NNPCL, Dangote Refinery and a livable Nigeria, By Babafemi A. Badejo

On 14 September, I had the privilege of chairing an important Coverage and Governance Discussion board Roundtable on the theme, “Nigeria and the Gas Value Conundrum: Mitigating the Dangers to Macroeconomic Stability.”

This dialog comes when our economic system faces profound challenges associated to gas pricing and its widespread implications. Nigeria’s economic system closely depends on oil and, to a lesser extent, fuel for vitality. Nevertheless, the nation has failed to maximise the advantages of oil wealth as a result of corruption, mismanagement, and overdependence on oil on the expense of different potential avenues for improvement.

The gas worth disaster, particularly after the “Subsidy is Gone” declaration by President Bola Ahmed Tinubu (PBAT), impacts all features of our socio-economic cloth – from inflation and price of dwelling to authorities income, overseas change fee/reserves and financial coverage. On the core of those challenges lies the query: How does Nigeria handle the volatility of worldwide oil costs, contemplating they’re dollar-based whereas mitigating the opposed impacts on the home economic system?

The Roundtable aimed to (i) present historic views on gas subsidy elimination in Nigeria, (ii) tackle salient questions on subsidy elimination, (iii) present knowledgeable evaluation on gas pricing, (iv) set up the nexus between gas worth and market costs (inflation, change charges, rates of interest); (v) talk about the implications of Dangote Refinery on gas worth; (vi) present insights into peer nations; and (vii) advocate guardrails for mitigating the dangers of gas worth hikes to macroeconomic stability.

As a political economist, I felt these aims had been incomplete with out addressing Nigeria’s management deficit and the corruption pandemic, particularly the mismanagement inside the oil sector. As such, I famous these essential factors on the onset of the assembly.

Subsidies

I began by noting that leaders – whether or not politicians, academicians, or journalists – have typically misused the time period “subsidy” to serve their pursuits. Globally, subsidies have been used as a coverage software in agriculture, vitality, and different sectors to cushion the value volatilities residents face. The choice to subsidize relies on society’s various pursuits and energy dynamics.

In 2022, international gas subsidies amounted to about N7 trillion, or 7.1 per cent of worldwide gross home product (GDP), and up by about 18.3 per cent from the earlier yr, in keeping with an IMF working paper revealed in August 2024. China contributed probably the most ($2.2 trillion), adopted by the US ($757 billion), Russia ($421 billion), India ($346 billion) and Japan ($310 billion).

In Nigeria, Femi Falana (SAN) argued that “THE REAL SUBSIDIES ARE NOT FOR THE POOR BUT FOR THE RICH” and listed 22 examples the place authorities actions and inactions amounted to subsidies benefiting the rich whereas inflicting avoidable hardship on the poor. In line with Falana, “Globally, subsidies, whether or not for meals, transportation, vitality or housing, are a part of good governance. So, the problem just isn’t subsidies however who advantages from them. In Nigeria, subsidies are primarily of the wealthy, by the wealthy and for the wealthy”. 

Tinubu, who harshly criticized President Goodluck Jonathan’s 2012 plan to step by step take away gas subsidies, sarcastically, did the identical in 2023, regardless of failing to implement the reforms he beforehand advocated together with the necessity to tackle corruption and enhance infrastructure to keep away from pointless struggling of the folks. 

Gas Costs and Change Charges

Nigeria imports most of its refined petroleum merchandise, making it extremely delicate to modifications in international crude oil costs. The weakening of the Naira in opposition to foreign currency, significantly the USA greenback, has elevated import prices and fueled inflation.

Corruption has exacerbated gas worth inflation. As an example, on Flip Round Upkeep (TAM) of Nigeria’s 4 moribund refineries, billions of {dollars} have been spent with out important manufacturing will increase. A 2023 report by Reuters exhibits that Nigeria spent greater than N11.35 trillion ($25 billion) on fixing three moribund refineries previously 10 years. Corruption in gas distribution, together with over-invoicing and cross-border diversion, worsens the state of affairs.

The interaction between Dangote Refinery, Nigerian Nationwide Petroleum Firm Restricted (NNPCL), and the federal government displays broader tensions. Whereas Dangote’s refinery may cut back refined gas importation, its influence on pricing and the federal government’s subsidy stance stays a essential and unresolved concern. The result could seemingly play a key position in shaping the dynamics in Nigeria’s Oil sector and by extension, the usual of dwelling of Nigerians.

The Panelists

The lead speaker on the Roundtable, Professor of Economics, Muhammad Sagagi, an knowledgeable in commerce and industrialisation coverage, was joined by Dr Ifueko M. Omoigui Okauru, MFR, a former chief at Federal Inland Income Service (FIRS), Mr Kelvin Ayebaefie Emmanuel, an vitality knowledgeable, and Dr Tope Fasua, an economist, former presidential aspirant, and at the moment, a particular adviser to the Nigerian president on financial affairs, within the workplace of the Vice-President. Collectively, they explored how Nigeria can be taught from different nations whereas adapting international methods to native realities.

