Just N1000 for a litre? By Toyin Falola

As is the case with most Nigerian things these days, the subject of this article has to do with petrol. And in commencing it, I am struck by the choice words of the real estate and automobile content creator, Ola of Lagos, as he markets multimillion naira assets saying “just.” He could go “for just N350 million, you can get so and so for yourself,” or, and this one stood out in my opinion, “for just N17 billion!” He rarely fails to intersperse his commentary with the famous catchphrase “It’s plenty!” or “I will not be poor in my life.” Why have I chosen to go this route, you ask? It is because ridiculous as these statements are for properties at those price points, they apply uncannily to Nigeria’s current economy.

Like me, you must have seen comparisons of fuel prices in Nigeria with those in neighbouring or far-flung countries. The astronomical figures in these locations are then leveraged to coax Nigerians into a false sense of stability about things not being as bad as they are elsewhere and, if anything, how little we pay to procure fuel. In an alternate sense, the premium motor spirit is sold for “just” N1,000 to the unrealistically statistical minds that are those of government planners and to the masses; these figures are stark reminders of their deepening poverty.

“I will not be poor in my life.”

According to the National Bureau of Statistics, Nigeria’s Multidimensional Poverty Index, 63 per cent, translates to 133 million Nigerians are multidimensionally poor. Put differently, well over half of the population suffers shortfalls in access to healthcare, food, shelter, and education, among other amenities. This is as reports variously indicate that more than eighty million Nigerians are in extreme poverty; that is, they live below the internationally acknowledged poverty line of less than $1.90 a day. Converted to naira at current rates, that amounts to a little over three thousand naira. Were one to take an ultimately incorrect approach to analysing this data, the ability to spend three thousand per day should amount to an expenditure of ninety thousand naira a month. This amount is significantly higher than the new minimum wage. On the flip side, analyzing this through the lenses of current living costs will put that amount on par with a variety of expenses ranging from a single measure of rice to three litres of fuel or even the entirety of transport fare expended in one day of transit in a state like Lagos. All these compared to figures as recent as just before the Tinubu administration.

Just N1,000!

Succinctly put, it is hardly the bare minimum for surviving. Yet, against this backdrop, the most consistent story in the news has been the issue of fuel prices. When it is not a novel twist in the seemingly unending showdown between Dangote Refinery and the Federal Government, it is the lapses of the NNPCL in preventing queues at filling stations. A third wheel in these controversies is the seesaw-like relationship between the infamous market dynamics governing the state’s attitude towards implementing or removing fuel subsidies and the entitled nature of the citizenry’s perception of subsidies. To understand things better, we must journey back into the seasons and settings of each facet of this conversation.

This takes us down the rabbit hole of fuel prices, international fluctuations and subsidies in the Nigerian market. Since Nigeria submitted itself to the notoriety of its curse, oil became a central determinant of the health of the Nigerian economy. Its scarcity predates increases in the prices of commodities and, consequently, instability in its politics. This is a natural order since it is elementary economics for the cost of production to influence purchase costs for the end user. However, these impacts should ordinarily be milder in an ecosystem with low import dependency and substantial manufacturing capacity. Where there is some degree of imports, which is inherently unavoidable in the grand economic scheme, a steady inflow of foreign exchange should equally serve to mitigate the imbalance occasioned by hefty quantities of local currency chasing scarce dollars. Nigeria defies this logic as it is, first and foremost, an imports-based economy, a bearing that unfortunately extends to its exploitation of oil.

