Nigerian Fuel Subsidy, Price Increase by IMF Modulation
By Izielen Agbon
Nigerian Guardian
January 4, 2016 4:31 am
FUEL“Hide nothing from the masses of our people. Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures…Claim no easy victories.”– Amilcar Cabral (Unity and struggles)
THE new Fuel Subsidy Removal or Fuel Price Increase by Price Modulation is an updated IMF strategy aimed at imposing fuel price deregulation on the Nigerian masses. The updated IMF strategy called for using the present low price regime to remove fuel subsidy and deregulate fuel prices. The strategy recommended an automatic price change mechanism that changes price slowly. Price modulation means that government will ensure initial slow price increases by regulating the components of fuel price such as taxes, freight, margins, transport, storage and bridging. The slow fuel price increase will reduce immediate mobilisation and opposition. There will be no direct government regulation of fuel prices. Rather, the marketers and traders will fix the final fuel price. Price modulation fixes the bottom commodity price in a market by tweaking price components. PPPRA will fix the minimum fuel price and the fuel cabal/marketers can sell at whatever price the customer will pay. The Nigerian fuel market is a corrupt oligopoly. The increase in fuel prices will have oligopolistic limits. Price modulation ignores corrupt practices and allows the fuel cabal to pass the cost of corruption to the masses.
THE new Fuel Subsidy Removal or Fuel Price Increase by Price Modulation is an updated IMF strategy aimed at imposing fuel price deregulation on the Nigerian masses. The updated IMF strategy called for using the present low price regime to remove fuel subsidy and deregulate fuel prices. The strategy recommended an automatic price change mechanism that changes price slowly. Price modulation means that government will ensure initial slow price increases by regulating the components of fuel price such as taxes, freight, margins, transport, storage and bridging. The slow fuel price increase will reduce immediate mobilisation and opposition. There will be no direct government regulation of fuel prices. Rather, the marketers and traders will fix the final fuel price. Price modulation fixes the bottom commodity price in a market by tweaking price components. PPPRA will fix the minimum fuel price and the fuel cabal/marketers can sell at whatever price the customer will pay. The Nigerian fuel market is a corrupt oligopoly. The increase in fuel prices will have oligopolistic limits. Price modulation ignores corrupt practices and allows the fuel cabal to pass the cost of corruption to the masses.
In several meetings held in Abuja and Lagos on December 1-5, 2014, IMF staff members explained the updated strategy to FGN officials (IMF Country Report No. 15/84, Nigeria 2014 Article IV Consultation – Staff Report, Press Release and Statement by the Executive Director of Nigeria, February 2015). The report of these meetings stated: “Lower oil prices provide an opportunity to phase out fuel subsidies. The recent drop in crude oil prices (and lower petrol and kerosene prices) could facilitate the completion of the subsidy reform, which started in 2012. Staff recommends introducing an independent price-setting mechanism to smoothly pass through international price changes to domestic prices and gradually eliminate fuel subsidies….” The report indicated that the FGN accepted the updated strategy,” Authorities’ views: The authorities expressed their commitment to subsidy reform, and indicated they were considering options, timing, and modalities of implementing these reforms in light of the decline in oil prices.”. Therefore, when we hear the Minister of State for Petroleum Resources talking about “price modulation” and the APC leadership talking about “thoughtful but decisive subsidy phase-out” we should know that this policy is just a simple summary of an updated IMF policy. We may conclude that President Buhuri’s fight against fuel subsidy corruption is over. Fuel subsidy corruption fought back and won. President Buhari’s forces are in retreat and disarray.
One of the critical constraints facing African leaders is that the amount of available resources is smaller than the amount required for the basic needs of the people and the government. Furthermore, a large percent of the limited available resources is lost to corruption, mismanagement and other leakages. If a leader is not careful, he/she will start to mistake the echoes of IMF propaganda chanted repeatedly by his/her advisers as the voices of the people. This is what happened to President Jonathan with fuel price deregulation in January 2012 and this is what is happening to President Buhari with his planned January 2016 fuel price deregulation. The IMF/fuel cabal forces have encircled President Buhari and pushed him to undermine his primal policy of fighting corruption by proclaiming PMS price as N87/litre “for now”. Those two words “for now” was all the IMF/fuel cabal price deregulation forces needed to kill his anti-corruption policy.
