If you don’t subsidise, the economy will collapse – Adebayo
Prince Adewole Ebenezer Adebayo was presidential candidate of the Social Democratic Party (SDP) during the last general election. A lawyer, social commentator and critic, Adebayo gave a broad assessment of President Bola Tinubu’s government and its policies, especially on subsidy, in this interview. He not only highlighted some problems and challenges, but preferred solutions. Excerpts […]
Prince Adewole Ebenezer Adebayo was presidential candidate of the Social Democratic Party (SDP) during the last general election. A lawyer, social commentator and critic, Adebayo gave a broad assessment of President Bola Tinubu’s government and its policies, especially on subsidy, in this interview. He not only highlighted some problems and challenges, but preferred solutions. Excerpts below.
What in your view is responsible for this perennial fuel scarcity in the country?
The discussion about the energy sector especially in the petroleum sub-sector of the energy mix. It depends on who is talking because there are many players there. If you are looking at it as a national security priority that you must have sufficient supply of Petroleum products to run your economy, then, you start from the government side. If you are looking at it as a market, that is, demand and supply situation in the market, then, you want to go purely into the economics of petroleum industry all over the world, which means you have to ignore the fact that Nigeria has crude and we are linked to the international petroleum market. Do we import? If we import, how do we pay for the import? Or do we refine locally? If we are going to refine locally, you would have allocated some cost to the naira outside the dollar. So, next is how do you bring the crude into the country? When you refine, how do you distribute to the country? Those are the questions you need to answer no matter where you are on this planet. No matter the abundance of oil in your economy, you must be able to answer this simple question. How do you get distribution into your country? That is the question Nigeria is struggling to answer. I think in the first Republic and the during the military era, we answered them from public sector point of view, which is that it is the responsibility of the government to keep the economy running and you need petroleum products to keep the economy running.
So it is a national security issue and government waded into the sector and created these four refineries. So if we pursue that, then, the question will come as to how come we could not maintain the refineries and build more when the population enlarged? How come we could not revamp the pipeline and storage infrastructure? How we are bridging which was supposed to be a temporary solution to the pipeline. How come bridging became a permanent feature and now we are having tankers running all over the country? And how come we even have next to nothing in refining capacity and we have to import and because we have to import, it is now impacting into our public finance? It is a big question. So it depends on the ideology of a leader.
And my own ideology is that we should continue to treat it as national security, just the way the United States of America is treating it, Russia is treating it, United Kingdom is treating it. If you treat it that way, then you will know that it is the responsibility of government, whether using market rules or policy tools to ensure that petrol is available and reliably delivered to the nearest pump and that it is not busting the budget.
Thought that the dynamics would change with the emergence of Dangote refinery, but from the look of things, that change may be a mirage.
The problem of our politics is that we are equating an industry with a firm. Dangote is one refinery out of many. The fortune of a country cannot rest with one company unless you are doing pre bendanlism or you are doing chronic capitalism. If you are doing proper economic planning , the refinery that Dangote is bringing will just be one of the things you are adding to your energy supply chain. Even if the refinery was working, I am not even sure it’s completed yet, but assuming it is working, I will still give you logistical requirements because the refinery is at the corner of Lagos, so you still have to get it to Sokoto, Zamfara, Benue, Mubi, wherever. So, the problems we have with logistics and transportation in the country, the absence of rail line and all of that will still impact on it. So, the way I will look at it as a policy leader I to give as much encouragement to a Dangote industry but not peculiar to him, but to make a general rule for the entire industry, of fashioning a policy and programme to fit into a particular company, but make a general rule to support the establishment of refineries in Nigeria using clearly laid down policies that anybody who wants to go into that industry will have equal rights like any other person.
I will not politicise a private company’s business because what we must run away from in Nigeria is that you must not privatise the profit and socialise the loss. Meaning, the core centres are given to the tax payers and the profit is given to private player.
Before you mention a Dangote refinery which I believe from my knowledge of the law , does not exist in the law yet. From my last record of regulatory position, they only had permit to construct, and I am not sure they have gone back to the regulators so say that we have finished constructing, come and inspect us as we now need a licence to operate. So any political celebration that was done in commissioning , I think it was done to give credence to government that they were doing some investments. But in terms of operational readiness, you have to give it its own time, unconnected to political agenda. I believe they still have several months before they can come out of the woods and say that they are operational.
The next question we should be asking is what happens to the four refineries owned by the public three of which have been under going turn around maintenance for years since I was a young boy. It may be possible that Port Harcourt or Warri refineries may even have more prospect of coming on stream before any other private comes on stream to have. The energy mix should be done in such a way that the fortune of the whole country is not dependent on what a private entity does. The only role of the government is to make his policy stable so that many players can come into the sector.
Will government continue to run the refineries.
Yes, government will continue to run everything but there are many methods that government use all over the world to run their asset.
We are talking about government concessioning these refineries to private interests.
You can concession the operating and maintenance. My own political philosophy does not permit me to allow you to wholesale carry what belong to the public and give to private people because our experience with privatisation, you give it to entity, they do asset stripping and make money out of the place, they take everything out of it and abandon it. That is not good. We need to change that model. But government things do not mean that the common wealth of the country and give to private people, because on many occasions from my reading and study of oil privatisation effort, many of the people they sold these assets to do not have as much experience as the public sector they took them from. That is why many of these DISCOS can’t perform well. That’s why many of many plants we privatised, they sold the assets and run away with the money ad they could not continue or improve upon what they met on ground.
