THE NIGERIAN OIL AND GAS SECTOR

Nigeria has a population of over 110 million people and an abundance of natural resources, especially hydrocarbons. It is the 10th largest oil producer in the world, the third largest in Africa and the most prolific oil producer in Sub-Saharan Africa. The Nigerian economy is largely dependent on its oil sector which supplies 95% of its foreign exchange earnings.
The upstream oil industry is Nigeria’s lifeblood and yet it is also central to the ongoing civil unrest in the country, which gained worldwide publicity with the trial and execution of Ken Saro Wiwa, and eight other political activists in 1995.
The upstream oil industry is the single most important sector in the economy. According to the 2011 BP Statistical Energy Survey, Nigeria had proved oil reserves of 37.2 billion barrels at the end of 2010, equivalent to 42.4 years of current production and 2.68 % of the world's reserves. The Nigerian government plans to expand its proven reserves to 40 billion barrels by 2010. Most of this is produced from the prolific Niger River Delta. Despite problems associated with ethnic unrest, border disputes and government funding, Nigeria’s wealth of oil makes it most attractive to the major oil-multinationals, most of whom are represented in Nigeria, with the major foreign stakeholder being Shell. Nigeria produced an average of 2401.6 thousand barrels of crude oil per day in 2010, 2.94% of the world and a change of 16.2 % compared to 2009.
According to the 2011 BP Statistical Energy Survey, Nigeria had 2010 proved natural gas reserves of 5.29 trillion cubic metres, 2.82% of the world . Due, mainly, to the lack of a gas infrastructure, 75% of associated gas is flared and 12% re-injected. Nigeria has set a target of zero flare by 2010 and is providing incentives for the production and use of gas. The government also plans to raise earnings from natural gas exports to 50 percent of oil revenues by 2010. It has been reported in the 2011 BP Statistical Energy Survey that Nigeria had 2010 natural gas production of 33.63 billion cubic metres, a change of 35.6% versus 2009 and equivalent to 1.05% of the world total.
Nigeria's downstream oil industry is also a key sector including four refineries with a nameplate capacity of 438,750 bbl/d. Problems such as fire, sabotage, poor management, lack of turn around maintenance and corruption have meant that the refineries often operate at 40% of full capacity, if at all. This has resulted in shortages of refined product and the need to increase imports to meet domestic demand. Nigeria has a robust petrochemicals industry based on its substantial refining capacity and natural gas resources. The petrochemical industry is focussed around the three centres of Kaduna, Warri and Eleme.
Until 1960, government participation in the oil industry was limited to the regulation and administration of fiscal policies. In 1971, Nigeria joined OPEC and in line with OPEC resolutions, the Nigerian National Oil Corporation (NNOC) was established, later becoming NNPC in 1977. This giant parastatal, with all its subsidiary companies, controls and dominates all sectors of the oil industry, both upstream and downstream.
In April 2000, the Nigerian government set up a new committee on oil and gas reform to deal with the deregulation and privatisation of NNPC. Seven subsidiaries of NNPC are due to be sold including the three refineries, the Eleme Petrochemicals Company Ltd, the Nigerian Petroleum Development Company and the partially owned oil marketing firm, Hyson Nigeria Ltd.
Nigeria is a member of OPEC and is its 12th largest producer. The former Secretary-General of OPEC, Dr Rilwanu Lukman, is a Nigerian national and Petroleum Advisor to the President.
The petroleum industry in Nigeria is regulated by the Ministry of Petroleum Resources. The government retains close control over the industry and the activities of the NNPC, whose senior executives are appointed by the ruling government.http://www.mbendi.com/indy/oilg/af/ng/p0005.htm

Fuel Subsidy

Oando CEO sets Record Straight on Subsidy

CEO of Nigeria’s largest indigenous Oil and Gas company, Mr. Wale Tinubu appeared before the ad-hoc committee investigating subsidy yesterday.

Mr. Tinubu setting the record straight disclosed that Oando was not a beneficiary of subsidy but a petroleum products marketer getting paid for a legitimate business it was transacting.

Tinubu disclosed to the committee that marketers, for instance, import 30,000 metric tons after opening an LC of $30 million and then go ahead to sell the product at $ 15 million. He revealed that subsidy is the amount government compensates them for their losses during sales.

Tinubu stated, “The Petroleum Support Fund (PSF) expected that there would be under-recovery. For example, when the landing cost was higher than the pump price, the government owed us money, which is paid as subsidy. When there is over-recovery, that is, when the landing cost is less than the pump price, we pay back to the government. For example, during the Yar’Adua administration, when the petrol price was N65 and the crude oil price dropped to $50 per barrel, the marketers paid back to the fund. I remember that Oando paid back N1.6billion back to the Federal Government.”

According to Tinubu, Oando accounted for 53% of petrol importation in 2006 and 47% of subsidy payment.http://www.thenationonlineng.net/2011/index.php/business/34581-oando-denies-benefitting-from-fuel-subsidy.html
https://twitter.com/#!/greattomorrow23

Boko Haram: National Assembly To Amend Anti-Terrorism Law – THE WILL NEWSLETTER FOR JANUARY 24, 2012.

