Presentation to the House of Representatives’ Ad-Hoc Committee Hearing on the Operation of the Subsidy Scheme in the Petroleum Sector.

23^rd January, 2012

Introduction:  The debate on the deregulation of the downstream sector of the petroleum industry has been a long drawn one. In the course of this debate the Nigeria Labour Congress has remained consistent in its contributions. Mr Chairman, let me briefly review the history of this contribution.

NLC Position on Petroleum products’ pricing: Following the agreement reached between the Federal Government and Labour to end the general strike called in June 2000 to protest increases in the prices of petroleum products, a 34 member committee was set up to review “all aspects of petroleum products supply and distribution sector of the Nigerian economy”. At the end of the work of the committee two reports were submitted to government.

These were the Majority Report acceded to by mainly government representatives and representatives of vested interests in the oil industry and the Independent Report submitted by the representatives of labour. One of the major points of departure between the two reports was the differential appreciation and acceptance of the economy-wide effects of petroleum products price increases. We argued then and we continue to argue that because petroleum products are, first and foremost, inputs in the production process of virtually all sectors of the national economy, the impact of increases in their prices needs to be evaluated on the basis of the overall economy and not just the narrow sector of the downstream and government revenues. Unfortunately, the main consideration for the present push for subsidy withdrawal is hinged on the need to bolster government revenues at both the state and federal levels. Our position is that we need to focus on the full cost-benefit implications for the national economy.

Honourable Chairman and Members, we are aware of the existence of only two empirical general equilibrium investigation of the impact of petroleum products’ prices on the Nigerian economy. The first, “Macroeconomic Implications of Higher Energy Prices in Nigeria” by Iwayemi A and A. Adenikinju appeared in the Pacific and Asian Journal of Energy in 1996. The more recent was a study conducted by NISER in 2000, in which model simulation was employed to investigate the differential sectoral impacts of an increase in petroleum products’ prices.

These two studies, particularly the latter, show the contractionary impact of increased petroleum products’ prices on the productive sectors of the economy. The sum total of the sectoral effects clearly demonstrates that there is an overall negative impact, at least in the short run.

These results are further corroborated by direct evidence publicly canvassed by the Manufacturers Association and other operators in the productive sectors of the national economy showing the deleterious impact of increasing energy costs for their operations. These impacts are particularly severe due to the high dependence of industry on privately generated power.

The case of Emanoye Investment Limited, reported in the Vanguard of 6 May 2004 adequately illustrates the problem. The CEO of the company was reported as lamenting the high cost of energy to his company operations, disclosing that the company had spent ₦85.5 million on energy alone in four years.

Other later surveys show that most manufacturing establishments traced their difficulties to rising energy costs which on average accounted for over 30 percent of total operating costs. The nexus between the prices of petroleum products and the energy cost of economic operators is straightforward. Given the crisis in the power sector, virtually all domestic  economic operators depend on generators for their operations. The deregulation of the prices of diesel, in our view, which has resulted in manipulated prices of the product, is largely responsible for the escalation of the costs of large businesses which has led to closures and shut downs of many manufacturing firms, with some relocating to other West African countries.

We need to realise that while diesel is the energy source of the large firms, PMS constitutes the main base of the energy requirements of the small scale firms and the huge informal sector. The image of the hair dresser with a small petrol driven generator is familiar to us all. That same image is replicated for the business centre operator, the small shop operator and so on. The proposed policy of price deregulation based on import-parity pricing will unleash chaos in the informal economy which is today the mainstay of the poor, the vulnerable and all those who cannot find gainful employment in the formal sector.

It is also worth emphasizing that a reform policy based on importation of refined products is inherently destabilizing for the domestic economy. Importation necessarily puts pressure on the exchange rate of the naira. Published data on the users of foreign exchange clearly show that a substantial bulk of foreign exchange demand is for the importation of petroleum products. The pressure on the value of the naira is thus obvious.

Since the exchange rate is one of the two major determinants of the domestic price of petroleum products in an import based reform regime, a destabilizing mechanism becomes automatically a feature of the system.

Sharp Practices and Abuse: In our view the major challenge is how to deal with the sharp practices and abuse in the industry. When the Petroleum Support Fund was introduced in 2006, we went before the Senate Committee hearings to argue that to allow the PPPRA and the NNPC as currently structured to manage the subsidy scheme was a recipe for abuse and corruption.  We had advocated for a lean independent manager of the Fund and the claims process for subsidy. This was based on our conviction that a process where NNPC would import, determine its claim and net off such claims from due payments to the Federation Account was open to abuse.

