(Opinion) The crude arithmetic of dishonest petroleum pricing

By Farouk Adejoh-Audu


In January 2012 international crude price had stabilized at $140…Jonathan’s government declared it was removing subsidy and NNPC announced a new pump price of N97 which led to widespread protests code named Occupy NIGERIA.

The protest shut down the country but Lagos, specifically Ojota was the epicentre.The usual activists were on ground. And for the first time it was obvious the vocal community was parting ways with the Jonathan goverment they helped birthed right from when their agitations forced the hands of the National Assembly into invoking the “Doctrine of Necessity” to the 2011 Elections that officially enthroned him as president.

Buhari up to that point a serially defeated presidential contestant quickly cashed in on the nationwide protest and declared that government’s claim of removing subsidy as dishonest because, as he fiercely argued, there wasn’t any subsidy at the then prevailing price of N65 pump price to be removed.

“Anybody who says he’s subsidizing anything is a fraud “
Buhari said. (https://youtu.be/y7nNWw_lXDk)

But the government of the day sustained the new price regime after reducing the initial price from N97 to N87 naira.

To show honesty of purpose the SURE-P Fund was established to warehouse the difference of between what would have been paid as subsidy and the pump price to be used for infrastructure mainly in the transport sector. Monthly this SURE-P fund was paid to the three tiers of government and the fund was sustained all through until the governed was kicked out in the 2015 Election.

By 2016, the international price of crude had been on a steady decline averaging at about $50 or even less. At times coming as low as $20 per barrel (pb). That was when the present goverment of the man who claimed there wasn’t any subsidy to be removed at a pump price of N65 against international crude price of $140 pb now came to announce they were removing subsidy and instantly announced a pump price of N145!

No protests. The vocal activist community retreated. The NLC called for industrial action and demonstrations, but both flopped monumentally. The politically correct mantra and answer to the bewildering volte face was : ” I Stand With Buhari “

This week, the government has announced a new price regime of petroleum products and the action is again being defended as “removal of subsidy” and “deregulation”. It is explained that because the international price of crude had risen again there was a need to mark up prices to conform with the international price. Beside, goverment they said, had totally deregulated thus the pricing is at the mercy and pleasure of the dealers and marketers.

I guess the “I stand with Buhari” crowd have lapped up all these and they are aggressively pushing the narrative of the advantages of deregulation and removal of subsidy. Good, but there are begging questions of simple arithmetic.

If at international crude price of $140 pb a pump price of N87 has nothing to do with the removal of a “non-existent” subsidy but dishonesty and fraud on the part of the former government how come N162 pump price from a crude price of $40-$45 reflects genuine subsidy removal and deregulation?

And if at N87 pump price from $140 the previous government made savings, infact profit to share SURE-P funds across the tiers of government how do we explain the regime of N162 pump price from $40 pb as deregulating?

A simple arithmetic will indicate that if product sold at N87 per litre at crude price of $140 at between $40 -$45 the price should be at about N27. 20 to N27.36. But if we decide to factor in the then exchange rate and today’s exchange rate which is about 120% increase against the naira, it should fetch a maximum pump price of N65. 66.

The above calculations is using the Jonathan template of N87 against $140pb with excess funds redistributed as SURE-P.

Now let’s imagine the Buhari “no subsidy at N65 from $140”. Using the current $40-$45 pb x120% currency differential will fetch a maximum of N23.14.

I do not pretend to be an economist or mathematician or even “arithmetician” so I will gladly welcome any logical presentation that will repudiate this layman analysis using the same stat or if it can be proven that there are better and more accurate data than the ones available to the public which I have used here.

I’m waiting.

▪︎ Mr. Adejoh-Audu, a former journalist, lives in Abuja and sent this material via WhatsApp