Boko Haram: National Assembly To Amend Anti-Terrorism Law

ABUJA, January 23, (THEWILL) – In a reaction to the deadly bombings in Kano that has claimed more than 180 lives, the National Assembly will urgently amend the anti-terrorism Act, so as to give maximum support to security agencies as they struggle to clamp down on members of the terrorist sect Boko Haram, President of the Senate, Senator David Mark said on Monday.  Read More...


Understanding The Petroleum Industry Bill (PIB) In Simple Terms

SAN FRANCISCO, January 23, (THEWILL) – The Petroleum Industry Bill (PIB) is a legislation that when passed into law by the National Assembly would change the entire petroleum industry in Nigeria for good and impact positively on the lives of Nigerians, according to the federal government.  Read More...


Imoke Emerges PDP Guber Candidate In Grand style

SAN FRANCISCO, January 23, (THEWILL) – Cross River State Governor, Senator Liyel Imoke has clinched the 2012 governorship ticket of the Peoples Democratic Party (PDP) in Cross River State in grand style, crushing his main challenger, Nigerian former Ambassador to Mali, Soni Abang by 737 votes – 3 votes. 7 votes were voided.
Read More...


Prayers Of Peace Turn To Fear Of Attack In Nigeria

The aging Muslim spiritual leader of this northern Nigeria city, his eyes heavy with fatigue, leaned into a microphone Monday and whispered to God his wish for peace after the killing of at least 185 people in an attack by the radical Islamist sect Boko Haram. Read More...


Police Confirm 186 Deaths In Kano BH Attacks

... Police Seize 10 Wired Vehicles Loaded With IEDs.

KANO, January 23, (THEWILL) - The Kano State Police Command Monday evening said it has confirmed 186 deaths following Friday's coordinated attacks in Kano by the Boko Haram Islamic terrorist sect.  Read More...


Boko Haram Kills High Court Registrar; 4 Sect Members Killed

SAN FRANCISCO, January 23, (THEWILL) – The Registrar of the State High Court in Maiduguri, Borno State, Mallam Baba Loskurima, 47, was slain on Sunday inside his Maiduguri residence by members of the Islamic terrorist sect, Boko Haram.
Read More...


Deputy Assistant Secretary William Fitzgerald’s As Delivered Remarks In U.S.-Nigeria Binational Commission Opening Session Monday, January 23, 9 A.M.

The Honorable Permanent Secretary in the Ministry of Foreign Affairs, Ambassador Uhomoibhi

The Honorable Security Adviser to the President of Nigeria, General Azazi

My Dear Friend from Washington, His Excellency, the Ambassador to the United States, Ambassador Adefuye

And other distinguished members of the Nigerian delegation. Read More...


Akpabio’s Big Push To Curb Crime; Launches Operation Thunder With 131 Security Vans

UYO, January 23, (THEWILL) – Akwa Ibom State Governor, Chief Godswill Akpabio Monday moved to deal with criminals and law breakers in the oil rich state with the commissioning of 131 branded Hilux vehicles fitted with state of the art communication and crime fighting hardware for the security outfit code named Operation Thunder.  Read More...


Security: Fashola Enjoins Lagosians To Be Vigilant and Pass Useful Information To Police

LAGOS, January 23, (THEWILL) - Lagos State Governor, Mr. Babatunde Fashola (SAN), Monday enjoined all Lagosians to be vigilant and report all unusual occurrences in their neighbourhood to security agencies saying, it is only by such collective vigilance that the security of the State could be ensured.  Read More...


Nigeria To Auction 89.7 Bln Naira Bond On Jan. 25

Nigeria said it will auction 89.75 billion naira ($556.93 million) worth of 10-year sovereign bonds with different maturity dates on Wednesday at its first monthly debt auction of the year, the Debt Management Office (DMO) said on Monday.  Read More...

OPINIONDISCLAIMER: THE OPINION ARTICLES BELOW ARE PURELY THE VIEWS OF THE AUTHORS KENYA’S ELECTIONS AND ODINGA’S DILEMMA

The humid Nairobi weather is tension soaked. The uncertainty is palpable. Any moment from now, the International Criminal Court (ICC) based in Hague will rule on whether six prominent Kenyan politicians and a radio journalist have a case to answer on charges relating to their alleged role during the 2007 post election violence that engulfed the country.  Read More...


NIGERIA: THINGS FALL APART

“Individuals derive strength from their society, and societies derive strength from the individuals who belong to them” – Things fall apart

With the recent happenings in Nigeria, what strength would individual derive from the country? What strength would innocent citizens derive from an insensitive government? What strength would an angry unemployed graduate derive from a clueless administration? Read More...


WHY WE OPPOSE THE LEKKI TOLL GATE

Today, scores of residents of Lekki defied the ban on public rallies by the Lagos State police command as they stormed the Admiralty Way roundabout in Lekki phase, to protest against Lekki toll gate of the Babatunde Fashola administration. They were led by human rights activist, Ebun-olu Adegboruwa.  Read More...


