Tag Archives: #Oil&Gas

Fuel Subsidy Removal: The Needless Furore

Mr President is in the eye of the storm recently for bravely realizing the inevitable expungement of the fuel subsidy in Nigeria, brave due to the extreme furore and knee jerk reaction by some gullible and credulous Nigerians, who are convinced that, this decision is most inhumane and anti masses. Yet, conflictingly, deep within their minds, they are secretly relieved in knowing that the removal is an absolute necessity. Also, they are not unaware of the fact that, Nigerian masses are neither directly nor indirectly benefiting from the obsolete policy. Thirdly, put them in the same position and the same condition, they would not be any different.

The term subsidy means a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or services low. For decades, Nigeria had a policy to subsidise petroleum product, especially on PMS, which is one of the most consumed petroleum products in the country. This, over the years, has become a thorn in the flesh of our National Economy, due to blatant abuse and corruption by many beneficiaries as would be outlined later. Experts in the field consequently argued that Nigeria can actually do better by removing the subsidy regime in petroleum, and instead, putting the money to use by developing other sectors with emphasis on health-care, infrastructure and agriculture.

For the past two decades, after democratic governments took over from the military in 1999; this topic has been a major bone of contention. The three past Nigerian leaders had a long and onerous battle with Nigerians, in an attempt to convince the Nigerian masses that subsidy is merely an exploitative and self-serving mechanism some unpatriotic elites use, to deprive the nation of its hard earned resources. This battle proved to be a hopeless one….almost!

Why does any attempt by the government to right the wrongs of subsidy hit a brick wall? Did the subsidy regime truly help in providing enough gasoline to our vehicles and industries? Who are the major beneficiaries of the subsidy idea and Why are they averse to the policy being abolished? Most importantly, what are the benefits Nigerians stand to gain in the eventuality of its removal? These are some of the questions, that are begging to be explored on this topic.

Going back to memory lane, in 1999 the price of petrol in Nigeria was N11 per litre, by 2015, despite the subsidy, the price had skyrocketed to N145 per litre, an increase of over 15 times the initial 1999 rate! Coupled with that, the incessant scarcity of petroleum in a country that parades itself as the sixth largest petroleum exporter all these years, is awfully disturbing and beyond shameful.

In reaction to this quagmire, experts like Malam Sunusi Lamido Sunusi: Former Nigerian Central Bank Governor, and former Emir of Kano argued, that the subsidies on petroleum products succeeded in making Nigeria the only oil exporting country that does not enjoy the benefits of increase in the price of crude oil in the international market. According to him; firstly, he reasoned we needed to fix the price of petroleum products ourselves, but then, we do not refine these products! How can you fix the price of a product that you do not produce? We produce crude oil but regrettably the price we fix is for refined products. Thus, suffice it to say….we are fixing the price of what we never produced, as a result, we end up paying enormously for NOTHING. The money meant to improve other more deserving sectors, now is monopolised by a few individuals, consequently deepening the fissures of poverty in the country. This plunged us in a bleak situation whereby while the rich are getting richer; the poor actually keep getting poorer.

Malam Sanusi Lamido is not alone in this argument, Former Minister of Finance; Dr Ngozi Okonjo Iweala also in a nine paged document, presented to the Federal Executive Council in 2011, similarly leaned toward the same direction of thought, as carried by Vanguard Newspaper of 25th December 2011:

“During that briefing to ministers, Okonjo-Iweala, in a document, titled, BRIEF ON FUEL SUBSIDY, (by) Dr. Ngozi Okonjo-Iweala, the coordinating Minister for the Economy / Honourable Minister of Finance explained the key facts about subsidy, what fuel subsidy is all about, deregulation of the downstream sector benefits for deregulation), why the subsidy was going to be removed, pointing out that it was a major fiscal and financial “BURDEN” on the nation, those who benefit from the subsidy as well as the relationship between subsidy and the Federal Government of Nigeria’s budget, among other things”.

From her point of argument, the former minister laboriously, and convincingly, pointed to the fact that, the benefit of subsidy’s removal far outweighs its stay. The policy is nothing but waste of resources and a huge needless economic scam in the name of making the products cheaper for the masses. On the final analysis, if government budgeted N10 for subsidy the masses only get a meagre fraction of Kobo out of it, while some subsidy elites are smiling to the bank with the rest. This systematic siphonage of our common wealth by a few subsidy elites can be clearly seen, if we are to consider the 2018 NEITI report alone, which stated that Nigeria spent about N722.3 billion on fuel subsidy! In healthcare, this amount can build 6 world class standard hospitals each in one of the six geopolitical zones of Nigeria. The money also if carefully invested on energy sector, can provide our country with over 2000megawatts! This can give a tremendous boost to power generation and lead to massive industrialization, which would in turn provide employment opportunity for millions of “qualified” yet jobless youths in the country. In the area of Agriculture, the money can guaranty food security in Nigeria, and improve farming and other agro allied products in the country.

