West Africa . Meanwhile, the documentation is perfected by criminal elements in Customs, Directorate of Petroleum Resources (DPR), Pipeline and Products Marketing Company (PPMC) and Petroleum Products Pricing and Regulatory Agency (PPPRA). They not only collect the subsidy (which actually is outright theft), they also connive to collect demurrage on product that really never entered the Nigerian market. The reality is that what we actually consume in Nigeria may not be up to half of what the records or statistics say we consume.
2. The second fraud is the Petroleum Equalisation Fund (PEF). PPMC used to have a network of pipelines and depots across the country. Supply envelopes were created around each depot in a way that ensured all parts of the country are covered. Each supply envelope is divided into zones. Actual transportation cost was calibrated according to zones within each supply envelope. The objective here was to ensure that products sell at the same price throughout each depot's supply envelope regardless of the distance of consumption from supply.
3. The third was also Bridging, the system whereby products are moved by road across depots as may be permitted in what was meant to be exceptional cases such as when repair is being carried out on the pipeline or at a depot. Over time and driven by fraudulent intent, what was designed to augment became the routine practice. Products would be released from Atlas Cove in Lagos ostensibly for bridging to say Kano or Sokoto but would actually be sold at nearby stations while the documentation is perfected and bridging allowance is paid.
The products were also meant to be sold at equal prices at all locations nationwide. When the refineries were working and the pipeline/depots were also functional, the products were pumped through pipelines from the refineries to the various depots from where they were picked for distribution within the supply envelope covered by each depot. In principle, the Eastern axis was meant to be supplied by the Port Harcourt Refinery 1. The Northern axis was meant to be supplied by the Kaduna Refinery. The Midwest and Middle Belt were meant to be supplied by the Warri Refinery while the Western axis was meant to be supplied by products shipped to Atlas Cove from Port Harcourt Refinery 2. This refinery was also meant to export products to West African countries.
All marketers were given a price structure by PPMC which routinely (and frankly unprofessionally) decided the marketers' margin and overhead allowance, the transportation allowance and the dealers' margin. Such a terrible system it was! The standard Transportation allowance was decided based on what was required to move products from the depot to Zone 3 within the depot's supply envelope. Transporters moving products to Zones 1 and 2 are paid less than the standard allowance while the balance was meant to be paid into PEF by the marketer. Transporters moving products to Zones 4 to 9 are paid the additional cost of transportation from PEF. Most of the consumption in around each depot occurs in Zones 1 to 3, usually up to 70%. The fraud: sell all products within Zones 1, 2 and 3 but collect PEF allowance as if almost all products were sold in the outer zones. This has been on for a very long time.
 
 We can imagine why all the various adjustments and maladjustments occurred over the years especially during the military era when the fraud was mostly perpetrated, actively promoted and culturally institutionalized by high ranking Generals and Administrators. We can also see why all refineries eventually had to be crippled and pipeline network/depots of PPMC had to be paralyzed. From Point No 1 to 3 were some of the arguments to remove “oil subsidy” by the Finance minister.
To Remove “Oil Subsidy” actually means to punish Nigerians for the failure of government to effectively fight corruption in the oil industry. Therefore, the masses should be penalized for government’s weaknesses. Does President GEJ have any guarantee that the so called money to be realized from the oil subsidy removal will be used judiciously? What about President GEJ announcing to the entire world that subsidy will be removed on April 1 2012, only for him to remove it on 1st January 2012!
Does that not speak volumes? Government has again proven not to be trusted. What happened to Petroleum Trust Fund after Obasanjo took over? What will happen to the Kolade committee after his tenure? Why set up Belgore committee to dialogue with the Nigerian Labour Congress/Trade Union Congress while the subsidy had already been removed? Why behave like an autocrat. How can the President cushion the effects economic problems to be caused by the oil subsidy removal? How will the poor and unemployed Nigerians survive this attack by the government? The list is endless. Nigerians should resist the oil subsidy removal, till this policy is reversed. May God bless Nigeria.