LABOR’S TREACHERY AGAINST THE “OCCUPY NIGERIA” REVOLT

There is no doubt that the last unprompted mass revolt against President Goodluck Jonathan’s cold-blooded economic war on Nigeria’s middle- and working-class families was a damp squib, as the British call something that turns out to be a disappointment after good expectations.  Read More...


ESCAPE OF BOKO HARAM SUSPECT: BE FAIR TO RINGIM, JONATHAN

These are not the best of times for the country.  The spate of bombings for which the Boko Haram Islamist sect has claimed responsibility has set the nation on the edge.  The fabrics of unity, harmony and corporate co-existence of the country have come under real threat.  Read More...


NIGERIAN GOVERNORS FORUM AND THEIR GREEK GIFT OF BOKO HARAM

I will use this piece to conclude on the series on Boko Haram and how the issues could be resolved from multifaceted angles. A preview of the earlier piece will help to situate on how the Nigerian Governor forum comes in.  The first piece, ‘Buhari,Jonathan and Boko Haram’ concludes that the Federal Government can solicit the assistance of General Buhari, former Head of State and major opponent in the just concluded presidential elections, in the fight against Boko Haram, since he is the most popular politician in the north.  Read More...

THEY CALL IT “FUEL IMPORTATION LICENSE”, WE CALL IT “FUND RAISING FOR PDP UN-OFFICIALS”.

Things like Road network, Hospitals and Health facilities, Education, Housing, Security of lives and Properties and Environment, job creations and Industries and social security support for the vulnerable citizens, these are hallmarks of a stable and responsible society. Officially, Nigeria’s daily crude oil production post-amnesty is “2.6 million barrels per day. Our daily local consumption is estimated to be 300, 000 barrels per day. This leaves approximately 2.3 Million bpd for export to international market to generate up to 85% of our national revenue and 95% of Foreign exchange earnings.” they say.  This generated revenue is a collective patrimony and sovereign wealth with politicians and policy makers as custodian of commonwealth trusted to be invested in social and developmental infrastructure for the benefit of every citizen of Nigeria and to meet our International obligations.

If Nigeria produces 2.6Million bpd of Crude and local consumption is 0.3Million bpd, what is the need for subsidy? Why is the need to import refined fuel? How can you subsidize what is already in surplus production from the natural reserve? The concept of fuel subsidy is another word for “capital cronyism” which allows private individuals to own Oil wells belonging to Nigerians, either as a front or in trust or in corrupt collusion with people in government with vast capacity and vessels to transport it out of the country and then refine it at some privately owned refineries cited in some other countries or by other arrangements with refineries own and built by other sovereign nations in which they have vested interest and later secure import contracts to bring it in to sell at exorbitant unregulated prices at the pumps to innocent Nigerian citizens. 

The personalities behind this so called Fuel subsidy sham are not unfamiliar to Nigerians and indeed the world. Removal or no removal, these cabals still retain the import license and infrastructure to continue to import refined fuels and transport crude anyway, so the current price that the government just announced would further increase the income given to these cabals and it will also promote artificial scarcity and hoarding of imported fuel as these people also own the storage facilities for the imported fuel. The abovementioned is typical of why Nigeria found herself in the current debacle of so called fuel subsidy.

In the midst of all these absurdities, the most enlightening issue that is indicative of what is to come when we finally come to terms with the need to move beyond petrol subsidy removal. But as long as the local refineries are owned by Federal Government, they will remain dysfunctional and we will continue importing petrol and allegedly subsidizing it, and no private investor will build refineries in such a regulated environment as they will not be able to compete with NNPC and PPPRA. The issue is not really the removal or retention of subsidy but if this government can be trusted to do all it has promised.

THE TRUTH ABOUT THE “CABAL” LIES

The social contract between the people of Nigeria and its leaders integrates expectation of the highest forms of accountability, transparency and value in governance. There is no such thing as “cabal”. It is also wrong to list individual companies and categorise them as “beneficiaries” of petroleum subsidy. The original intention of the petroleum subsidy regime as envisaged under the Petroleum Support Fund Guidelines developed further to the PPPRA (Establishment) Act which set up the PPPRA has long been thwarted.

Firstly, oil trading and marketing companies are not beneficiaries of the money generated from subsidy. The primary beneficiary of petrol subsidy is every person who drives into the petrol station and pays N65 for petrol which is actually imported at a market rate and total cost that is much higher. The subsidy is simply a refund of the difference in price between the government decreed price cap and the international market price at which the products are imported. It incorporates the logistics costs of shipping the products to Nigeria.

Further, many marketers are briefcase companies with little investment in infrastructure. Most oil marketers have invested billions of naira in physical infrastructure across the country, ranging through shipping, ports, storage and logistics. These investments are operated and maintained by a corps of skilled and regularly trained professionals. A new generation of young, internationally competitive manpower, readily deployable across economic sectors has been developed by the efforts of many legitimate oil trading and marketing companies.  