Different authors reflect on the history of fuel price increases in Nigeria from 1973. I will focus on the same periods, too. The 1970s coincided with a decline in the exploitation of alternate commodities in favour of oil. Before this period, hydrocarbons accounted for less than 2 per cent of national exports and generated around N66 million in revenue in 1970. Enter the anti-west energy embargoes of the Arab states in 1973 and the astronomical surge in oil prices, the country was immediately exposed to a generous trough of foreign exchange than it had previously been familiar with. With oil now seeming like the goose with the finest golden eggs, other revenue sources, such as agriculture, were abandoned to a sharp recession in the shadows. The same year coincided with an increase in Nigeria’s pump price from 6 kobo to 8.45 kobo under the stewardship of the Yakubu Gowon administration. In 1976, Murtala Muhammed followed this with an increase to 9 kobo per litre. He was succeeded by the rise two years later to 15.3 kobo per litre under Obasanjo, then 20 kobo per litre under Shagari. It is instructive to note that the Obasanjo-led military administration instituted the Price Control Act in 1977, achieving the dual purpose of making it illegal to sell certain products, such as petrol, above the regulated price and institutionalizing the subsidy regime as we now know it.

As prices rose under successive administrations, so did consumption. Between 1977 and 1981, consumption rose by 30 per cent due to higher incomes and growing industrial application of hydrocarbons. Subsequently, consumption data would swing back and forth between high and low moments depending on the tenor of the market at any given time. Between 1986 and 1992, the military government of Ibrahim Babangida increased pump prices a total of five times, winding up at N3.25 by the twilight of his administration after much furore. His increases were notably driven by the conditions set by economic reforms advanced by Bretton Woods institutions to which Nigeria had subscribed. From that time onwards, different governments spearheaded the fuel price increases, all mainly under the theme of removing subsidies. Organized labour fiercely resisted them at varying points, as seen under the Obasanjo and Goodluck Jonathan administrations. These two contrasting standpoints led to the perpetuation of an arrangement that many economists attest was a positive leech on the purses of the Nigerian state. The need to subsidise in the first place was driven by the import dependency of what is, antithetically, one of the world’s largest crude producers. Lacking a functional refining capacity, the country relies on a round-tripping structure that sees oil exported raw and bought back as finished products for the local markets. The four state-owned refineries in Port Harcourt, Kaduna, and Warri lie moribund in the wake of Nigeria’s importation of nearly a hundred per cent of its refined product needs. To make matters worse, subsidy has not been the sole culprit in gulping up Nigeria’s scarce resources; its unproductive refining facilities have, too. Two thousand twenty estimates suggest that $25 billion has been expended on the four refineries in 25 years, with figures computed by the national assembly last year placing this at N11.35 trillion since 2010.

Such outrageous sums certainly demand that value be given and accountability be demonstrated. However, the national petroleum company has repeatedly reneged on its promises in recent years. On different occasions, Nigerians have been taken on a joyride by the abject dishonesty of state officials on the actual, realistic condition of these assets. December 2023 mainly saw the state curate a buffet of falsehood steeped in technical jargon to sway the emotions of long-suffering Nigerians. Debates about the implications of “mechanical completion” occupied the minds of many as the NNPC broadcast videos suggesting to the uninitiated masses that work on the Port Harcourt refinery was at an advanced stage. Nine months later, the rhetoric persists. Yet, mysterious as the affair has been, experts have posited that Nigeria’s refineries, while potentially one of Africa’s largest if fully utilized, are marred by myriad problems, top among which are dilapidated infrastructure made worse by decades of neglect. In the absence of functional refineries, product importation becomes the following line of action.

Given that this regime is vulnerable to the caprices of the international market, such as those witnessed in the 1970s, upticks in the prices of crude translate to higher subsidy commitments by the Nigerian government. For this reason, the energy crisis triggered by the Russia-Ukraine conflict forced Nigeria to pay an even higher subsidy bill, running into trillions of scarce naira. With increased local consumption also comes a jump in subsidy payments.

