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Labour opposes petrol subsidy removal as analysts back FG’s decision

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THE labour unions are opposing the Federal Government’s decision to remove petrol subsidy, but analysts believe there is no better time to cut the waste and save the Nigerian economy from collapse. 

Deputy President of the Nigerian Labour Congress (NLC) Joe Ajaero,  who spoke in a monitored broadcast on Channels TV on Tuesday, said removal of subsidy would inflict hardship on workers who would bear the high cost of transportation.

Ajaero described the dialogue between the government and labour union as a ‘monologue,’ accusing the government of being the sole dictator of the negotiation.

“Our statement is not ambiguous. The whole idea of subsidy removal is going to create inflation, and if you’re talking about inflation, you’ll look at the issue of revenue, increase in wages, cost of living index, foodstuff, and transportation. This is not how to run an economy if the subsidy removal happens.”

He noted that the government had not had any meaningful dialogue with labour but went ahead to announce a date for subsidy removal.

“That is why Labour viewed the so-called dialogue with the government as a ‘monologue.’ We were meeting, but all of a sudden the government adjourned it  ‘sine die’ and didn’t get back to labour again and went on to announce the N5000 palliative and date for the subsidy removal,” he said.

Labour unions argue that before the subsidy removal, the Nigerian National Petroleum Corporation (NNPC) must fix the country’s refineries in order to cut down on the importation of refined petroleum products into the country. The NNPC currently has four idle refineries, two in Port Harcourt (PHRC), and one each in Kaduna (KRPC) and Warri (WRPC).

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However, since 2019, none of the refineries has been able to refine a drop of fuel, hence the country relies entirely on imports to satisfy demands.

The Federal Government has been subsidising petrol for Nigerians with N1.2 trillion to N2 trillion annually, but analysts say the government is helping the middle-class and the rich who buy petrol at the expense of the poor.

Amid petrol and electricity subsidies, the government has been on a borrowing spree with about 74 per cent of its revenue spent on debt servicing in the first eight months of 2021.

However, an attempt by the government to find a lasting solution through the deregulation of the petroleum downstream sector via the Petroleum Industry Act has witnessed stiff resistance by labour unions in the country.

Although the Nigerian government has shifted the implementation of the subsidy removal after the first half of 2022, there are indications that labour unions across the country are resisting the removal citing a few concerns.

Informed analysts knowledgeable about the economy say that if the government fails to reach a truce with the labour unions, the country may face a deeper economic crisis.

“This is the part that led to the collapse of the Venezuelan economy. It is this subsidy that brought down that economy. Go and check Venezuela economy, and it is an oil-producing country,” Economist and the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE) Muda Yusuf said in a monitored broadcast on Channels Television.

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“I think people that are labour leaders and all of that, I am appealing to them to be a bit more realistic to their position and engage a lot more. We have to think about sustaining this economy. I mean look at the fiscal position of the economy. Look at the amount of debt that we are accumulating and look at the amount of debt service.

“We can have engagement about the cost of governance generally, but that should not allow the continuous bleeding of the economy. The Nigeria Labour Congress said last week that it had listed key issues that should be addressed before the Nigerian National Petroleum Corporation would adjust the pump price of premium motor spirit (petrol).”

Immediate past Chairman of the Society of Petroleum Engineers Joe Nwakwue said the petrol subsidy had become a tumour on the Nigerian economy, arguing that it must be removed for the economy to survive.

He said it made commonsense to remove the subsidy and channel the money to essential needs of the Nigerian populace.

 

 

Recall, the government has at the recent release of the World Bank report last week expressed concern about its inability to sustain the annual trillions in subsidy payment. Also, the International Monetary Fund, IMF express deep worry about its impact on the economy.

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The subsidy, it said serves as a fiscal drain, IMF said is projected to reach NGN 2.6tr, higher than the budgeted expenditure for either education or health. The IMF report also linked the petrol subsidy as a major incentive to Petrol smuggling. “The PMS subsidy is seen as one of the incentives for petrol smuggling to neighbouring countries as smugglers take advantage of arbitrage.

The government aims to cease the subsidy as of H2:22. Following the oil price rally, the landing cost for PMS has considerably risen to NGN 279 per litre as of September, from NGN 216.31 per litre in Apr ’21, albeit the PMS price remains steady at NGN 162-165. As of September ’21, over NGN 800bn (USD 1.95bn) had been spent on petrol subsidy, which was not included in the 2021 budget. Consequently, oil revenue reached only 56.3% of the prorated budget as of August, putting upside risk on the 2021 fiscal deficit, said the report.

An energy economist, Adeola Adenikinju, said, “The maintenance of subsidy has brought us to a level where we have completely mismanaged the downstream sector. “It has had a negative impact on our foreign reserves, exchange rate, government revenue, and the capacity of the Federal Government to perform its responsibilities.

Also, Henry Ademola Adigun, an oil sector governance expert told The ICIR that the government cannot sustain its lies on subsidy, noting that over the years, it has sold lies to people, but cannot sustain the lies any longer.

 

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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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