Additionally, indebtedness of downstream operators is evidence of fraud. In the midst of the foregoing challenges, the Nigerian public has been misinformed, and downstream operators, vilified and crucified. Most condemnable, has been the deliberate incitement of the public against legitimate business interests. The appropriate agencies of the law should by all means do their job in identifying those who have fraudulently and criminally undermined the system, but those working hard against all odds to provide jobs and create economic value should not be painted in the same tar. 

We suggest that the deregulation policy of the government should be fully implemented, starting with an elaborate definition and development of the legal framework to guide it. The reform and renewal process must ensure true value-creation for the Nigerian people and weeding out of the system leeches.

DEVELOP THE NATION AND STOP DEREGULATING LIVES!

Nigeria is blessed with vast capacities of oil and is one of the largest fuel exporters. This has generated billions of dollars in revenues over the last years since oil was found in Nigeria.

As seen in most developing countries, this has not translated into an enriched economy for the country. Instead, through inefficiencies, corruption, abuse of powers, mismanagement, smuggling, bureaucratic bottlenecks and excessive subsidizing, the supply of refined crude oil in the country has virtually collapsed.

The Nigerian oil industry is divided into two sectors; the upstream sector, which deals with Exploration and Production and the downstream sector, which deals with refining of crude oil for domestic consumption. The government of Nigeria has decided to emulate other developing and developed nations by privatizing and liberalizing the country’s downstream sector which was previously managed by the Nigerian National Petroleum Corporation (NNPC) on behalf of the government. The Nigerian government has decided to go ahead with the policy even against widespread disapproval on the part of ordinary citizens.

The deregulation policy has been globally embraced by several countries, in order to diminish public sector dominance and for developing a liberalized market while ensuring adequate supply of products. These other countries plan and map out an effective policy response which transcended into full deregulation. The economic reforms of the government have become rather imperative since they are geared towards reviving the ailing sectors. The precedence of some sectors that have been fully deregulated and their achievements were so remarkable that Nigerians had forgotten the scares of the initial experiences.

If Nigeria should borrow a leaf from these nations and allow the downstream sector to be fully deregulated, we are sure to have a success story to tell eventually. Otherwise, Nigeria becomes an onlooker in the policy of oil producing nations. As the recent events unfold, deregulation becomes inevitable. We understand that there is no point running away from the grasping reality, what should be done is that collective efforts should be made to face the challenges stoically than posting the evil day that will most likely befall us. If there must be deregulation, let it be for the building up of the nation and not to further compound the problems of the masses.

Fuel Subsidy -A Sad Gift from the President

We entered into the New Year with such optimism and confidence. New Year resolutions, visions and dreams that were hindered the year before were reconsidered with the hope of success this year. As a common fact that the new year brings much more only to be destabilized by the Federal Government with the announcement of the Removal of Fuel subsidy. The announcement was received with strike action from the people and the National Labor Congress.

Following the truce reached by both organized labor and the federal government over the disagreement and subsequent clash over President Goodluck Jonathan’s fuel Subsidy Removal, which was later partially reversed. This evidently shows the instability of the Nigerian economy and its lack of vision.

Nigeria is a country without doubt, immensely blessed with enormous resources. In addition, her citizens are reputed to be very hospitable and resourceful, among the best in the world. The only hitch is the endemic corruption which all and sundry claim is turning the country into shreds and making a mockery of all the invaluable investment and endowment bestowed on it. Pathetically, persons fingered in corruption incident are turned to scared cows and regarded far above the country as untouchable. Corruption presents all the sociable and affable citizens of this great country as a bunch of unpatriotic and disloyal fellows.

The fear many Nigerians have and which informed their disapproval of President Goodluck Jonathan’s New Year day fuel subsidy removal, is the attendant and uncontrolled hike in the prices of other commodities along with the fuel price deregulation. At these times, transporters cease the opportunity of the subsidy to shoot the cost of transporting goods and persons up, traders in the markets are also quick to hold fuel subsidy responsible for the rise in the price of wares. The Nigerian man is at the receiving end and is made to bear the brunt.

This gift could have been properly thought out before it was delivered. The Palliatives the Government introduced subsequently should have been in place before the removal of fuel subsidy. Now everything has gone up and has refused to come down based on these actions.  The subsidy should not have been the first priority of the Government amidst the present challenges the country is facing and that is why the people rejected the measure. The right step should have been for the government to tackle the security challenges in the country presently, improve on the people’s wellbeing before embarking on such an act.

PETROL AGONY AND ITS IMPLICATIONS

Every time there is an increase in fuel price, it is always common sight to see motorist queuing up in fuel stations both in the morning and in the evening, and many who are brave enough to face the challenges of sleeping overnight at fuel stations also take the risks. The whole economy becomes grounded. International industries, refineries, as well as local entrepreneurs close down their factories because of the strain to cope with the ever increasing prices of fuel.

Commercial drivers and other road transport workers make use of this opportunity to increase their fares by over 100 percent thereby extorting the Nigerian People.