Interestingly, this same amount of money could also build Ten Dams with modern irrigation facilities, which would also improve agro business in Nigeria, and launch Nigeria in the league of major exporters of Agricultural products for the inexhaustible foreign consumption.

It is both curiously perplexing then, how some politicians who maximally exploited subsidy removal as the cardinal principle of their campaign, now turn back to be its major adversaries! The former Vice President Atiku Abubakar and the PDP Presidential candidate in the

2019 elections happens to be one of these. He was quoted recently, attacking President Buhari’s decision on the removal and argued thus on his Twitter handle:

” Federal Government finally withdraws the fuel subsidy and price fixing bazaar that had been rife with corruption and stalling investment. This is something patriots have been calling for and for which I was demonised”

Even the Chief political adversary of PMB, from the above statement, believes the policy is corruption permeated, which every patriotic Nigerian must fight to a standstill. Subsidy removal will at least have two major advantages, killing one major form of corruption and also encouraging investors to put their money in the sector. These at the end of the day, will witness more refineries built in Nigeria, provide job opportunities for our teeming unemployed youths, and would translate to a source of income for more projects development, in transportation , healthcare , housing, and many more sectors.

Dr Rabiu Musa Kwankwaso, a two time governor in Kano State and former Minister of Defence also kicked against the President’s unpopular decision on subsidy. However, if we are good students of history we could remember vividly how in 2011, during fuel subsidy removal’s nationwide protest, the same governor ordered for the shooting of the protesters in Kano. According to him, the idea is ill-timed and inhumane, but like the Chairman of Nigerians in diaspora acknowledged, much as the idea is painful, coupled with Corona Virus pandemic and a slump in the global economy, still agreed the decision is unavoidably necessary. As far as the oppositions are concerned the only right time for the removal is when they are in power, as long as as they are out of it, no time will ever be right!

As far as “WE” are concerned, it is a welcome idea, Nigerians need more focus on developing projects, they have no or limited luxury of enjoying as a result of subsidy regime, the wise and far-sightedly man, took the painful decision, not to further the harsh economic conditions Nigerians are in, but to alleviate their suffering, fight corruption, improve, lay out and solidly set the stage for more infrastructures, and a solid foundation for National Economic growth. There is no way we can stop fuel smuggling across our boarders with the current pricing system. The subsidy removal will bring more investment in the sector, government will get more income for projects implementation, and in the long run, prosperity and progress will reign!

By: Maryam Shetty

Maryam I Shettima is an Abuja based social media activist, and the CEO of webelieve movement.

Fuel Price Hike And Market Fundamentals 

With the recent slump in global crude, oil price shock and the pandemic outbreak of COVID-19, induce economic lockdown impact on the masses. The Nigerian Government has gifted her citizenry increase in PMS (Petrol Motor Spirit) Price from N145 to N151.56/litre, but in reality fuel is been sold majorly between N161 to N170/litre in filling stations across the nation.

This news didn’t come as a surprise to many analyst and economist going by the prevailing circumstance around crude and primary commodities price falls and depression triggered by world economy uncertainties. Even with the trajectory eyes on the storm of recession hovering over us. The news also came on the heels of the fraudulent and cosmetics monthly PMS Price fixing regime and deregulation of the oil sector by Petroleum Products Pricing Regulatory Agency (PPPRA) in the last three months.

Let rewind back to March, 2020 when the Federal Government, through the PPPRA, announced a new fuel price regime. First, was the reduction price regime from N145 to N125/litre that came into effect on March 19, 2020. Followed is government’s approval of adjustment of N121.50 to N123.50 per litre PMS. Then, followed again, was the N141.80 to N143.80 per litre of petrol, adjustment in June, 2020.

Secondly, then came the Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Abdulkadir Saidu, who said “Going forward, pricing of the PMS will reflect market fundamentals in a circular dated Wednesday, July 1, 2020, to oil marketers, with PMS pump price increase from N143.80 to N145 /litre, Saidu noted that the essence of “the price band was to ensure price efficiency that would be beneficial to both consumers and oil marketers. PPPRA will continue to monitor price trends and advise monthly guiding price for all petroleum products, based on prevailing market realities and other pricing fundamentals,” he stated.