We agree with government that the cost of the subsidy scheme is too large. However, we had tried to work with government in the past to get to the roots of the abuse of the system. As part of the Governor Yuguda committee set up by late President Yar’Adua, we participated in a technical sub-committee charged with recruiting international auditors to probe the subsidy scheme. It was chaired by Mr. Steve Oronsaye, then Permanent Secretary of the Federal Ministry of Finance. The committee was not allowed to complete its work. The power of the oil cartel or cabal must not be underestimated.

Within the PPPRA board in 2006 for example, representatives of labour and independent marketers raised concern over the practice where the NNPC was supplying the bulk of the diesel under its control to one individual/firm who had no storage facilities and who merely transferred the supply papers to marketers at a mark-up in excess of 55%. Try as we would, the government representatives on the board, particularly NNPC prevented a review of the matter. Remember, Honourable Members that at this time, diesel was already fully deregulated. Deregulation, by itself, does not eliminate corruption and sharp practices! It merely transfers the impact of corruption to the consumers. The sharp practices that have continued in one form or the other in the case of diesel has resulted in domestic prices of the product which are way above what the import-parity price would suggest. In 2008 for example, while a litre of diesel in Nigeria on average sold for 113 US cents, in Ghana it sold for 90 cents, in Togo it sold for 88 cents, Niger 97 cents and Gambia 75 cents. The following table shows diesel per litre prices for several countries of the world. It should be pointed out that in most of these countries the quoted prices are inclusive of domestic tax.

		Retail Price of Diesel (US cents/litre) in 2008
Venezuela	1	India	70	Australia	94	Côte	120	Luxembourg	133
Iran	3	Kazakhstan	72	Chile	95	Congo, DR	121	Belgium	134
Saudi	7	Colombia	73	Paraguay	96	Kosovo	121	Mozambique	137
Libya	12	Gambia	75	Ukraine	96	Montenegro	121	Rwanda	137
Bahrain	13	United	78	Niger	97	Uganda	122	Bulgaria	137
Algeria	20	Honduras	80	Peru	99	Lithuania	122	Croatia	137
Egypt	20	Guatemala	82	China	101	Romania	122	Hungary	138
Brunei	21	Nicaragua	82	Botswana	102	Burundi	123	Finland	139
Kuwait	21	Morocco	83	Portugal	102	Latvia	123	Poland	140
Ecuador	27	Tunisia	84	Benin	103	Sudan	125	Greece	141
Indonesia	42	Jamaica	84	Brazil	103	Cyprus, South	125	Madagascar	143
South Africa	45	Russian	86	Cameroon	104	Senegal	126	Austria	143
Jordan	45	Namibia	88	Zimbabwe	105	Slovenia	126	Czech	145
Bolivia	53	Togo	88	Mali	110	Israel	127	France	145
UAE	53	Ethiopia	89	Armenia	111	Spain	128	Netherlands	145
Mexico	54	Cambodia	89	Macedonia	112	Tanzania	130	Liechtenstein	152
Azerbaijan	56	Gabon	90	Nigeria	113	Estonia	130	Sweden	152
Argentina	58	Ghana	90	Kenya	114	Iceland	131	Switzerland	152
Pakistan	64	Canada	90	Serbia	114	Chad	132	Denmark	154
Panama	68	Japan	90	Uruguay	117	Burkina Faso	133	Germany	156

Government has not shown the commitment or sincerity to fight the corruption and sharp practices.

Reform of the Downstream Sector: We believe there is a genuine need for a reform of the oil industry. In the upstream today, Nigerians know that crude is being stolen. However, to concentrate on the downstream for now, we support a comprehensive reform which will confer the maximisation of benefits of oil on the national economy.

There is need to admit that the existing reforms are not working and that a more comprehensive programme of reform needs to be agreed among all stakeholders. We recommend a reform agenda that will seek to revive domestic refineries, encourage the establishment of new ones across the country and reduce dependence on imports. It is also our contention, that domestic products pricing must not be based on import price parity so as to confer on the domestic economy a competitive advantage based on the resource in which the country is richly endowed.

Our proposal for reform, therefore, involves the following planks:

1.     A revival of domestic refining through existing refineries and promotion of new refineries.

We believe that our domestic refineries must be made to work. Appropriate incentives need to be worked out to attract new investment in refining. While domestic refining by itself is not sufficient to guarantee product price stability, there are clear gains to be derived from domestic refining as opposed to imports.

There are the overall gains in employment and general economic activity.  There are also the obvious savings in freight and insurance costs. In addition to these, domestic supply of products will relieve the destabilizing pressure of import dependence on the exchange rate. It is worth emphasizing that a reform policy based on importation of refined products is inherently destabilizing for the domestic economy. Importation necessarily puts pressure on the exchange rate of the naira. Since the exchange rate is one of the two major determinants of the domestic price of petroleum products in an import based reform regime, a destabilizing mechanism becomes automatically a feature of the system.

