Fuel Scarcity, Subsidy, Argument then, Reality now.

Admin 27-Dec-2020 Nigeria_News

By Simbo Olorunfemi 

This time last year, the nation was faced with another round of fuel scarcity, the first and only time (I think) that has been the case under the present administration.

So much was made of it then, especially in the media, following on the enquiry at the National Assembly into the matter that the real issue was almost lost in the inferno of the moment.

As usual, most of the lead voices in the debate, the media inclusive, lacked an understanding of the issues and unfortunately, they will not keep quiet.

The point then, as I argued, was that there was really no basis for the scarcity experienced then, given the reforms that had attended the process of purchase and supply. If local refining was not meeting local consumption need for a variety of reasons, the DSDP arrangement which was built around a swap of the over 400,000 barrels per day allocation to NNPC for refined products should suffice in meeting local consumption need.

As a matter of fact, I had argued that with the DSDP, the argument for subsidy or under-recovery was a difficult one for me to understand. If rise in oil price would benefit the beneficiaries of the DSDP arrangement, how should that benefit not translate into a commensurate absorption of losses that might occur from higher costs in terms of importation? Or is it that NNPC would rather appropriate rise in income on one side of the book and seek to socialise the loss incurred on the other side of the book, when one should cancel out the other?

Well, back to the matter of fuel scarcity, the argument then was that NNPC was not properly configured and/or incapable of solely meeting local consumption need and that it needed 'marketers' to fill the gap, otherwise we would continue to experience scarcity of products intermittently, especially in December.

I did not see the point. I did not buy it. I argued then that with the DSDP, the argument for  'marketers' importing fuel or claiming to import, with landing cost higher than the recommended retail price, thus occasioning a subsidy regime in which the PPPRA had the mandate for paying the differential was no longer tenable. That opened the process to huge fraud, as was witnessed under the previous administration.

That the NNPC had been successful in sufficiently wetting the market, many months after the 'marketers', who had no basis being involved then, had pulled out was sufficient proof that the right thing was being done. It was also evidence that the fuel scarcity experienced in December 2017 was largely orchestrated to trigger a return of the 'marketers' into the space - an argument repeatedly marketed by the 'marketers, the legislators and many in the media, who, probably, could not see through what was going on.

A year after, it should be sufficiently clear that with the DSDP and whatever else the NNPC is doing to ensure steady supply of products to the market, even if it claims it does so at the price of 'under-recovery', it has worked so far, as I had argued that it should. The crisis then was artificial, orchestrated to achieve set objectives. Glad that leadership was conscious of and strong enough to withstand the shenanigans at play whose plan was to foist upon Nigeria another subsidy regime.

The template at work, temporary as it is, should be kept at, ending when private refineries being worked on, come on-stream, which hopefully would lead to meeting local consumption need through local refining.

As I argued in December, 2017, as we experienced the scarcity, "Whichever way we look at it, I would think the best bet is still to continue with whatever short-term fixes NNPC is applying now, pending when the Dangote 650,000 bpd refinery is ready. 2019, I think.

Throwing the doors open now when we are not able to guarantee sufficient local production will only trigger a price hike that might prove suicidal.

Whatever we choose to do, one can only hope the government will be able to see the place of proper engagement and timely communication in this.

People are able to endure the pain and sacrifice if and where they see the end-point and what it is all about."

That it has been a crisis-free reign since then is proof enough that something is being done right, for now, while we wait for a more sustainable regime that should come soon.

Olorunfemi, a Journalist and Public Affairs analyst writes from Abuja

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