Speaking at the 10th memorial anniversary of Bala Usman in December 2015, Bola Ahmed Tinubu, a national APC leader, stated, ”In a perfect world, I wish we could sanitize the subsidy regime and thus continue it. However, I have reached the conclusion that there are too many demons in the system for this hell to be converted into good earth let alone heaven….Let us begin a process of a thoughtful but decisive subsidy phase-out. While this is occurring, we should simultaneously phase in social programmes benefiting the poorest, most vulnerable among us. Programmes such as transportation subsidies, school feeding, improved basic medical care and coverage for the poor, and potable water projects are some of the things that can be done with the funds.”. This sounds like the former Finance Minister, Dr. Ngozi Okojo-Iweala, promoting the IMF fuel price deregulation and SURE-P programmes policy in December 2011. The similarity is because both efforts are rooted in the IMF policy of fuel price deregulation/fuel subsidy removal.
In 2013, the IMF reviewed the lessons from the 2012 struggles against fuel price deregulation in Nigeria (IMF: Energy Subsidy Reform: Lessons and Implication, January 2013). The report outlined six key elements for a successful fuel subsidy removal. On subsidy phase-in and social programmes, the report stated, “Appropriately phased and sequenced price increases…Phasing-in price increases and sequencing them differently across energy products may be desirable. Pace and timing of energy price increases. Too sharp an increase in energy prices can generate intense opposition to reforms, as happened with fuel subsidy reforms in Mauritania in 2008 and Nigeria in 2012. A phased approach to reforms permits both households and enterprises time to adjust, and permits the country time to build credibility by showing that subsidy savings are being put to good use”. So, we can see that the IMF updated fuel subsidy removal strategy is the source of Tinubu’s subsidy phased-out proclamation. Furthermore, Tinubu declared that the demons of corruption in the fuel subsidy system are unbeatable on earth and in heaven. This was an open surrender by the APC; a public proclamation of the superiority of the corrupt fuel cabal forces.
• Dr. Agbon, former ASUU chair, UI Branch, is an oil expert based in Texas, United States.
Nigerian Guardian
January 4, 2016 4:31 am
FUEL“Hide nothing from the masses of our people. Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures…Claim no easy victories.”– Amilcar Cabral (Unity and struggles)
THE new Fuel Subsidy Removal or Fuel Price Increase by Price Modulation is an updated IMF strategy aimed at imposing fuel price deregulation on the Nigerian masses. The updated IMF strategy called for using the present low price regime to remove fuel subsidy and deregulate fuel prices. The strategy recommended an automatic price change mechanism that changes price slowly. Price modulation means that government will ensure initial slow price increases by regulating the components of fuel price such as taxes, freight, margins, transport, storage and bridging. The slow fuel price increase will reduce immediate mobilisation and opposition. There will be no direct government regulation of fuel prices. Rather, the marketers and traders will fix the final fuel price. Price modulation fixes the bottom commodity price in a market by tweaking price components. PPPRA will fix the minimum fuel price and the fuel cabal/marketers can sell at whatever price the customer will pay. The Nigerian fuel market is a corrupt oligopoly. The increase in fuel prices will have oligopolistic limits. Price modulation ignores corrupt practices and allows the fuel cabal to pass the cost of corruption to the masses.
THE new Fuel Subsidy Removal or Fuel Price Increase by Price Modulation is an updated IMF strategy aimed at imposing fuel price deregulation on the Nigerian masses. The updated IMF strategy called for using the present low price regime to remove fuel subsidy and deregulate fuel prices. The strategy recommended an automatic price change mechanism that changes price slowly. Price modulation means that government will ensure initial slow price increases by regulating the components of fuel price such as taxes, freight, margins, transport, storage and bridging. The slow fuel price increase will reduce immediate mobilisation and opposition. There will be no direct government regulation of fuel prices. Rather, the marketers and traders will fix the final fuel price. Price modulation fixes the bottom commodity price in a market by tweaking price components. PPPRA will fix the minimum fuel price and the fuel cabal/marketers can sell at whatever price the customer will pay. The Nigerian fuel market is a corrupt oligopoly. The increase in fuel prices will have oligopolistic limits. Price modulation ignores corrupt practices and allows the fuel cabal to pass the cost of corruption to the masses.
