The issue of fuel subsidy has generated so much indignation all over the country. The reason for the heat is obvious; Nigerians readily remember the immediate hikes in the price of virtually every product or service as petrol prices climbed from less than 20 kobo/litre in the early 1980s to the current regulated price of N65/litre. Thus, for most Nigerians, especially those 80 per cent or more, who live on the proverbial $2 a day, the prospect of a deregulated fuel price of over N130/litre must be very frightening. Indeed, Labours hard won victory of N18,000 minimum wage might just become a Greek gift.This much is obvious and Organised Labour has begun pounding war drums to alert workers to prepare to resist any government attempt to force the issue. Government, on its side, has responded with subtle propaganda, coercion of the Organised Private Sector and assurances that over N1,000bn will become available for infrastructural and social welfare enhancement that would assuage the pains of the impact of rising inflation caused by high fuel prices. Expectedly, Nigerians have not got much faith in the prospect of such palliatives; they hear such promises every year and have become helplessly resigned to the reality of non-delivery!On its side, government has identified the villains in the deregulation and pricing of petrol and kerosene as the oil marketers. President Goodluck Jonathan has directly admitted to the existence of a cartel, which he claims has successfully truncated governments efforts over the last 20 years or so, to remove subsidy! The Senate President, David Mark, obviously also shares Jonathans perspective as he informs the Senate that, My personal view is that there is a cartel and whatever they do, like most of you know, the mafia, it is exclusive to them. 90 per cent of us are not in that circle, while he prods the senators on the need to open it (cabal) up. So, the head of the executive and the head of the legislature have presumably exposed who our enemies are and they have also unceremoniously dressed them up in a criminal garb.The mafia in general consciousness, does not connote a law-abiding band. Presumably, public anger should be directed at these economic saboteurs for their brazen intent to keep the rest of us poor, while cartel members continue to feed fat. But wait a minute, the dictionary defines a cartel as an international syndicate, combine or trust formed to regulate prices and output in some field of business. So, we have it, that for the oil marketers to be properly described as a mafia-like cartel, they should have the ability to control price and or output! Well, the question is, do the oil marketers have such powers' The oil marketers can indeed influence market supply, by the conscious control of their import volumes, but, they certainly do not have a monopoly on supply as the Nigerian National Petroleum Corporation remains a major, if not the biggest importer! Thus, the cartel cannot truly control supply except with the collaboration of the government-owned NNPC! Indeed, the oil marketers are known to regularly lift fuel supplies from NNPC imports at government-controlled price! The so-called mafia-style cartel probably, also, has very little control on fuel price, as the NNPC also dictates the price. Thus, the question of marketers fixing an oppressive price on the market may be a bit far-fetched, as the NNPC dictates the pump prices of petrol and kerosene and ensures that marketers sell at the mandatory controlled prices, particularly in major towns and cities.So, it seems that both Jonathan and Mark may only find the villain in the fuel business, if there was one, in their own agency, the NNPC!But, does this make the NNPC a mafia-like cartel' Well, to the extent that it controls both pricing and output, yes, it could be seen as a cartel in concert with itself. But, we must not forget that the NNPC has no mind of its own, with regard to fuel pricing. The current price of N65/litre was not set by the NNPC based on commercial cost calculation, but rather, it is a price imposed by its principal, the Federal Government; in this event, it seems rather odd that both the executive and legislatures pointed fingers at a villainous cabal may inadvertently be pointing back at themselves!Indeed, if the actual villains were otherwise, Mr. President would simply have directed the Attorney-General of the Federation and the EFCC to investigate and prosecute the members of the perceived cabal if they had infringed any law in our statute books, including any violation of antitrust laws.In the event, of course, that the practices of the perceived cabal cannot be successfully prosecuted under existing legislation, then both Jonathan and Mark would be expected to collaborate to speedily enact laws that would break open the nefarious activities of the cartel, if indeed it was so.But, it will not be expedient for our leaders to indict themselves, it is certainly more politically strategic and diversionary to find a scapegoat to carry the can of woes of subsidy removal or retention. I have maintained over the past decade or so that a deregulated market space that would also bring down fuel prices (without a kobo of subsidy) will become practical once the monopoly of the Central Bank in the foreign exchange market (similar to NNPCs fuel monopoly) is broken by paying dollar-derived monthly allocations to the three tiers of government with the instrument of dollar certificates, so that they can approach the money deposit banks directly to exchange their certificates for naira. Such a framework will improve the value of the naira (amongst other empowering benefits) and reduce the pump price of fuel without subsidy.In spite of our strident advocacy, government has blocked its ears and prefers to remain fixated on the potential savings of over N1000bn annually from the removal of fuel subsidy, notwithstanding public outcry and Labours sabre-rattling and call to the trenches for workers to oppose governments action. With hindsight, it would be folly for government to ignore the devastating impact of over 100 per cent fuel price increase on an already severely deprived populace, the outcome of enforcement of such price may be totally unpredictable, more so, when possibility of a devalued naira could further push pump price of fuel beyond N150/litre!In the event that government stubbornly refuses to countenance the plausible and less risky option of breaking CBNs dollar monopoly, the least government can do will be to seek out ways of reducing wastages and leakages in the current system. For example, the estimated subsidy of over N1000bn is roughly equivalent to $6bn, which is a less sum than the over $8bn of crude oil reportedly stolen every year from our reserves. The earlier Wikileaks report on the magnitude of oil theft was lately corroborated by Shell Petroleum in its news bulletins, which reported estimates of 100,000 barrels per day of crude oil stolen from its operations in Nigeria. The current value of crude theft from Shell alone would approach over $4bn per annum at an average of $100 per barrel; if other joint venture operators together lose an equal volume in their operations, the lost value from such crude theft will exceed $8bn (well above the $6bn expected revenue from fuel subsidy removal, (with over $2bn left over for policing and enforcement of a strict code of compliance in the lifting and export of our crude oil).It is worth noting that the above estimated figure of $8bn for direct crude theft does not include such issues as under-declaration of actually lifted oil volumes with the complicity of our oversight and regulatory authorities, nor does it include the value of huge leakages to neighbouring countries of a substantial part of the 30 million litres of petrol purportedly consumed everyday by Nigerian motorists and artisans neither does it include potential savings from reducing the excessive cost of governance or the pervasive reduction of inflated government contracts. Thus, Senator Bukola Sarakis call on the floor of the Senate for a probe of the claim of N1.2 trillion subsidy value for 2011 may be useful in throwing light on the operations, calculation and payment of subsidies; Nigerians will also be equally interested to know how the NNPC accounts for the 445,000 barrels daily allocations (over $36b or N8000bn) for export and local refining and sale!Boyo, an economist and entrepreneur, wrote in from Abel Sell Limited, Lagos via lesleba@lesleba.com.
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