Saidu further explained that the recent plunge in oil price occasioned by the outbreak of COVID-19 and slowing global oil demand had a direct bearing on the EOMP of petrol, pushing it to a level below the pump price cap of N145/litre. He however concludes that “Nigerians should be ready to pay high or low prices for petrol following the price liberalization scheme currently in place and what we have in place is a market reflective pricing system”
Earlier in the year also on May 15, 2020, a statement credited to the Minister of State for Petroleum Resources, Timipre Sylva, who said deregulation was approved on March 19 this year. Adding that “But as you all know, PMS (Premium Motor Spirit) and other petroleum products are very strategic commodities, so you cannot allow the prices of these commodities to be determined wholly by the marketers,” he stated.

Sylva further said that “deregulation meant that the government would no longer continue to be the main supplier of petroleum products, but would encourage the private sector to take over the role of supplier of the products”. Officially, as we all know since 2017, the NNPC is the monopoly sole importer of petrol into the country after private oil marketers stopped importing due to crude price fluctuations globally, while the PPPRA retains the unjust price template.

Thirdly, then came, the bombshell, provocative and dooms day statement by the Minister of State for Petroleum Resources, Timipre Sylva which rightly observed by saying, fuel subsidy “benefiting in large part are the rich, rather than the poor and ordinary Nigerians.” The government decided to rid itself of the burden by the removal of the subsidy on petrol pump price was abundantly and categorically clear in affirmatively this month of September, 2020 with PMS Price from N145 to N151/litre.

He, however, noted that efforts were being made to develop alternative fuels to the PMS by deepening the utilization of Liquefied Petroleum Gas/Compressed Natural Gas as auto gas in Nigeria. From, aforementioned, it stands to reason that here is the glaringly contradiction, that would be creating controversy and confusion, soon the “market fundamentals”.

The purview and crux of this piece is to x-ray the genuity and ingenuity of market fundamentals that the government as so much put it hopes on to drive the pump price of PMS in Nigeria. “Accordingly, price will naturally be adjusted to reflect a true picture of market fundamentals at any particular period, high or low” The question is how true the above statement, we knowing fully well that the so called market fundamentals is hinge on supply and demand, hancour on the invisible hand of market forces, embellish in profit maximization drive of global capitalism.
In as much as government decide to bite the bullet so as to put in place a more transparent pricing model, stimulate investment growth in the sector and encourage resumption of product imports by oil marketing companies. Regrettably, with the shambles and rots in the downstream sector of Nigeria’s oil and gas industry, government throwing the sector up into the risky and uncertainty space and manipulative tendency of market fundamentals live us with concern. One great pitfall of market fundamentals is it poor scientific outlook and dangers it will pose to our economy.

The petroleum products marketers in this realm would be market fundamentalist. To this end we are confronted with the following questions: Will the market fundamentalist not exploit consumers with arbitrary pricing and round tripling of PMS? Would the market fundamentalist not create artificial scarcity of PMS? Will the market fundamentalist not put pressure on the naira? Will the market fundamentalist not join forces with forex speculator to sabotage, distort and deflect our foreign reserve? How would the uncertainty challenges of accessing foreign exchange be address?

The way forward, if the government is serious about the deregulation of the sector, is not surrendering PMS Price to market fundamentals that are predicated on free market capitalist economy principles not devoid of rooted sharp practices and market manipulation. Secondly, repositioning the sector is to attract the much-needed investments in functioning refineries and pipelines transport construction in the country with incentives for investors in that sectors. Thirdly, the government should also avoid creating a situation where the market fundamentalist in the PMS importation become a nightmare to CBN tired less and painstainking efforts to keep the naira stability jeopardized by the market fundamentalist cowboys. Lastly, we expect healthy competition among marketers that would enhance value for consumers without monopolistic structure that market fundamentals normally bring on, to kill vibrant and competitive market, a cyclical feature of free market economy. In conclusion, we must say here that market fundamentalist are primitive accumulator and maximum profit minded.

By: Adefolarin A. Olamilekan
Political Economist & Development Researcher
Email: Adefolari77@Gmail.Com
Tel: 08073814436.

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Breaking: NNPC Discovers Crude Oil In Kanam and Wase LGs of Plateau State

The Nigerian National Petroleum Corporation (NNPC), said on Saturday 20th June, 2020, that it is exploring for oil and gas in Wase and Kanam Local Government Areas of Plateau State. The NNPC said Wase and Kanam, which are parts of the Upper and Middle Benue Trough. have oil and gas prospects capable of contributing to the economic growth of the country.

