By Wole Balogun
S.A Media to VC
An associate Professor of Economics and public affairs analyst, Dr. Omolade Adeleke of the Department of Economics, Federal University Oye-Ekiti (FUOYE) has urged the Federal Government to urgently privatize all refineries, give licenses to private individuals interested in refineries and immediately jack up the take-home pay of all workers as a way out of the quagmire caused by the fuel subsidy removal.
Adeleke who is also the Acting Director of FUOYE Centre for Continuing Education gave the solutions during an interview with the Nigerian Television Authority (NTA) Ado-Ekiti recently. The Associate Professor of Economics reviewed the sociology-economic challenges of Nigeria over time and listed solutions to the perennial problems of fuel subsidy removal and others.
He said: “Fuel subsidy is a term synonymous with a reduction in prices of goods and services when certain percentages of the real price have been paid by another entity in the case of oil subsidy to the government. He further described it in economics as a phenomenon to keep maximum price celling working.
According to him, “In Nigerian, we are subsidizing the fuel purchase with N7trilion annually and our budget deficit for the fiscal year is N12 trillion, the implication of this is that we are using more than half of our annual budget deficit to subsidize fuel. I support the call that fuel subsidy must go because it is an organized scam against Nigerians,”.
The Associate Professor, gave his views on how to manage the fuel subsidy removal saying:”
There are ways to manage the removal of fuel subsidies and this is the creation of palliatives and incentives by the government. One of the palliatives is from the supply side which is to make the refineries work.
The turnaround maintenance of both the Warri and Port Harcourt refineries is 75 percent completed. Port Harcourt refinery can produce 210,000 barrels of oil on a daily basis, and Warri can give us 135,000 barrels. Dangote refinery just completed is giving Nigeria 650,000 barrels per day. A barrel will give u about 159 liters of fuel.
The totality of the liters the three mentioned refineries will produce per day will be 153 million liters per day. Our daily consumption according to the NNPC is approximately 66.8 million liters so the implication of fixing both the Warri and Port Harcourt refineries is that we will be having the fuel supply daily in surplus. And in Economics, the surplus supply will reduce the price.
“Other direct palliatives are from the demand side which is the minimum wage increment. And there is also the indirect approach to palliatives which is the provision of infrastructure. We are generating just about 11,000 Megawatts in this country of over 200 million citizens. Still, South Africa with a population of about 60 million people generates between 30 to 50 thousand megawatts of electricity.
To compound the problem for us It is only less than 5000 Mega Watts out of our 11,000 that are even distributed in Nigeria. But if there is an adequate power supply for all manufacturers, it will have a far-reaching effect on production. If the government fixes power today, a lot of things will come into place. An adequate supply of power is more than distributing small palliatives of foodstuffs and all that. If the manufacturers are expending so hugely on the cost of production l, how will the profitability come?
On his take on tackling inflation, Dr. Adeleke advised: “ Currently, the interest rate is 18.5 and by the time it gets to the end users, the banks, it will be about 30 percent. Tell me, which investor would go and borrow money at that particular high-interest rate?
If you don’t have access to production, there will be a scarcity of commodities and prices will keep going up. So, the government should make sure that there is something done to our monetary policy. This is where l have a quarrel with the CBN governor. The CBN governor is only attacking the inflation issue of Nigeria from the monetary policy, he is not looking at the structural perspective. In Economics, we believe that inflation can be curbed either monetarily or structurally.
.“For Nigeria, our own inflation is not monetarily motivated, it is a structural one. There is a low rate of production not excess money in circulation. It is when you believe that there is so much money in circulation that you increase the interest rate so that there would be a decrease in money in circulation. For three consecutive times now he has raised the interest rate and yet inflation has continued to rise. Our own inflation is structural, production is low, there is exchange rate disparities among others and these are structural problems.
“Government should make sure that there is concerted efforts to encourage manufacturers, Small Scale Businesses (SMEs) to get soft loans at cheaper rates and I think this will go a long way to ameliorate the suffering of the people.
“There is a slogan that l like. It says the government has no business in business. Many of the refineries in the U.S. are owned by private individuals and the fuel is in large supply there.
I can remember during former President YarAdua administration, Dangote wanted to buy the PH refinery and Otedola also wanted to buy that of Warri. They have even perfected the transaction but YarAdua came and scattered all. If that has been done then, we wouldn’t have been in this mess today because there is no way Danogte will allow any saboteurs to short-change him because he wants to make a profit. But for the government, you know it is business as usual.
“ I am an advocate of total privatization of the refineries. All the money we have expended on the refineries has gone to waste. Many contracts are awarded and nothing is done. Today, the Port Harcourt refineries have not produced anything. They are working far below the capacity of the facility built.
“On gas, if we want to properly utilize our gas resources all our refineries have to be privatized and there must be licenses for all other modular refineries. Let people come in . By the time they flood the market with refined petroleum products, automatically the resources of the government will improve, prices will come down and all will be okay. The government is saying we are subsidizing PMS for our neighboring countries because of the porous borders which is aiding smuggling. Whose duty is that?. At this juncture, to bring competition to the market and promote efficiency there must be total privatization of our refineries, “he advised.
