President Goodluck Jonathan disregarded a proposal by the former board of the Petroleum Products Pricing Regulatory Agency (PPPRA) to remove petroleum subsidy in phases, a Premium Times investigation has revealed.
The board hadthrough a letter routed through the Minister of Petroleum, Diezani Alison-Madueke, advised the president against a complete deregulation of the downstream sector, multiple sources familiar with the matter told this newspaper.
They warned in the letter that it would bring untold hardship to Nigerians.
But regardless of the advice, the president announced a full deregulation of the downstream sector on January 1.
Consequently, shortly after the announcement, Nigeria witnessed a nationwide strike and huge anti-government protests in varying parts of the country. These reactions almost crushed the economy of the nation.
Premium Times gathered that at the twilight of the former board’s tenure, the former chairman of the ruling People’s Democratic party, Ahmadu Ali, and his team, agreed that a full deregulation was one of the most viable ways of strenghtening the downstream sector and save the country from debt.. But at the end of the board’s deliberation, most of its members established that a phased removal was most suitable for the country.
At its meeting, the board reportedly sent a proposal recommending a gradual removal of subsidy by 25 per cent every six months, till the price of petrol is reduced from over N151 per litre to about N131.
In the proposal reportedly sent to the president through the Minister of Petroleum Resources, Diezani Alison-Madueke, the board also suggested to the government, the need to grant some waivers as incentive to marketers by reducing the port charges for use of the products handling facilities, the cost of demurrage for imported petroleum products.
“By proposing removal of the subsidy in phases as well as granting waivers to marketers, we believed the landing cost of petrol would gradually be reduced from about N151 per litre to about N131 after the final phase,” the former member of the PPPRA board said, without wanting his name mentioned for fear of offending the President.
“With this approach, consumers would have gradually adjusted to the pain of paying for increased cost per litre of petrol from one timeline to another, rather than being saddled in one go the extra burden of increased petrol price they hardly prepared for,” he board suggested in its proposal.
However, a senior presidency official who spoke with Premium Times on the issue, denied knowledge of the said memo. He noted that the president’s action may have been informed by other considerations, including the need to block the loophole in fuel imports through which politicians were exploiting to perpetrate corruption.
“For a long time, we all know that allocation of fuel import licenses has remained the cheapest way for politicians to make easy money,” the official said. “It is an open secret that most of the companies indicted by the National Assembly for failure to deliver on permits to import petroleum products, were fronts of politicians, including some highly placed members of the board, in concert with the minister.”
The official noted that the president may have opted for full deregulation to close the avenue for corruption and to ensure that Nigerians do not to swallow the bitter pill of subsidy removal more than once.
“There is no other way the president could end the corruption associated with fuel importation without closing the source, and there is no way he would deal with the people involved without jeopardizing his political interest,” he said.
On the other hand, a senior official of the PPPRA, who pleaded anonymity, said the argument for a phased removal of subsidy may not have been a beneficial one; considering that it would be difficult to manage the consequences each time the pump price of petrol is adjusted.
“Nigeria is a peculiar country,” he said. “What works in other places may not work in Nigeria. For instance, since a 33 per cent adjustment in the price of petrol in January from N65 per litre to N97, the over 100 per cent inflation it triggered is yet to come down. If the removal of subsidy were to have been phased, the country would still be facing problems.”
He made reference to the rise in the international oil market fundamental since the reduction in petrol price from N141 to N97. Pointing out that as at January 13, 2012, the landing cost for petrol has since risen from $1,095.66 per metric ton, or N130.63 per litre, to about $1,266.32 per ton, or N150.16 per litre today. This he said may perhaps have made nonsense of whatever decision the government would have taken on subsidy.