Bye-bye, kerosene subsidy


LIKE a shot from the blues, the Petroleum Products Price Regulatory Agency (PPPRA) announced a new retail price for Household Kerosene (HHK) last week.  As against the old regulated pump price of N50, it announced a new price of N83 per litre. Also, in the new template, the Expected Open Market Price, which represents the landing cost plus total margins for the marketer now stands at N72.28 per litre. For a Federal Government that has hitherto subsidised the product, the new price structure comes with a net gain of N10.72 per litre.

Far beyond merely reflecting the current dynamics in global oil prices, it comes to us as a new dawn that the Federal Government, after its initial dithering, has finally woken up to the need to confront a monster that has not only constituted a needless drain on the treasury but has spawned a complex web of rent seekers.

Before now, the arguments have dwelt on whether or not the Federal Government cannot afford to remove the subsidy on a product that means so much to the poor without risking further impoverishment of the class. We have also heard – and this argument is as familiar as it is persuasive – that the poor majority will simply switch to firewood – a ready alternative fuel – in the event of the price going beyond their reach and with it the risk of further depletion of our forest resources and other associated environmental challenges.

We must admit that some of the fears are as legitimate as others are quite exaggerated. Overall, the narratives would seem to fly in the face of our experiences of unending scarcity of the product and the human toll that it continues to exact, particularly in the last decade. The simple truth is that few Nigerians actually get to buy kerosene at the official rate of N50 per litre, and these are usually residents of state capitals where the Nigerian National Petroleum Corporation (NNPC) service stations are mostly found. And where it is sold, getting to buy is sheer struggle akin to survival of the fittest. As for the rest of the consumers outside the state capitals, they have since learnt to worry more about getting the product than the issue of the so-called regulated price.

It is certainly not hard to decipher why the subsidy has remained a permanent fixture on the fuel price template. What has happened is that corrupt government officials and their allies – the cartel of fuel importers – had over the years, managed to sell the lie to the general public that the subsidy actually benefits them when it is in fact their ready source of unearned wealth.

We recall that then governor, Central Bank of Nigeria, now Emir Muhammadu Sanusi II, actually attempted to put lie to these claims in his 2014 memo to the then President Goodluck Jonathan at the height of the controversies over the alleged missing $20 billion when he noted that: “In dollar terms every vessel of kerosene imported by NNPC with federation money cost about $30m and it was sold at $10m or $11m generating rent of $20m per vessel to the syndicate”.

By his estimates, the loss to the treasury came to $100m per month. That was two years ago when oil sold above $100 a barrel.

Today, the reality is different. With crude prices currently selling at barely a quarter of the 2014 price, the idea of retaining that old regime of subsidy at a time of severely shrunk revenue is quite frankly, unimaginable. Rather than subsidise kerosene, the government will do well to focus on making healthcare affordable, improving the learning environment for our kids, providing electricity and potable water, all of which are ineluctable components of the good life. Those are certainly better ways to spend public funds.