Greed is as old as the human race and you are a victim of greed just as I am. It is said that subsidy is the President and other petroleum minister use this opportunity to sift people as a substitute for service. The Federal government however argues that removing the subsidies, which are estimated to cost $8bn a year, would allow the government to spend money on badly needed public projects across Nigeria, with its cratered roads, little electricity and a lack of water, infrastructure and other resources. Nevertheless, many of us still remain suspicious of government as military rulers and politicians have plundered government budgets since independence from Britain in 1960.

Nigeria is the sixth largest producing nation of oil in the world but this fact is hardly noticeable with the economic trend in the nation. In the wake of the recent struggle over the subsidy removal, the Federal Government needs to adopt a strategy to win the public and not engage in unjustifiable propaganda that eventually leads to protest and pandemonium in the nation.

We understand that any member of the public who bought petrol or used petrol bought at N65 per litre (now N97 per litre) benefitted from the PSF and was a beneficiary of subsidy and that 90% of petrol consumed in Nigeria is imported due to inadequate and limited local production.

Nonetheless, we have no hope in our leaders as they have failed us countless times. If they say this is indeed a democratic regime which means the government should be by the people, of the people and for the people, then it suffices to say that the Federal Government needs to implement its budget in a way and manner that it will not tamper with the lives of innocent Nigerians.

SUBSIDY REMOVAL: WHO REALLY BENEFITS?

On January 1^st 2012 the Federal Government finally made good its promise of removing the fuel subsidy on Premium Motor Spirit (Petrol). Due to the importance of this fuel to Nigerians, the organized labour and Nigerians embarked on a nationwide strike to protest the removal. As things stand, no major solution has been found to the impasse with Government and labour maintaining their positions.

Without doubt, government handling of the issue has been far from commendable. Why remove subsidy? Government claimed that it had expended over N600billion on fuel subsidy in 2009 and over N1.2trillion between 2006 and 2008. To save the nation therefore the subsidy must be removed. Many analysts have argued about the unconstitutionality of the removal or payment of fuel subsidy. One school of thought holds the view that there is no longer backing for the payment of the subsidy from the excress crude account. Perhaps that gave government the fillip to stop it. Another school of thought again posits that the action of the government to remove the subsidy is an act of illegality itself. Even if it will remove the subsidy it cannot do so until the commencement of the 2012 budget in March as the nation is currently running on the 2011 budget.

From the argument posited on the benefits of the removal to the citizenry, there is a wide pool of people who believe that subsidy removal will only benefits government, its patrons and cabals. But who are these cabals and how will the new pricing benefits them further?

To begin with, it is only a government and media propaganda to refer to oil companies as cabals. Who is a cabal? According to Dictionary.com a cabal “is a small group of secret plotters, as against a government or person in authority; the plots and schemes of such a group; intrigue”. The list of beneficiaries of the fuel subsidy, who import fuel and legitimately distributes cannot generically labeled a cabal. It is very possible that a few of those companies are not playing by the rules and the government therefore owes its people a duty to fish out those few and deal with them appropriately. What should Nigerians expect from a government that openly admits it cannot unravel the Boko Haram sect and that they may have infiltrated his government?

Pre-subsidy regime of N65 per litre, PPRA Product Pricing template for PMS published on its website, the pre-subsidy margins built into the cost of PMS at N65 per litre wallows only a margin of N4.60 while dealers were allowed a margin of N1.75 respectively. This margin remained unchanged with the pricing template of N141. If the masses are not happy with the subsidy removal and there is not margin improvement to oil marketers it stand to reason that government is the only and actual cabal to enjoy the benefits of this removal.

Many do not even know the challenges of the oil marketers in claiming their subsidy. When an oil marketer brings fuel it takes averagely about 90 days in some lucky instances to get paid. With the high interest rate from the banks, a marketer’s margin would almost have been wiped out. The notoriety in delayed subsidy payment led many major marketers not to import fuel and created a scarcity some years backs. It is this same problem that led to the introduction of the Sovereign Debt Note to ameliorate the plight of the marketers. Many mono trade energy companies licked a lot of wounds before the introduction of the SDN.

Is the government not creating further problems for the unemployed youth with this shortsighted plan? It will be recalled that the nation was plunged into massive unemployment when the wave of retrenchment greeted the CBN intervention in the banking sector. The nation is yet to recover from that ill though out intervention. The oil sector as a strong employer of labour should not be allowed to be plunged into another crisis.

In conclusion, if the government is certain and convinced about its intentions, let explain its position to the people in a coherent manner. It should be democratic in the commencement of the removal policy. The palliatives should have been seen to be working and effective before removing the subsidy. As a government portraying itself as honest, it should mandate the attorney general to set up a committee to review the list of oil marketers, unveil their directors, their pedigree in the oil and gas industry, verification of claims on subsidy payments made to them and evolve a new framework for registration of fuel importers, verification of fuel to check round tripping and a payment regime that eliminates kickback and compromise. Till these steps are taking, many will negatively perceive the fuel removal and see this government as a joker. It is time for the cabal to confront the cabal within its administration. There is no process or system that can be abused without the connivance of the insider.

