When we note that Nigeria is an oil-producing country with 2.5 million barrels per day of production, endowed with valuable "sweet" crude (see Table 2), then refining only 12% of our oil would fulfil our local demands. It would also be wise to increase that refining capacity to 20-50% for local consumption expansion and regional and global export purposes.

On that score, Nigeria has three complex oil refineries (in Kaduna, Warri and Port Harcourt (with two complexes)), with a total name-plate capacity of 445,000 barrels per day only, and with theoretically favorable product yields structure (see Tables 3a, 3b and 3c). What that means is that if these refineries could run at only 70% efficiency, they would supply more than our daily needs. Alas, for the past ten years, none of the refineries has ever run above 61% if at all, often running significantly less than half of that figure, and averaging about 30% in those ten years (See Table 4.)

What the above information means is that in order to meet our daily needs, Nigeria has had to import on average 40% of our daily needs for petroleum products, and sometimes as high as 80-90% - which is a huge net drain on our foreign reserves, bearing in mind that we first have to sell and transport the crude abroad, refine it there, transport the refined products back, with freight and insurance charges, port/demurrage costs, etc., all with margin charges as well as hidden transaction (and corruption) costs.
 

Which brings us all to the vexing question of fuel subsidy. Government, defining it as the difference between the landing cost of imported fuel and the government-fixed pump price (for example N141 - N65 = N76 per liter for PMS, and N148.98-N50 = N98.98 for HHK), says it can no longer afford it (at least for PMS), therefore abruptly discontinuing it effective January 1, 2012. (See new PPPRA Table 5 below).

Based on a 76:6 volume ratio of PMS:HHK consumption estimate (see Table 1), and the disclosure that N1.4 trillion (N1,400,000 million) was spent in 2011, that roughly comes to unverified amounts of 16,700 million liters of PMS per year and 1,300 million liters of HHK per year - or about 46 million liters per day of PMS and 3.6 million liters per day of HHK. If it is the often stated consumption of 32 million liters per day of PMS that we were paying for, then that would mean 14 million liters per day of HHK.

SOME NAGGING QUESTIONS

These latest calculations bring to mind four more vexing questions that need to be fully addressed before this pill of fuel subsidy removal can be "sweetened", trust (re-)established between the "governors" and the governed, and confidence built:

1. Were these fuel consumption estimates real or imagined - that is, the PMS (46 million or 32 million liters?) and HHK (3.6 million or 14 million liters?) consumptions ? Or did the subsidy collectors - those 100+ companies of Majors, Petrol Depot Owners and Independent Marketers and Road Construction Companies (see summary in Table 7) - merely quote figures for which the federal government paid up, or were there credible checks on the actual amount of petroleum product delivered?

2. If not, is there a refund possible, particularly from those subsidy collectors who illegally used their HHK allocation as asphalt cutback for road construction? Or will we just allow the manipulators of the system get away with impunity, when they have been identified so publicly, and make the Nigerian masses to suffer the consequences of inflated subsidy now being removed?

3. With PMS price previously set at N65 per liter and HHK at N50 per liter, should we have, as an oil-producing nation, despite being forced by refining incompetence (or sabotage?) to import products, been subtracting these figures from international prices of N141 and N148.98 respectively, or should we not be comparing them with the much less local prices as given for example in Table 6 - between N35 per liter to N65 per liter by some estimates, with the concomitant argument that there is in fact no subsidy? Can we come to some agreement on these figures, as part of the confidence-building measures?

4. why can't we just simply make one or more of our refineries work (as a national emergency commitment) to almost maximum capacity first before phasing out the subsidy removal, preferably on a quarterly basis? Should that not be a major focus of the SURE (Subsidy Reinvestment and Empowerment) program, at least from the federal government angle?

5. why can't we begin to ensure that the fore-gone SURE money - rather than being allocated according to the usual Federal Account Allocation Committee (FAAC) formula - be considered a SPECIAL INTERVENTION Fund at least for the next five years and distributed as shown in Tables 8 and 9, with specifications of 70% for INFRASTRUCTURE and 30% for SOCIAL SAFETY NET? Then we assign SPECIFIC tasks to the various tiers of government based on their best readiness/appropriateness to intervene - rather than having the federal government do EVERYTHING and the lower tiers do NOTHING IN PARTICULAR - and use objective measures (population, area) to allocate the money? Then there would be greater possibility of holding all tiers of government accountable, particularly if furthermore monitoring boards are set up at the federal, state and local government levels - - not just one federal board, as recently announced to be led by Dr. Christopher Kolade - comprised more of civil society members than government officials , which bureaucracy can be paid for by some of the N31.37 billion SURE money currently allocated to "Transfer" . These boards would ensure "adequate oversight, accountability and implementation of the various projects" etc. as suggested in the FGN's SURE program document.

These are questions begging for answers, with those answers blowing in the wind.

Have a Happier New Year.

FIGURE 1: Total Oil Consumption in Nigeria (Omonbude, 2011)

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Table 5: New Petroleum Products Regime in Nigeria

See: http://www.pppra-nigeria.org/

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