The exploration exercise was disclosed on Saturday when the Management of the organisation paid Governor Simon Bako Lalong a courtesy visit at Government House, Little Rayfield, Jos. The Group Managing Director (GMD) of the NNPC, Mele Kyari through the Group General Manager (GGM), Frontiers Exploration Services, Abdullahi Bomai, while highlighting on the development, stressed that NNPC has acquired and used modern equipment which has resulted to the identification of hydrocarbon materials in the Upper and Middle Benue Trough.

Mr. Bomai, added that the NNPC has identified additional oil and gas province known as the Kolmani discovery in addition to those of the Niger-Delta as well as increase the worth of the Benue Trough with a billion barrels of oil reserves among others. While emphasising on the readiness of Government to cooperate in the process, Kyari also assured that the NNPC will engage people of Plateau, both skilled, semi-skilled and unskilled workers in different operations in the two identified LGAs.

Commenting on the development, the Governor of Plateau State who was represented by his Deputy, Professor Sonni Tyoden, commended the NNPC for such untiring efforts, noting that under the leadership of Mele Kyari, the organisation had done exceedingly well in identifying and unraveling geological deposits in the Upper and Middle Benue Trough.

Crude Oil Prices Fall As COVID-19 cases pick up in China, US

Daily Watch Press, gathered that oil prices fell on Wednesday as investors worried about fuel demand due to fresh outbreaks of COVID-19, though prices drew some support after US stocks of diesel fuel fell for the first time in weeks and US oil production dropped sharply.

Brent crude was down 31 cents, or 0.8 per cent, at $40.65 a barrel at 10:50 EST (1450 GMT). US West Texas Intermediate (WTI) fell 43 cents, or 1.1 per cent, to $37.95 a barrel.

US crude inventories rose by 1.2 million barrels, but distillate stockpiles, which include diesel and heating oil, fell by 1.4 million barrels following weeks of significant builds as refiners continued to blend jet fuel into their distillate pool, EIA data showed on Wednesday.

“That snapped a 10-week streak of builds, and the market needed that,” said Bob Yawger, director of energy futures at Mizuho in New York.

US oil production fell last week to 10.5 million barrels per day, lowest since March 2018. Some of that was due to Storm Cristobal, which shut more than one-third of US offshore output.

The World Health Organization said it was moving to update its guidelines after results showed the corticosteroid medication dexamethasone cut death rates by about a third among the most severely ill COVID-19 patients.

However, the virus is spreading in parts of the United States, while scores of flights were cancelled and schools were shut in Beijing to head off a new virus outbreak in the Chinese city.

“We think the oil market is not currently pricing in a significant probability of either second waves of coronavirus cases in key consumers and the associated lockdowns, or anything less than a rapid return to economic business-as-usual,” Standard Chartered analysts said.

Weak economic activity is still weighing on demand for crude. US fuel demand, as measured by product supplied, is down 20 per cent over the past four weeks, compared with the year-ago period, EIA said.

China REQUIRE 3 oil corporations to transfer the management of half of their liquefied natural gas

Report gathered by Daily Watch Press, shows that China has required the three biggest state-held oil corporations to transfer the management of half of their liquefied natural gas (LNG) terminals to the newly created state-controlled midstream firm, Caixin Global reported, citing industry insiders.

The transfer of 10 LNG terminals owned by China National Petroleum Corporation (CNPC), Sinopec, and China National Offshore Oil Corporation (CNOOC) is the first step in China’s plan to consolidate the oil and gas pipeline infrastructure into a new giant state-held midstream company.

At the end of last year, China launched the long-mooted state oil and gas pipeline group combining the infrastructure assets of the state-owned energy majors into one huge midstream group, which analysts say could be worth between US$80 billion and US$105 billion.

The new company is part of China’s efforts to allow its energy companies to focus on boosting exploration and production. Combining China’s pipeline infrastructure into one firm and opening access to this infrastructure to foreign and private producers would help the state oil and gas firms to focus on exploration at a time when China aims to increase its domestic production.

Earlier this year, CNOOC said it had signed with the new state pipeline giant to transfer to it the management of oil and gas infrastructure projects. 

The ten LNG terminals that are set to be transferred to the new company include seven terminals currently managed by CNOOC, two terminals managed by CNPC, and one by Sinopec, according to Caixin.

The new state pipeline giant, China Oil & Gas Piping, will initially only have the right to manage the assets, while the oil and gas majors will still own the assets until audits are finalized. After the transfer of the LNG terminals to the new company, there still will be 11 other LNG facilities that will continue to be managed by the three oil and gas majors, Caixin’s sources said.

Source: Oilprice.com