"The earth does not need saving, humans do?" 
How will humans survive the next millenium and survive their greatest threat -- ourselves?

Should there be laws against the conjugation of more then 3 humans in any area? Or perhaps, should there be laws against having sex period. Would a worldwide breading program limited to test tube babies and surrogate cow mothers help bring to fruition a more peaceful, chemically balanced society based on more then what we are today? 

Would we even be ready to take on a worldwide responsibility for limiting the size of our nations well expanding our colonizing of the solar system? 

We have achieved great things on earth but will we ever achieve great things on other planets or have we reached a glass ceiling of which humans were never meant to break through? 

We have failed to control nature beyond ourselves or within, even with all the great accomplishments of the present and the past ... we have lost an entire world of knowledge in our quest for yet more understanding of ourselves and the universe. 

Do we really know any more about ourselves, our origins, our future then we did at any moment throughout history?

What does the future hold for humanity?

SUBSIDY REMOVAL: WHO REALLY BENEFITS?

On January 1^st 2012 the Federal Government finally made good its promise of removing the fuel subsidy on Premium Motor Spirit (Petrol). Due to the importance of this fuel to Nigerians, the organized labour and Nigerians embarked on a nationwide strike to protest the removal. As things stand, no major solution has been found to the impasse with Government and labour maintaining their positions.

Without doubt, government handling of the issue has been far from commendable. Why remove subsidy? Government claimed that it had expended over N600billion on fuel subsidy in 2009 and over N1.2trillion between 2006 and 2008. To save the nation therefore the subsidy must be removed. Many analysts have argued about the unconstitutionality of the removal or payment of fuel subsidy. One school of thought holds the view that there is no longer backing for the payment of the subsidy from the excress crude account. Perhaps that gave government the fillip to stop it. Another school of thought again posits that the action of the government to remove the subsidy is an act of illegality itself. Even if it will remove the subsidy it cannot do so until the commencement of the 2012 budget in March as the nation is currently running on the 2011 budget.

From the argument posited on the benefits of the removal to the citizenry, there is a wide pool of people who believe that subsidy removal will only benefits government, its patrons and cabals. But who are these cabals and how will the new pricing benefits them further?

To begin with, it is only a government and media propaganda to refer to oil companies as cabals. Who is a cabal? According to Dictionary.com a cabal “is a small group of secret plotters, as against a government or person in authority; the plots and schemes of such a group; intrigue”. The list of beneficiaries of the fuel subsidy, who import fuel and legitimately distributes cannot generically labeled a cabal. It is very possible that a few of those companies are not playing by the rules and the government therefore owes its people a duty to fish out those few and deal with them appropriately. What should Nigerians expect from a government that openly admits it cannot unravel the Boko Haram sect and that they may have infiltrated his government?

Pre-subsidy regime of N65 per litre, PPRA Product Pricing template for PMS published on its website, the pre-subsidy margins built into the cost of PMS at N65 per litre wallows only a margin of N4.60 while dealers were allowed a margin of N1.75 respectively. This margin remained unchanged with the pricing template of N141. If the masses are not happy with the subsidy removal and there is not margin improvement to oil marketers it stand to reason that government is the only and actual cabal to enjoy the benefits of this removal.

Many do not even know the challenges of the oil marketers in claiming their subsidy. When an oil marketer brings fuel it takes averagely about 90 days in some lucky instances to get paid. With the high interest rate from the banks, a marketer’s margin would almost have been wiped out. The notoriety in delayed subsidy payment led many major marketers not to import fuel and created a scarcity some years backs. It is this same problem that led to the introduction of the Sovereign Debt Note to ameliorate the plight of the marketers. Many mono trade energy companies licked a lot of wounds before the introduction of the SDN.

Is the government not creating further problems for the unemployed youth with this shortsighted plan? It will be recalled that the nation was plunged into massive unemployment when the wave of retrenchment greeted the CBN intervention in the banking sector. The nation is yet to recover from that ill though out intervention. The oil sector as a strong employer of labour should not be allowed to be plunged into another crisis.

In conclusion, if the government is certain and convinced about its intentions, let explain its position to the people in a coherent manner. It should be democratic in the commencement of the removal policy. The palliatives should have been seen to be working and effective before removing the subsidy. As a government portraying itself as honest, it should mandate the attorney general to set up a committee to review the list of oil marketers, unveil their directors, their pedigree in the oil and gas industry, verification of claims on subsidy payments made to them and evolve a new framework for registration of fuel importers, verification of fuel to check round tripping and a payment regime that eliminates kickback and compromise. Till these steps are taking, many will negatively perceive the fuel removal and see this government as a joker. It is time for the cabal to confront the cabal within its administration. There is no process or system that can be abused without the connivance of the insider.

Fuel Subsidy: What Government should not have done?

