Actual average daily fuel consumption in Nigeria today is between 32m and 40m litres a day. Bogus daily consumption figures of 57 to 92m the NNPC reports are made up of a combination of, perhaps, some ghost imports and real imported volumes smuggled across porous borders of Nigeria to neighbouring countries in West Africa. Countries whose leaders and people are very rational and smart enough to know the destructive impact of corruption-laden consumption subsidies, have fully deregulated their downstream oil and gas markets.

Thus, because their markets are fully deregulated and importing directly from Europe or Asia or the Middle East will make their costs high, they now depend on smuggled products from Nigeria which is led by uncaring leaders and vastly ignorant population who assume that petroleum subsidies favour the poor.

Consumption subsidies on white petroleum products favour mostly the rich, middle class and not the poor. The 100 million extreme poor Nigerians do not own cars, motorcycles, generators, etc. Out of the 5 million vehicles registered in Lagos State, which is 50% of estimated national vehicle population, only 200,000 are articulated commercial vehicles. The remaining 4.8m are privately owned by the top 5% Nigerians on the median and upper ranges of the socio-economic pyramid.

75% of daily PMS consumption in Nigeria is in Lagos, Ogun, Delta, Edo, Rivers, Cross River, Akwa Ibom etc. Locations that are not Petroleum Equalisation Fund subsidies-allowable. Most of the big trucks and articulated commercial vehicles that move food commodities around Nigeria use gas (diesel) and not PMS (gasoline).

Interestingly, food inflation is already at 23% within first quarter of 2021. I hope we are all aware that root cause of this rising food inflation is not driven primarily by hike in prices of petroleum products. It is driven by onslaught of bandits, terrorist herdsmen and killers against farmers across Nigeria and the atrocious exchange rate instability with continued devaluation of the naira against major convertible currencies.

I do also hope we are aware that prices of the more essential food commodities needed by the extreme poor in Nigeria, such as yam, 2.9 billion kg per annum; rice, 7.9b kg; garri, 7.2b kg etc are not subsidised in any form and manner by the FG.

If we continue to retain PMS subsidies, going by average price of the product over the last 4 months and projected price levels in 2021 and high daily import/consumption volumes occasioned by activities of smugglers and ghost imports, NNPC will practically spend all her dollar earnings and receivables from sale of crude oil to import and subsidise white petroleum products.

What this simply translates to, beyond NNPC’s inability to remit any more naira revenue into federation accounts to be shared by the 3 tiers of governments, is that there will not be enough dollar available for CBN to defend the naira.

Further implication here without any funds going into the federation accounts is that members of the Nigeria Labour Congress and Trade Union Congress, who are all part of the gangsters destroying Nigeria and who have refused to allow the refineries to work, even after we have squandered over N750bn on them, will not receive any salaries.

Nigeria will not use the blood of the masses to pay for their irresponsibility, profligacy and obstinate agenda never to follow the right paths. I see more danger and bumps ahead if we refuse now to deregulate the downstream oil and gas sector and privatise those unprofitable and loss-making refineries.

So, what will be the short, medium and long term implications of removal of petroleum subsidy, total deregulation of the market and privatisation of the refineries?

1. By fully deregulating the market, removing all forms of consumption subsidies, allowing marketers to import white petroleum as they deem fit, and privatising refineries, we shall be pulling the rug beneath the feet of smugglers and ghost iimports.

2. This will help reduce daily import and consumption volumes down to the true and actual level of 32 to 40m litres a dday.

3. This will cut down annual projected cost of $11bn we would have wasted in 2021 importing white petroleum products, to about $6bn.

4. This will free more dollars for CBN to defend the naira and prevent it going over the roof.

5. Total deregulation and removal of consumption subsidies will free excess of over N2.5tn into the federation account.

-- Dr Nnaemeka Obiaraeri, Ikoyi, Lagos. 08134441140

SOURCE (abridged): https://punchng.com/havoc-subsidy-consumption-causes-nigeria/