EXPOSED: Jonathan Plans To Raise Petrol Price After 2015 Election

jonathan diezani“Nigeria….Although the government campaigned vigorously for the removal of the subsidies, the measure was still highly controversial when it went into effect. The backlash has been predicted. The public communication campaign lasted only six months, and there was no broad popular consultation.” -IMF African Department paper 13/02: Energy Subsidy Reform in Sub-Saharan Africa: Experiences and Lessons. Trevor Alleyne et al, April 18, 2013.

“When we go on this strike; what if the NLC backs down and compromises along the way…..I asked them. Excuse me. Where is Plan B?. What is Plan B if they back out? Everybody was so convinced that this can never happen. Then, it happened. There was no Plan B…” -Femi Kuti. On the January 2012 Subsidy Struggles. Interview with Sahara Reporters. N.Y. Jan 13, 2013.

The Federal Government of Nigeria (FGN) plans to raise current petroleum products prices after the 2015 election in accordance to an updated IMF subsidy removal strategy. Indonesia successfully implemented the updated IMF strategy and raised PMS prices by 30 % in November 2014 after its national election. Nigeria is next.  On December 2, 2014, petrol prices fell to $1.98/gal ($0.523/litre) in a few petrol stations in Oklahoma and Texas as crude oil prices dropped to $70/bbl. In Nigeria, the Central Bank exchange rate was $168/$ and the PPPRA Expected Open Market Price (EOMP) was N115.1/litre ($0.685/litre). The official FGN price was N97/litre ($0.577/litre) with a declared “subsidy” of N18/litre. The fact that petrol is now cheaper in USA than Nigeria shows us that the EOMP/Official PMS prices in Nigeria are political prices based on European spot market prices and not on Nigerian economic realities.   The industrial take-off and sustainable development of Nigeria presupposes affordable domestic energy inputs driven by production costs plus average refining profit margins. The FGN promotes the continuous underdevelopment of Nigeria by imposing European energy prices on Nigeria’s developing industrial and agrarian structures. The PMS production cost of a litre of petrol in Nigeria is N40/litre and any price above that is a reflection of the power relationship between the Nigerian masses on one hand and the IMF/FGN/Cabal on the other. The current drop in crude oil prices and revenue will force the FGN to impose austerity measures after the 2015 elections. The IMF standard austerity measures are: increasing petroleum products prices; removing subsidies (food, petroleum products, etc); devaluation of the national currency (naira); inflationary monetary policies; reducing the wage bill (firing workers) and decreasing government spending (cutting government programs).  The IMF will demand implementation of these austerity measures as preconditions for its support of Nigeria’s request for loans. We will examine the IMF petroleum subsidy removal strategy and the FGN efforts to implement it in Nigeria since 2013.  In January 2013, the IMF reviewed energy subsidies in 176 countries and reaffirmed its “how to do” energy subsidy removal programs based on detailed case studies of petroleum products subsidy removal programs in 22 nations including Nigeria. (“Energy Subsidy Reform: Lessons and Implications” IMF paper prepared by a staff team led by Benedict Clements, January 2013). The study blamed a lack of information and FGN credibility for the partial success of the 2012 subsidy removal in Nigeria. In April 2013, another IMF team studying energy subsidy removal in Sub-Saharan Africa reached similar conclusions. (“Energy Subsidy Reform in Sub-Saharan Africa: Experiences and Lessons.” IMF African Department paper 13/02 by a staff team led by Trevor Alleyne, April 18, 2013).This study concluded that “in oil exporting countries, the task of removing subsidies has proven even more challenging because it is difficult to convey to the public the rationale for products to be sold at their opportunity cost and not their cost of production”. These conclusions and summaries of many other studies were communicated to the FGN by the IMF during annual bilateral discussions.  Under Article IV of the Articles of Agreement, the IMF holds annual bilateral discussions with its member nations. Every year, an IMF team visits Nigeria, collects relevant data/information and holds numerous meetings with Nigeria’s financial and economic officials (FMF, CBN etc). The team returns to the IMF headquarters and prepares a report for the IMF Board. The IMF Board holds a meeting and sends a summary of the views of IMF directors to the FGN. The FGN responds and implements its economic/financial programs within the broad guidelines of the IMF. This is one of the institutional mechanisms that the IMF uses to control the Nigerian economy. Studying the annual IMF Article IV Consultation Staff Reports on Nigeria since its inception teaches us a lot about neo-colonial imperial institutional economic control of Nigeria.   According to the IMF 2011Article IV Consultation Staff Report on Nigeria, “….President Goodluck Jonathan and his economic team have announced a “Transformation Agenda’ that sets out the economic goals and policies of his administration for 2012-15…….Other Key Fiscal Policy Objectives (i) Remove the fuel subsidy, which cost over 4 percent of GDP in 2011…..” (Appendix 1- Transformation Agenda, “Nigeria: IMF Staff Report for 2011 Article IV Consultation,” IMF Country Report, Feb 2012).  The foundation/backbone of the Transformation Agenda is increasing fuel prices (removing fuel subsidy). Despite assurances from the IMF, subsidy removal has not reduced poverty in Nigeria since 2012. The IMF wrote “…With growth concentrated in the pro-poor, labor-intensive agriculture and trade sectors, the disappointing outcomes in unemployment and poverty reduction are somewhat puzzling.”  ( “Nigeria: IMF Staff Report for 2012 Article IV Consultation .” IMF Country Report, Jan 2013). There is nothing puzzling about increasing energy costs and increasing poverty in a mono economy oil exporting developing nation. By 2014, Nigeria was 152 out of 186 nations on the UN Human Development Index List. The share of working poor (PPP $2 a day) was 79.2%.  Despites these economic realities, the FGN intensified its efforts to implement the updated IMF subsidy removal program.   Since 2012, the FGN has intensified its efforts to organize all sectors of the Nigerian ruling class behind the removal of all “fuel subsidies”in line with IMF/World Bank reviews and recommendations. The SURE-P is the IMF inspired political tool for organizing the Nigerian ruling stakeholders. It represents the largest transfer of cash from the pockets of the Nigerian masses to the bank accounts of the cabal since independence. Under the program, the monies extracted from the Nigerian masses are shared amongst the FGN, the State Governments, the Local Governments, the National Assembly and the Judiciary. SURE-P pays off all the governing institutions of the ruling class. According to SURE-P,  “The total projected subsidy savings per annum is N1.3 trillion, out of which N633 billion accrues to Federal Government, N349 billion to State Governments, N269 billion to Local Governments and N49 billion to Special Transfers to the Judiciary and the National Assembly in compliance with the Appropriation Act.” .  The FGN put the disbursement of its share of SURE-P under the Christopher Kolade Committee. The Kolade Committee is to ensure that SURE-P federal programs such as maternal child health, public works, mass transit, east-West Road, Roads & bridges, railway and secretariat services were successfully executed. The Kolade committee began work with a lot of fanfare. However, it was not long before the contradictions in the sharing formula intensified the disagreement amongst the ruling stakeholders. The State Governments opposed the direct deduction of subsidy funds from the states budgetary allocations at source. They accused the FGN of giving SURE-P contracts to only the supporters and cronies of the Presidency. The FGN accused the State Governments of giving their share of SURE-P funds to the political cronies of the individual state governors through the State Implementation Committee (SIC). The FGN paid the petrol cabal the sum of N1.3 trillion in 2012. When the Presidency requested an additional N161.6 billion for subsidy payment in 2012, the state governors protested vigorously. They took the FGN to Court. The relationships between the FGN and the State Governments became increasingly antagonistic in 2012-13.   On December 8, 2014 the Supreme Court began hearing on the case of the State Governors against the FGN method of deducting “fuel subsidy” funds from oil proceeds before payment into the Federation Account. The State Governors want the Supreme Court to declare the NNPC practice of deducting “fuel subsidy” funds from oil proceeds before payment into the Federation Account unconstitutional. They also want an account of all “fuel subsidy” deduction made from the Federation Account from 2007 to 2014. Given that the Judiciary is a direct recipient of funds from SURE-P and the Supreme Court will materially benefit from any decision that its takes, justice will probably not be served. But then, there is no honor amongst thieves.  Irrespective of the outcome of the case, the FGN plans to use the verdict as one of its building blocks for defending the planned price increase.   On December 18, 2014, the FGN presented a 2015 budget proposal with a 245.53 billion naira subsidy request to the National Assembly. This amounts to 37.37 million litres a day of imported PMS at a N18/litre “subsidy”. It implies no PMS will be produced internally by Nigerian refineries and NNPC will pay nothing into the Federated Accounts for its 445000 barrel per day domestic allocation. The FGN has refused to reduced PMS prices. The FMF declared that “It’s only when our crude oil price for Bonny Light falls below this level ($60 per barrel) that we can now talk about the issue of bringing down any pump price.” The FGN hopes that the Supreme Court decision and the devaluation of the Naira after the 2015 election would help her impose higher international PMS prices on the Nigerian populace. Currently, the IMF is intensifying its pressure on the FGN to increased prices after the 2015 election to the PPPRA Expected Open Market Price (EOMP) of N115.1/litre ($0.685/litre). The Nigerian oil unions and civil society are demanding a reduction in PMS prices.  If we want to stop the FGN from increasing PMS prices to N115/litre after the 2015 election, our demand must be clear, direct and simple. We should demand N65/litre for PMS. Not a kobo more. Furthermore, we should organize  Plan B. We must be prepared for alternative actions if the leadership (union or civil society) capitulates on our demand for N65/litre or are arrested as the struggle unfolds. We should organize Plan C for when the FGN sends the Nigerian Army and Police to take over our streets and democratic spaces in order to force the increased price on us. We must make petrol subsidy the most important issue in the upcoming 2015 election. Each electoral candidate must be forced to take a position on fuel subsidy. The repeated questions for each candidate in the 2015 election must be: Are you for subsidy removal/fuel price increase or are you not? Are you for the N65/litre or are you not? Will you dismantle the corrupt petrol cabal or will you not? Are you for the Nigerian people or are you for the Cabal? Yes or No?. This is our path to victory.

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