The thrust of this article is to identify and discuss the 5 pertinent issues that government failed or handled poorly and how and how it negatively impacted the fuel subsidy issue. These key issues are germane to the ongoing nationwide strike action.

1.       Cost of fuel subsidy.  The Executive Director, PPPRA, Reginald Stanley, told the Senate Committee that the gross amount spent on fuel subsidy from 2006 to September this year stood at N3.655trillion. The figure contradicted the N1.426 trillion submitted by the NNPC as subsidy on the products as at August 2011. Government dented its own credibility badly from this incident as it cannot accurately tell the amount of subsidy paid so far. This incongruence is what made many to believe that the whole process itself is a sham. How do you explain, contradicting figures with such gaping variance from 2 government agencies. The NNPC tried through advertorial to justify and reconcile this figure unsuccessfully.

2.       Beneficiaries and Cabal:. Anybody that buys fuel at N65 benefits from the subsidy. By context, all Nigerians can therefore be adjudged beneficiaries of fuel subsidy. Companies that imports fuel and entitled to subsidy refunds are therefore claimants. Cabals, this term have been loosely used to refer to all the companies that have received subsidy claims. Government erred with the list as it shows that it does not conduct due diligence on the companies that does business with. How can a contraction company be involved with fuel importation? The cabals of this construction company are so mindless that they cannot even register a new company to perpetrate the nefarious act

3.       Consultation –The Presidency set itself up against the legislature, an important arm of the government. What about the masses, what consultation did government do with them? As one activist said, government had already broken the round table. What about the oil marketers? Informed sources also said that while consultations were ongoing, the government also came to down like a bolt from the sky. And if the PPRA pricing template is anything to go by, the fortune of the marketers will not fare any differently if petrol is sold at N65 or N141. This goes to reinforce the position of some economists that this government is actually broke and in debts with removal of subsidy seen as a fulcrum to get out of the doldrums.

4.       People oriented implementation – If government is by the people and for the good of the people. It stands to reason therefore that the Federal Government will implement its budget in a way and manner that it will not hurt its people knowing fully well that 90% of its population live on less than $2 a day( according to UNDP Human Development Index). Announcing the commencement of the removal on the first day of the year was a wrong timing in a country that the bulk of the population remains fatalistic of what you start a week, month or year with will be your success story throughout the period. The President must have been deluded by the success of the IBB regime that announced similar measures on January 1, 1986.

5.       Emasculating Opposition – In the public relations parlance, crisis is often seen as an opportunity to turn adversity into advantage. This government massively failed to see the growing agitation on subsidy removal as a platform for engagement and tell its economic transformation agenda to the organized labour unions. Government was ill advised to see it as an affront and therefore went for the bloke. It obtained a court injunction to stop the proposed strike. This action only energized the labour. What was the result; the strike went on and it was successful nationwide. Added to this lives were lost due to the excesses of the armed forces.

In conclusion, I came to the realization that government failed itself by not finding and presenting a credible rationale for the implementation of the removal of fuel subsidy and how it will improve our economic well being. For a government that was already percied as not upbeat about governance, the quick implementation of the announcement was suspect.  For a government that was suspect to the listening to the dictates of World Bank and IMF through its cronies in government, it needed to do more to convince Nigerians it has their interest at heart. For a government that claims to be consulting when perceived to be slow, why is this exception for that engagement strategy. You can’t cut off a head to cure a headache. 

SUBSIDY FACTS

·         90% of petrol consumed in Nigeria is imported due to inadequate and limited local production.

·         This importation is carried out by NNPC, MOMAN, DAPPMA and other independent marketers under permits issued by PPPRA.

·         The PPPRA has a 26 member Board which inter alia includes CBN, Finance, NECA, NLC, TUC, PENGASSAN, NUPENG, NARTO, NURTW, Nigerian Guild of Editors, NACCIMA, MOMAM, DAPPMA, IPMAN, and the Media amongst others.

·         The PPPRA pricing template was established by its Board and was utilised to calculate on a daily basis the landed price of regulated products. This formed the basis of subsidy claims made by participants under the Petroleum Support Fund.(PSF) (www.pppra-nigeria.org).

·         The PSF is funded by the Federation of Nigeria, administered by the PPPRA and supervised by the Ministry of Finance.

·         The difference between the higher cost of imported PMS as ascertained by PPPRA and the then lower regulated pump price of N65 per litre was the subsidy that was repaid to importers after being subjected to an audit by Government appointed auditors. For example, as at 6 Dec 2011, the total cost of PMS imported product is as detailed below;

·         Description	·         PMS (N/ litre)
·         Total Cost of Imported PMS (A)	·         N141.38
·         Regulated Pump Price (B)	·         N65.00
·         Subsidy Claim (A-B)	·         N76.38

ANY MEMBER OF THE PUBLIC WHO BOUGHT PETROL OR USED PETROL BOUGHT AT N65 PER LITRE BENEFITED FROM THE PSF AND WAS A BENEFICIARY OF  SUBSIDY.  Our members who participated in the Subsidy Fund were merely claimants who were entitled to reimbursement of costs incurred in the importation and delivery of petrol into Nigeria. Claiming subsidy under the PSF for reimbursement is neither an unwholesome act nor is it illegal. A change in the guidelines of the PSF in particular Part V, in 2007, allowed companies with nothing more than a throughput agreement to operate under the PSF as opposed to only companies that owned storage of minimum 5,000 metric tons and retail stations. Unfortunately, this saw the emergence of ‘briefcase ’  companies (with no asset base nor accountability) in the PSF scheme. MOMAN members who have extensive storage and distribution capacity have invested massively in retail distribution infrastructure and assets nationwide, ensuring adequate petroleum products supply to all parts of the Federation and gainful employment for thousands of Nigerians.