Talking about how the government is grappling to sustain prices. While it is about N500 in Lagos, it is about N600 something in Abuja, it is about1 N1000 in other parts of the country. However, it is said that the landing cost is about 1300. Yet government says subsidy is over. So why can’t the government leave the landing cost price to reflect the actual price in the market.
It is a structural problem. It is a two dimensional problem and a one dimensional analysis will not get it. When you look at the price of petrol. You are looking at two problems. One is the logistics cost of landing one litre and the arbitrage in the pricing of the naira. That’s why the price went haywire. The government created structural problems in that all they needed to do was to focus on how to get the supply. And the two ways to get the supply is to either import which is what they are doing, buy import in the most efficient and transparent way so that all the corruption associated with importation and over invoicing will be a thing of the past.
To say we shall import for the next 24/48 months and stop importation six months after the refineries have been reliably show they can supply us. But to try to control the price on the streets when the demand is growing but the supply is shrinking If you are going to be disappointing people . Subsidy cannot go away but subsidy can be hiding from one subhead to another. What the present government has done is is to move the subsidy finance outside the budget so that they will not appropriate money for it again in the budget but the dividends which the NNPC is supposed to pay into the federation account , they will use that dividends to fund the subsidy because if you don’t subsidise the economy will collapse. I am not one of those who support the removal of subsidy.
So, we must continue with the subsidy.
Yes, you must continue because of the fact that you have created a structural problem which is that we refused to take a large chunk of our population from the use of petrol to do transportation. We didn’t do investment in rail lines, Maritime highways. We didn’t do investment in transportation generally using CNG so that majority of the people will have no reason to drive. I came from Ikoyi now to your studio. If there was a bus reliably coming from ikoyi to your place, I will not drive. I will just jump into the bus. That is what I would have done in London or New York. You also need to make sure that the refineries are not dead woods. They are not just call centres that are not performing. You need to make sure that the turn around maintenance is done and the racket created around it where every government comes and spends money on it must come to an end. The only problem I see in all these as a petroleum industry adviser is that the people who built refineries, their cost is international. And the currency is weak. So they are trying to work towards a minimum price guaranteed before they can sell in our domestic market. This is where the last administration of President Muhammadu Buhari was trying to manage the situation where by they will merge the market to the industries so they will prep the market by raising the price already so that when they start producing, the price would have been high enough in such a way that government does not have to do domestic subsidies. Even if you stop importing, any private sector that is going to supply refined products into Nigerian market would still have to bear the international cost and if international cost is above the same price, somebody had to make the intervention, unless they work in such a way that the export price is higher than the local price and then bridge it by some incentives.
But the key to having a reliable petroleum price is to have stability of the naira and supply. This can be done if the government is efficient.
If the price of petroleum products is cheaper in all neighbouring countries compared to our pricing here. That means we are the one still subsidizing the countries.
The argument they are making does not make sense. The entire consumption in our neighbouring countries is not up to that of Ibadan (Oyo State capital ) alone. Technically speaking, 15% export should not break the bank for you. Secondly, petroleum is so feasible that unless you let them go, they cannot go. Of all borders in Nigeria, I know at least 21 of them. How many of the borders are so motorable that you can carry petroleum tanker and travel at 80 kilometres per hour? Is it towards Garuwa? Is it towards Idi Iroko? You can mount your borders through aerial surveillance. You can tag every tanker in Nigeria so that we can know which tanker had travelled to where. Government is only using that as excuse to raise the price because the government does not want to have a firm conversation with the people to show that they have had a lot of inefficiency and they need to be serious about it. After all, the minister of petroleum is the president. He cannot say he is sleeping on duty. We should be more serious than this. There is no reason to make that kind of argument because it is laughable with all due respect.
Between the CNG and petroleum, how do we strike a balance because the government is trying to have more vehicular movement on CNG in order to reduce the pressure on petroleum.
If you look at our national gas policy and implement it, liquefied natural gas, compressed gas and all kind of ways by which we can utilise gas, they are all there. What government needs to do is to create a gas market that has incentive. To have converters put on cars which they have been mouthing for a long time. You can first clearly make it an automotive policy that every vehicle you want to have in Nigeria must be capable of using both petroleum and gas alternately. If you go to Kenya, Tanzania and many places, even Ghana they have. Even in Nigeria, we have it at microscopic level. You can have these plants that will generate employment. But you still have to supply the gas and all these gas fields that we have, the pipelines, sometimes are shut down, but if we take care of that sector effectively, we can use CNG and have a three-year plan where we have at least 50% of construction of CNG. That will reduce the cost of reliance on petroleum. We also need to invest in public transportation. Nigeria has not reached a level where every man and woman would have to have a car. We can set up plants, where whether in partnership with people in Brazil or in Asia, by the time you produce 50,000, 100,000 public buses that are on CNG, some of them are even on electric. But there must be a national programme that is devoted to that , that is not political in nature, or not palliative in nature especially at campaign season. By that, we reduce petroleum consumption by 75% in the kufe of one administration.