In several meetings held in Abuja and Lagos on December 1-5, 2014, IMF staff members explained the updated strategy to FGN officials (IMF Country Report No. 15/84, Nigeria 2014 Article IV Consultation – Staff Report, Press Release and Statement by the Executive Director of Nigeria, February 2015). The report of these meetings stated: “Lower oil prices provide an opportunity to phase out fuel subsidies. The recent drop in crude oil prices (and lower petrol and kerosene prices) could facilitate the completion of the subsidy reform, which started in 2012. Staff recommends introducing an independent price-setting mechanism to smoothly pass through international price changes to domestic prices and gradually eliminate fuel subsidies….” The report indicated that the FGN accepted the updated strategy,” Authorities’ views: The authorities expressed their commitment to subsidy reform, and indicated they were considering options, timing, and modalities of implementing these reforms in light of the decline in oil prices.”. Therefore, when we hear the Minister of State for Petroleum Resources talking about “price modulation” and the APC leadership talking about “thoughtful but decisive subsidy phase-out” we should know that this policy is just a simple summary of an updated IMF policy. We may conclude that President Buhuri’s fight against fuel subsidy corruption is over. Fuel subsidy corruption fought back and won. President Buhari’s forces are in retreat and disarray.
One of the critical constraints facing African leaders is that the amount of available resources is smaller than the amount required for the basic needs of the people and the government. Furthermore, a large percent of the limited available resources is lost to corruption, mismanagement and other leakages. If a leader is not careful, he/she will start to mistake the echoes of IMF propaganda chanted repeatedly by his/her advisers as the voices of the people. This is what happened to President Jonathan with fuel price deregulation in January 2012 and this is what is happening to President Buhari with his planned January 2016 fuel price deregulation. The IMF/fuel cabal forces have encircled President Buhari and pushed him to undermine his primal policy of fighting corruption by proclaiming PMS price as N87/litre “for now”. Those two words “for now” was all the IMF/fuel cabal price deregulation forces needed to kill his anti-corruption policy.
Speaking at the 10th memorial anniversary of Bala Usman in December 2015, Bola Ahmed Tinubu, a national APC leader, stated, ”In a perfect world, I wish we could sanitize the subsidy regime and thus continue it. However, I have reached the conclusion that there are too many demons in the system for this hell to be converted into good earth let alone heaven….Let us begin a process of a thoughtful but decisive subsidy phase-out. While this is occurring, we should simultaneously phase in social programmes benefiting the poorest, most vulnerable among us. Programmes such as transportation subsidies, school feeding, improved basic medical care and coverage for the poor, and potable water projects are some of the things that can be done with the funds.”. This sounds like the former Finance Minister, Dr. Ngozi Okojo-Iweala, promoting the IMF fuel price deregulation and SURE-P programmes policy in December 2011. The similarity is because both efforts are rooted in the IMF policy of fuel price deregulation/fuel subsidy removal.
In 2013, the IMF reviewed the lessons from the 2012 struggles against fuel price deregulation in Nigeria (IMF: Energy Subsidy Reform: Lessons and Implication, January 2013). The report outlined six key elements for a successful fuel subsidy removal. On subsidy phase-in and social programmes, the report stated, “Appropriately phased and sequenced price increases…Phasing-in price increases and sequencing them differently across energy products may be desirable. Pace and timing of energy price increases. Too sharp an increase in energy prices can generate intense opposition to reforms, as happened with fuel subsidy reforms in Mauritania in 2008 and Nigeria in 2012. A phased approach to reforms permits both households and enterprises time to adjust, and permits the country time to build credibility by showing that subsidy savings are being put to good use”. So, we can see that the IMF updated fuel subsidy removal strategy is the source of Tinubu’s subsidy phased-out proclamation. Furthermore, Tinubu declared that the demons of corruption in the fuel subsidy system are unbeatable on earth and in heaven. This was an open surrender by the APC; a public proclamation of the superiority of the corrupt fuel cabal forces.
• Dr. Agbon, former ASUU chair, UI Branch, is an oil expert based in Texas, United States.
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