The Losses and Pains Of Fuel Subsidy
As at Thursday when the nationwide protest called by organised labour and civil society groups against the withdrawal of fuel subsidy by the federal government entered its fourth day, the Maritime industry has been losing N20 billion daily. Boniface Aniebonam, founder, National Association of Government Approved Freight Forwarders, NAGAFF, said transporters lose N70,000 on a daily basis on each of their vehicles that was already loaded but could not move out, as a result of the strike action. “For four days now that the strike had lasted, I can calculate the total sums of money lost to the owners of these vehicles by multiplying by the number of days of the strike. The demurrage on the ship and the inability to maintain the quick turn-around consignment and return back debt, which the Nigerian government would be required to pay hinders them", Aniebonam revealed.
There is no doubt that the strike embarked upon by the Nigeria Labour Congress, NLC, the Trade Union Congress, TUC, and Civil Society Organisation, CSO, following the withdrawal of subsidy on petrol by the federal government is taking its toll on the nation’s economy. The Central Bank of Nigeria, CBN governor, Mallam Sanusi Lamido Sanusi said the nationwide strike is costing the economy $617 million (about N100 billion) daily. This, Sanusi said, would push inflation to around 14.15 percent by the middle of this year. The current inflation rate is put at 10.5 percent.
Niyi Labinjo, general secretary, Indigenous Ship Owners Association of Nigeria, ISAN, said vessels belonging to indigenous ship owners had been idle since the beginning of the strike. Labinjo revealed that shipping companies spend a minimum of $5,000 to $55,000 as running and maintenance cost daily, depending on the size, type, destination and cargo aboard the ship, whether the ship is sailing or not.
Foreign vessels are also sailing into the country. Information available to this magazine shows that container shipping group, Maersk Line is stuck outside Nigeria’s sea ports. Sonny Dahl, the company’s director for West Africa, said eight of the company’s container ships were being affected by the strike. “We are at a standstill. The Nigerian market represented 60 percent of our container-ship import into West Africa. We are evaluating whether we should divert any of them to other ports. However, we have made arrangements for this week after which we know what next to do if the strike was not called off.”
The maritime sector is not the only one affected by the nationwide strike. The aviation sector equally has a tale of woes. Throughout the period of strike, no plane was allowed to take off in any of the nation’s airports. Although planes on international flight into the country were allowed to land, none was allowed to check in passengers for flight outside the country. The Super Eagles of Nigeria, who were due to Monrovia, Liberia over the weekend to honour international friendly with the Liberian national team, could not leave because aviation workers could not allow any flight outside the country.
Virtually, every sector of the economy was shut down. The banking sector closed their offices against customers; and many customers who wish to withdraw money resorted to the Automated Teller Machines, ATM. Even markets and petty business concerns could not transact any business.
Statistics have shown that Nigerian industries lost N82 billion daily. Muda Yusuf, the director general of the Lagos Chamber of Commerce and Industry, LCCI, revealed that the informal sector which is sustained by daily transaction is also losing so much. Similarly, the strike affected shares of companies, including those quoted on the floor of foreign stock exchanges. For example, MTN shares have dwindled on the Johannesburg stock exchange. The shares in the group lost N83.06 (about R2.00) on the JSE, with the group’s shares down close on seven percent for the first 11 day of 2012.
The nation has also lost a huge sum accruing from import duty collected by Nigerian Custom, Service, NCS. Haulage charges, marine services dues, terminal handling charges as well as dues from other ancillary services in the industry have also been lost. Chinedu Okoli, a clearing agent at the Apapa Warf is not finding things funny. He told Newsworld that he might not be able to cope any longer if the strike continues this week, and regretted that his foreign counterpart was running out of patience because of the delay in clearing his goods due to the labour strike. Okoli estimated his daily losses at N900, 000.
The strike led to loss of lives. Over 10 lives were lost and many others injured. Public and private properties were torched while dusk to dawn curfew were imposed in Kano, Kaduna, Niger and other states where the street protest ordered by labour turned violence.
This is the first time Nigerians were turning out in large numbers to protest against government policies. Other previous strikes were merely sit-at-home by civil servants while labour unions engage the government in dialogue.
It is not for nothing that Nigerians were mobilised to revolt against the deregulation policy. There were fears that the protests have been hijacked by politicians who want to settle scores with the federal government. Former minister of the Federal Capital Territory, FCT, Mallam Nasir el-Rufai appeared on national television on the first day of the protest, accusing the federal government of profligacy. el-Rufai also said the federal government had gone bankrupt, and that was why it was deregulating the downstream sector of the petroleum economy. Former governor of Lagos State, Asiwaju Ahmed Bola Tinubu, in an advertorial published in some national newspapers, equally took a swipe at the deregulation policy describing it as “unneeded and avoidable emergency.” Tinubu noted that “by pursuing the trail of elitist economics, the federal government brings economic disaster to our doorstep. Attempting to protect government bank accounts from false bankruptcy, they push the people into real bankruptcy.” Former aviation minister, Chief Femi Fani-Kayode and former member of the House of Representatives, Hon. Dino Malaye were some politicians who participated in the protests.
