Africa’s largest oil producer could experience yet another scarcity of Premium Motor Spirit, popularly known as petrol, as talks between the Federal Government and organised labour over the recent removal of fuel subsidy drags, a top government official warned Monday.
The Nigerian government in November 2020 announced a hike in the depot price of petrol from N147.67 to N155.17 per litre, forcing marketers to sell between N165 and N173 naira per litre across the country. The price was then reviewed downward by N5 after public outcry.
The government had announced an end to the petrol subsidy regime in April 2020 but the sector is far from full liberalisation given the continuing role of government agencies in fixing prices and the fact that the state-run Nigerian National Petroleum Corporation (NNPC) remains the sole importer of petroleum.
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Meanwhile, a similar increase in the price of electricity tariff also sparked massive national outrage with both the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) vowing to shut down the country.
Minister of State for Petroleum Resources, Timipre Sylva, raised the concern after the latest meeting with labour leaders that the unions’ insistence on a reversal of the recent increase in prices could affect the availability of petrol products in the market, Channels TV reported.
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The closed-door meeting on Monday was a continuation of the series of dialogues aimed at resolving the issue between both parties as the government tries to persuade labour unions not to go on strike over the increases.
Representatives of the federal government led by Sylva and the Minister of Labour and Employment, Dr. Chris Nigige as well as labour bodies represented by NLC chairman Ayuba Wabba and TUC’s Quadri Olaleye submitted their respective reports.
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The Secretary to the Government of the Federation, Boss Mustapha, as well as the Group Managing Director of NNPC, Mele Kyari, also attended the meeting.
Upon receiving the report of the federal government, labour leaders requested three weeks to study the document in order to determine their next step, a demand that was rejected by the state petroleum minister, cautioning that the 21-day request may cause petrol scarcity in the country.
That would only add to the several instances of petrol scarcities that have occurred in Nigeria. Over the years, citizens in the crude-rich but fuel-poor nation have been subject to rolling energy crises and often been forced to join long queues at filling stations in order to stock up on fuel – for cars, home, and business generators.
Fear of labour unions’ power to bring people to the street had for decades frustrated attempts to eradicate Nigeria’s exorbitant petrol subsidy. Besides being a heavy fiscal burden, the subsidy has been linked to the most egregious episodes of fraud in Nigeria, a nation where outrageous corruption is not unusual. Until the new coronavirus pandemic slashed oil prices and Nigeria’s finances, the government of President Mohammadu Buhari unlike its predecessors did not see any need to remove the fuel subsidy.
The quantity of subsidised petroleum that is actually consumed rather than lost to fraudulent accounting or shipped to be sold at higher prices in neighbouring countries benefits richer Nigerians rather than the poor. As high as 67% of subsidised petroleum is consumed by wealthier urban households.
Over three decades, Nigerian labour movements have had no agenda beyond retaining the petroleum subsidy. They completely have ignored the economics i.e. its fiscal burden or the possibility of investing the subsidy in economic and social infrastructure which could stimulate growth. The overwhelming evidence that the fuel subsidy engenders corruption and is “regressive” i.e. benefitting the rich more than the poor has also been completely ignored.
It is not clear how the request by labour for more time to study the government report on the fuel subsidy could trigger another bout of scarcity as the government remains the sole importer.
Nigeria imports virtually all the petroleum (more than 90 percent) it consumes. As the prices rise globally, a gap opens between the fixed domestic fuel price and what the Nigerian National Petroleum Corporation pays to import. The Nigerian treasury is in no position to shoulder “under-recovery”, as the NNPC and the Government euphemistically described the fuel subsidy under President Buhari after failing to deliver on promises to remove the subsidy in 2018, on behalf of Nigerian drivers and commuters. The economy is in a recession; growth declined by 4.3% in 2020. In 2021, 24% of the budget will go towards debt servicing. No provision has been made for the fuel subsidy in the budget.
It seems by going into negotiation with the labour unions rather than explaining why it has to eradicate the fuel subsidy to a broader segment of Nigerians e.g. employers of labour, the government has handed the power of veto over the decision to remove the fuel subsidy to the unions. The unions are also trying to block the move to a market-based tariff for electricity.
