FG, labour face-off worsens crisis of PMS deregulation in penultimate election year

THE Federal Government’s current face-off with the Nigeria Labour Congress (NLC) will likely worsen the crisis of full deregulation of the petroleum downstream sector, analysts have said.

The Federal Government, in 2021, signed the much-awaited Petroleum Industry Act, which has prepared the legal template for the full deregulation of the petroleum downstream sector.

Following this development, the government has set up a committee to oversee the transition to a deregulated downstream market.

However, current negotiation with labour, which is currently deadlocked, could see workers embark on an industrial action which they had threatened earlier.


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“Pursuant to its rejection and resistance of further increase in the price of petrol, to organise protest rallies in the 36 states of the Federation on January 27,2022 which would culminate in the submission of protest letters to all the 36 state governors, ” NLC President Ayuba Wabba said in the Communique issued after labour union’s most recent National Executive Council meeting.

The labour union further disclosed in the communique that its planned January 26 state rallies would be followed by a national protest on February 1, 2022.

Nigeria has shifted the goal post for the subsidy removal severally.

The face-off between the government and the labour will put the country in a dilemma, making deregulation more difficult and sustenance of subsidy much harder, analysts say.

“We really missed the opportunity to remove the fuel subsidy in 2012.The economic indices in 2012 were slightly better off than what we have today.

“If you remove fuel subsidy today, it will spike inflation, and purchasing power of many household is currently weak,” Associate Consultant to the British Department of International Development and a development economist  Celestine Okeke told The ICIR.

“Despite all these concerns, we must do away with subsidy. This is a penultimate election year, I doubt whether the government would have the balls to remove it, but President Buhari is someone you cannot predict. Let’s watch and see.”

Professor of Financial Economics at the Department of Economics of University of Lagos Ndubuisi Nwokoma, who also spoke in a monitored broadcast on Arise Television, expressed doubts that the government could enforce full deregulation in a penultimate election year.

He noted that the best bet for the government was to ensure the full deregulation in phases in order not to heat up the already weak economy.

Meanwhile, the government-owned oil corporation, the Nigerian National Petroleum Corporation (NNPC), said over N1 trillion was spent on subsidy payments in the first 11 months of 2021.

Those knowledgeable about the sector have also, on numerous occasions, expressed worry over why the government has not been able to deal with the subsidy removal once and for all.

Former Central Bank of Nigeria’s Governor Sanusi Lamido Sanusi had described subsidy as a scam, regretting the protest that halted its planned removal 10 years ago when former President Goodluck Jonathan was in power.

“Oil price goes up, oil-producing countries are happy. However, in Nigeria, oil price goes up, it doesn’t favour Nigerian economy because of subsidy payment,” he said.

“We have this scheme called ‘subsidy,’ which is a scam. Hence everything that practically comes in goes back out to import of petroleum products and payment of subsidy because our refineries are not working and we rely on imports hugely.”

A higher oil price is a double-edged sword for Nigeria, which, on the one hand, hopes for elevated oil prices to be able to implement its budget and, on the other hand, spends more to maintain an expensive subsidy regime when the oil price goes up.

Due to this concern, analysts are worried that as oil price continues to surge, with Brent sold for $85.04 a barrel on Wednesday and the United States West Texas Intermediate crude  on $82.9, Nigeria may not derive benefits from them.

Analysts say the government may pay over $4.5 billion to subsidise fuel for its citizenry in 2022 in view of oil price projection of $100 per barrel.

Oil Sector Governance Expert Henry Ademola Adigun told The ICIR that there must be a push to ensure that the Federal Government comes up with a working guideline that would see a quicker implementation of the PIA.



    “We’re still in the administrative level. We need to get the working template for the PIA so that all these teething problems of subsidy could be holistically addressed.”

    Economist and former Director-General of the Lagos Chamber of Commerce and Industry (LCCI) has urged labour unions to be reasonable and allow the market to determine petroleum prices to cut subsidy corruption and enable even development in the country.

    Meanwhile, the Federal Government says it will take care of petrol subsidy in the first six months of 2022 and no more.

    Minister of Finance Zainab Ahmed disclosed this at a panel session during the ongoing Nigerian Economic Summit (NES#27) in Abuja.

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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