Before last Thursday’s closed door meeting with labour, government had remained adamant on the labour’s demand for total reversal of bump price of fuel to N65. In a bid to forestall the impending protest, President Goodluck Jonathan had in a nationwide broadcast, announced some palliative measures meant at cushioning the effect of the subsidy on Nigerians. He announced the provision of 1,600 diesel buses to be distributed across the country and N10 billion revolving loans to transporters. As a sacrifice for the new policy, the president also announced 25 percent cut from the basic salaries of members of his cabinet.
State governments equally on their own offered palliative measures to cushion the effect of the subsidy withdrawal. The Plateau State government provided 118 busses for mass transit scheme in the state, while the Niger State government pledged to provide 200 buses to members of the National Union of Road Transport Workers, NURTW, to in aid transport services in the state. In Delta State, 405 Marcopolo buses were purchased by the government with a promise to provide additional 50.
On its part, Rivers State governor, Chibuike Amaechi offered to subsidise the cost of fuel sold in the state by N4 per litre. This means that instead of N141 per litre, fuel will be sold at N137 in Rivers State.
This is not the first time Nigeria is increasing the pump price of petroleum products. Between October 1, 1978 and May 27, 2007, fuel price had been increased in the country 21 times. As a military head of state, Olusegun moved the price from N8.45kobo to N15.3kobo per litre in 1978. Also, between 1999 and May 2007 when he ruled as elected president, Obasanjo increased the pump price of petroleum products a record of nine times. In fact, the price of fuel was N20 when he was sworn in on May 29, 1999 but by the time he left office on May 29, 2007, Nigerians were paying N75 per litre of fuel.
Jonathan’s argument for complete deregulation of the downstream sector of the petroleum product was to provide money for the government to execute its project. The areas where the money to be realised from the policy was conceptualised in his Subsidy Reinvestment and Empowerment Programme, SURE, Programme. In this, the federal government promised to use its share of the fund to provide maternal and child health services, urban mass transit scheme, women and youth employment scheme, road construction, rail construction across the six geopolitical zones of the country and Abuja as well as vocational training schemes.
The project further includes about 22 rural and urban water supply projects that would be spread across the country. There would also be provision of three new petroleum refineries in Bayelsa, Kogi and Lagos States with combined estimated capacity of 400,000 barrels of petroleum every day. Government has also marked the completion period to last for three years after the award.
According to government, the epileptic power supply witnessed in the country will also be a thing of the past as it would also embark on the construction of the large Mambilla Hydropower Project targeted to generate 2,600 megawatts of electricity. Newsworld gathered that 17 additional hydroelectric power projects expected to generate a combine capacity of 140.257 megawatts would be spread across 15 states. The major highways in the country including the Abuja-Lokoja and the Lagos-Benin expressway have also been marked for completion and rehabilitation.
A committee headed by Christopher Kolade was set up to oversee the SURE Programme board. The committee would ensure the effective and timely implementation of projects to be funded with the fuel subsidy savings as well as liaise with the ministries of finance and petroleum resources to determine the subsidy savings for each month. The board will also ensure that the funds are transferred to its special account with the CBN. The board’s mandate would also include approving the annual work plans and cash budgets of the various project implementation units within the ministries and other government parastatals. Periodic poverty and social impact analysis is also part of their job.
Another committee, chaired by the former Chief Justice of Nigeria, Justice Alfa Belgore was also inaugurated to meet with the organised labour with a view to settling issues that may arise from the fuel subsidy funds. This is to prevent the programme from derailing.
Initially, the organised labour had refused to dialogue with government over the strike. But after much intervention by the National Assembly, the group agreed for an interface with the government. Labour has always insisted that government should fix the refineries and establish of new ones, repair of bad roads, eliminate corruption associated with importation, supply and distribution of petroleum products in the country, construction of railways and regular power supply before subsidy could be removed.
The strike also had ripple effect in the international oil market. Brent crude, at the weekend sold at $114.70 a barrel while crude oil rose by 1.87 percent to land at $102.75. The Petroleum and National Gas Senior Staff Association of Nigeria, PENGASSAN, threatened to stop crude oil production if there is no truce between government and labour by Sunday. This will further push the price of crude in the international market.