RECENT PUBLICATIONS AND STATEMENTS REFERRING TO ALL CLAIMANTS UNDER THE PSF AS MARKETERS AND A ‘CABAL’ ARE FALSE, UNFOUNDED AND WITHOUT ANY MERIT WHATSOEVER.

MOMAN has always been a proponent of the total deregulation of the downstream sector and viewed the Subsidy Scheme as an intermediate measure. As responsible entities, we hold efficient utilisation of national and corporate resources very dearly. We welcome any inquiry or investigation into our activities under the PSF which will no doubt establish utmost good faith on the part of our members. Furthermore, MOMAN commits to future participation in any such scheme on the basis of total transparency and accountability. MOMAN is a law abiding body and remains committed to supporting the Nigerian People and the Federal Government in ensuring petroleum products are made available nationwide. 

Fuel Subsidy: Process, Abuses and Removal

The emotions the fuel subsidy removal have been fierce and had further fueled the misinformation that has characterized its misunderstanding. Nigerians believe that the fuel subsidy is only the benefit they enjoy in the absence of a structured social security system. The removal as announced at the beginning of the month is argued to be an act of government’s insensitivity to the plight of its people.

On the other hand, the Federal Government has been trying hard to convince the very angry populace, including me, that the subsidy is unsustainable and not a judicious utilization of resources, especially when infrastructure and other developments are yearning for the same limited revenue. I returned to the country early last year after 4 years to pursue a post-graduate to realize that we are still we are still at the same level of infrastructural development, if not worse.

Govt says subsidy has also encouraged corruption by certain group of individuals tagged ‘Cartel’ or ‘Cabal’ to cheat the system to the detriment of the people. Nigerians, let’s look at how fuel subsidy works for a moment. It is the difference that the FG pays for the cost of imported petrol and the price of N65 sold at the pump to Nigerians. This also includes the cost of transportation to various parts of the country. The cost of imported petrol is guided by the global market and the volatile international cost of crude oil. As a result, the landing price of the product is monitored by the Petroleum Products Pricing Regulatory Agency (PPPRA) template to ensure parity, while an agreed profit margin is marked up to ensure comfort for the importers.

To help NNPC meet consumption demand, major marketers such OANDO, MRS, AP, Total and others are invited to help with importation as the refining capacity cannot satisfy domestic consumption. The process of allocation and licensing is solely guided by PPPRA. These fuel importers are simply reimbursed for the importation and transportation expenses incurred on petrol imported and sold in their various filling stations. From a contextual premise, the beneficiary of fuel subsidy is any Nigerian who had patronized any service station to purchase petrol at N65. Hence, when the price of international crude oil climbed beyond N100 the Nigeria consumer was unaware.

But the government continues to pay the difference between costs of importation and the pump price which continues to widen as the crude oil prices continued on the ascendancy. While the country enjoyed excess crude revenue, it was using it to fund the growing cost of petrol instead of investing on social and economic infrastructure.

Unfortunately, the process has been abused by a few individuals in partnership with corrupt government officials (who unfortunately are in the majority). A lot of people took advantage of the loopholes to make abnormal profits. However, labeling all major marketers as ‘Cabal’ for claiming what they are due under the subsidy policy is a fallacy of generalization.  This is even an unfair appellation as these companies have had to import with their own monies, pay huge interest rate at the banks prior to government reimbursement.  On its part, government do not pay make the reimbursement on time and this has resorted to a situation in the past where marketers stopped the importation until their outstanding debts were paid. To forestall similar occurrence government then introduced the Sovereign Debt Note (SDN). This misinformation is not only unfair and misleading; it also leaves the companies exposed to public anger. If there are cabals, then the importers that PPPRA granted license and locations without meeting criteria should be unveiled. The NNPC, in the bid to shift attention from its corruption charges, went to town with a list of containing leading oil marketers are beneficiaries of subsidy.  The word beneficiary in this instance almost sound like the over-inflated allowances that the GMD of NNPC was used to, when in actually fact it was a reimbursement of funds that has been incurred on behalf of the FG.

Government needs to adopt a strategic story telling to win the populace and not engaged in unsustainable propaganda messaging. It should be democratic in the commencement of the removal policy. The palliatives should have introduced before removing the subsidy.. The adoption of the above recommendations will reduce the negative perception and rating of this administration. Only government can put its own house in order.