Analyses in past years have shown that the country’s regulatory habit towards pump prices has cost it dearly in terms of opportunities to develop human capital and invest in other sectors of the economy. In 2022, subsidy payments running into N4.3 trillion exceeded total healthcare, education and infrastructure funding by an excess of 800 billion naira, according to a PWC report. This subsisted despite the deregulation of kerosene and diesel, leaving both to control market forces. Contributing factors to the high level of subsidy include false entries to import petroleum without procuring the product and diversion of refined crude to the country’s neighbours in acts of arbitrage. Consequently, the expectation is that onshoring refining would prevent exposure to the downsides of importation, freeing up revenue and reducing the debt taken to fund subsidies. Neither of these would be possible without consensus from labour unions, which reflect a national sentiment that cheap fuel is a fundamental right. With government commitment to upscaling living conditions of the citizenry being next to non-existent, the most tangible way for ordinary Nigerians to access social benefits would be the black gold. Yet, paradoxically, the state is, for the same reason, handicapped from operating optimally. It is against this backdrop that the Dangote Refinery, globally acclaimed for its magnitude, appears to promise some redemption from the incompetence of the Nigerian state. With approximately $20 billion sunken into the Lekki Free Trade Zone grounds and a 650,000 bpd-capacity refinery stemming from it, it appeared to be the magic bullet to solving all our supply woes.

Not only is it right on home soil, but it would also save the government the headache of explaining over and over the mechanics of fuel pricing to a restive audience. Since what was most certainly a politicized inauguration in the final days of the Buhari leadership, the refinery has been able to do anything but relieve the burdens of the Nigerian people. In the last few months, it has appeared that both the complex and its regulators have been intent on displaying their public opinion manipulation talents in full glory. From accusations of monopoly and substandard quality to debates over supply-side challenges, the end feels distant for observers of this saga. So that we might avoid the pitfall of emotional illogic, we must understand the stances taken by either side. For Dangote, the nature of the oil business has its obstinate imperatives. He can compensate for the government’s failure to meet supply needs by importing from afield, but he cannot work the magic of reducing fuel prices unless he wishes to do so at his peril. On the NNPCL’s side, the case is a culmination of the problems it has contended with for decades now. It cannot simply guarantee a steady of crude to Lekki when its lines are consistently sabotaged by disgruntled locals in the Niger Delta. Neither can it compel producers to sell crude when the entire principle of sale and purchase depends on choice – and the provisions of the legislation.

Dangote is first a businessman and, despite all his theatrics, must equally be seen as such. He has entered the arena of public opinion and swayed people to his side on what is a just cause. Still, he is also careful not to offend the interests of the masses, his ordinary but numerically capable allies. Thus, it is fair to join in the protests when top officials in the NMDPRA and NUPRC cannot seem to dedicate their jaws to positive speech concerning the project; it is also fair to ponder why NNPC is failing to meet its payment obligations to international suppliers despite a range of searing policies not least of which is the purported removal of subsidy. However, one can suspect deception when the CEO of the largest privately run refinery markets his fuel as being of top quality because of its pristine nature and plays a calculative back and forth in its public relations by doing everything but declaring its prices; it stops being fair. Just N800!

Interestingly, the victimhood embodied by the refinery was conducted while publicizing claims of marketers defying logic by patronizing more expensive international suppliers only for their prices to wind up more costly than anticipated. To be fair, the company has few choices given the purchase of its stocks from overseas. If it were to sell any cheaper, it would potentially invite the fraternal twin of the word’ profit.’ If it were also to adopt the naira as its currency of trade, it would expose itself to the uncertainties of a weak tender, making losses an ever-present risk.

So, in contrast to messy public feuds that we have seen play out, he must sell abroad if Nigerians will not buy and do business in dollars, a currency that has so far been responsible for many of the woes of ordinary citizens – except of course, the government develops frameworks like the naira-for-crude agreement. As these narratives unfold, one thing that must remain apex in the minds of all of us is the ongoing hardship. For the families who have now had to withdraw their children to schools within trekkable distance, forgo simple nutritional indulgences due to inflation, hike some or the entirety of their route to work daily, or pack up their businesses due to financial loss, these persistent twists by the elites are all just drama – one that they can neither afford nor enjoy the liberty to understand.

Could it be “Just for the masses”?

Toyin Falola, a professor of History, University Distinguished Teaching Professor, and Jacob and Frances Sanger Mossiker Chair in the Humanities at The University of Texas at Austin, is the Bobapitan of Ibadanland

The article was first published by Premium Times.

Related Articles

Back to top button