The standard and experience of the panelists and the final Nigerian taking part viewers, leaves one confused as to why it continues to look as if there’s a lack or limitation when it comes to experience and human sources within the administration of Nigeria’s essential sources below this and a number of the speedy previous administrations. That is additional dumb-founding when positioned in opposition to the background of a President who had thought of the Presidency an age-long ambition with adequate experiences below his belt and greater than sufficient time to arrange for the problem. Extra so after the claims of tremendous gurus from Lagos and the additional time it took to assemble a cupboard whose reforms and insurance policies knowledgeable our present unlivable realities.

Reflections on the Highway Forward: Coverage, Governance, and Financial Stability

The Roundtable concluded with a dedication to discovering sustainable options for gas pricing, change fee floatation, and macroeconomic stability. It was clarified that subsidies are common instruments built-in into social safety plans, however in Nigeria, corruption has turned them into instruments that profit the rich on the expense of nearly all of Nigerians who stay in abject poverty. Elimination of gas subsidies that contact the lives of each Nigerian immediately shouldn’t have been the precedence of the federal government earlier than the cushioning reforms and infrastructure developments that Tinubu argued for in 2012 had been put in place.

The benefit with which the presidency modified the nationwide anthem (a aim the President had been articulating nicely earlier than he got here into workplace) and procured a jumbo presidential airplane in addition to different profligate expenditures in a supplementary budgetary intervention, and the 2024 padded budgets clearly recommend there would have been a approach to curb related corruption and preserve the gas subsidy regime nicely past 29 Might, 2023, if there was the political will. Moreover, the president can independently concern Government Orders to, if he has the desire, reorder the subsidies loved by the wealthy, together with the over-pampered banking sector, to supply various in-flows on authorities funds.

Prof. Sagagi highlighted the deepening financial disaster and the disproportionate influence of subsidy elimination on low-income folks and micro/small companies. Emmanuel and Ifueko echoed these issues, calling for important impact-driven reform on the highest ranges of presidency, significantly inside NNPCL. Fasua took a extra optimistic view, arguing that Nigeria’s 64 years of independence are too brief to conclude that the state of affairs is irreparable.

Prof Sagagi famous very clearly that the problem with the subsidy regime in Nigeria just isn’t a technical drawback, as it’s made to look, however it’s a political one. The lead speaker, with many individuals’ concurrence, unequivocally referred to as on PBAT to assessment the gas subsidy coverage. He referred to as for reforms to guard probably the most weak whereas balancing financial development.

Conclusion

The dialogue emphasised the necessity for complete reforms throughout a number of sectors in Nigeria, underpinned by sturdy political dedication. These reforms should prioritize addressing Nigeria’s management deficit, corruption pandemic, unfavorable exterior dynamics, and failure to construct establishments. To deal with these is to present Nigeria the required probability to maneuver in the direction of improvement. Corruption has change into pervasive, infecting all arms of presidency – the manager, legislative, and judicial branches, together with the civil service and academic establishments; ranges of governance – federal, state, and native; in addition to the three sectors (public, non-public, and social) of society. For emphasis, it’s essential to deal with state and native authorities ranges on the corruption pandemic. It’s much more so vital with direct federal allocations for native governance.

Research have proven that Governors, as an illustration, have been changing federal allocations into overseas foreign money, exacerbating Nigeria’s overseas change points. Corruption additionally permeates the non-public sector, significantly the banking trade, in addition to civil society and spiritual organizations. A widespread mobilization, akin to the battle in opposition to COVID-19, is required to sort out this concern. Sadly, the present authorities has proven little curiosity in combating corruption, as evidenced by its inaction on repossessing previous thefts, reminiscent of these within the Jim Obazee report on the Central Financial institution of Nigeria. Investigations into corrupt practices on the Division of Humanitarian Affairs and different areas stay stagnant.

Public strain should be utilized to power nationwide and subnational governments to behave. A essential space of focus must be revitalizing public refineries to compete with the extremely welcomed Dangote refinery. The NNPCL management has failed to fulfill expectations, and the NNPCL Board must be held accountable. To get well from Nigeria’s financial collapse, the nation should ramp up manufacturing in its refineries and develop industrial ventures, significantly agribusiness.

Lastly, transparency within the pricing of petroleum merchandise is very fascinating within the interactions between the NNPCL and the Dangote refinery. The value at which the Dangote refinery is promoting to NNPCL must be overtly disclosed by the Dangote refinery even when the NNPCL had been to wish to proceed in its opaque methods. If Dangote refinery has the desire to be clear, the NNPCL is just too small to intimidate it. The Dangote refinery is just too huge to fail and should not be allowed to fail Nigerians.

Babafemi A. Badejo, writer of a best-seller on politics in Kenya, was a former Deputy Particular Consultant of the UN Secretary-Normal for Somalia and is at the moment a Authorized Practitioner and Professor of Political Science & Worldwide Relations at Chrisland College, Abeokuta, Nigeria.