2.     A re-institutionalisation of a policy of differential between the price of crude for domestic consumption and for export.

As long as the domestic prices of products continue to be tied to the international price of crude, the crisis will remain. It is in recognition of this that we propose a re-introduction of a modified policy of guaranteed crude price for domestic consumption. Rather than returning to the fixed guaranteed price as earlier operated, we propose a price band within which the price of crude for domestic consumption can fluctuate.

In this regard, we agree with the spirit of the proposal put forward in the Senate Committee on Employment, Labour and Productivity report to the Senate on the 7^th of October 2004. This proposal involves setting “a price modulating band for crude to be processed in Nigeria for domestic consumption”. As for the specific band, we propose the cost of extraction and delivery to the gates of refineries X  as the floor and X+y  as the ceiling, where y is the target inflation rate set by government policy in the current year.  The adoption of this mechanism will ensure a stable price regime that will allow economic actors make plans.

It should be emphasized that the guaranteed price should not be on offer to only NNPC, but to all refiners and to the limit of the crude actually refined for domestic consumption. Given that in the short run, there are no domestic refiners, tenders should be opened for the domestic crude for potential refiners to bid with clear timelines on domestic refining. In the short term, which should not exceed two years, bid winners will be allowed to arrange off-shore contract refining.

3.     Promotion of Competition

The downstream sector as presently constituted is characterised by industry dominance by NNPC and general monopolistic tendencies. Recommendations need to be made on how to open up the sector to competition. We need to design strategies for opening up monopoly assets and infrastructure (such as import receptacles, storage depots and pipelines) to competitors, who must of course pay economic fees.

It needs to be recognised and emphasized that the implicit subsidy implied by the guaranteed crude price scheme need not undermine competition and deregulation. Examples abound the world over where subsidies continue to be provided in deregulated and competitive environments. The agricultural sectors of the economies of the United States and other OECD countries are competitive and deregulated. Yet, agricultural subsidies continue to be provided daily. In like manner, a number of drug subsidy schemes exist in various countries of the world. Yet, the pharmaceutical industry remains deregulated and competitive.

Conclusion: Honourable Chairman and Members, while it is true that the national uprising of the past two weeks was the direct result of the increase in the price of PMS, the issues of corruption and cost of governance became additional rallying points. We appeal to your Committee to address these issues. Nigerians are counting on you to unravel the syndicates of corruption which continue to hold our nation hostage.

Press Statement ARREST THE CARNAGE NOW

January 23, 2012

The Nigeria Labour Congress views with patriotic concern the growing state of insecurity that seem to have engulfed some parts of the country, and calls for far reaching actions from the Federal Government.

Armed groups have been attacking residents of several parts of the North, culminating in the bloodiest of such attacks in Kano where about 250 people were reported to have died as a result of multiple bomb attacks in several locations in the commercial city. This was followed with another attack in Bauchi.

We see in all these attacks a total failure of our security system that has consistently displayed incompetence in securing lives and properties of everyone living in Nigeria.

We have noticed that on all occasions when bombs were detonated, all we hear from security agencies are lamentations about their state of helplessness as well as unfulfilled promises of improvement.

We call on the Federal Government to urgently overhaul the country’s security and intelligence community as well as provide contemporary equipments and manpower that will enable the various agencies improve their competence in handling security challenges, especially as terrorism seems to have taken root in Nigeria.

We however note that what has heightened these challenges are deeply rooted in our government’s failure in combating the country’s socio-economic deficiencies which has led to unemployment, collapse in our education system, collapse of industries as well as other infrastructures. All these have been compounded by the recent increase in the pump price of petrol.

We therefore call on the government at all levels to take urgent steps to address these socio economic challenges.

On behalf of all Nigerian workers, we condole with the families of all those who lost their lives in these unfortunate incidents and also call on government to compensate all the families of the dead as well as take responsibility for the effective treatment of those injured.

We appeal to all Nigerians to see every part of the country as their homes and reject the interpretation in some quarters that these attacks are directed towards ethnic cleansing.

Abdulwahed I.  Omar

President

THE (SCIENTIFIC) DEATH OF JESUS

 

For the next 60 seconds, set aside whatever
you’re doing and take this opportunity! Let’s see if Satan
can stop this.

…  THE
(SCIENTIFIC) DEATH OF JESUS

At the age of 33,
Jesus was condemned to death .

At the time
Crucifixion was the “worst” death. Only the worst
Criminals were condemned to be crucified. Yet it was
even more dreadful for Jesus, unlike
other criminals condemned to death by
Crucifixion Jesus was to be nailed to the
Cross by His hands and feet.

Each nails
Was 6 to 8 inches long.

The nails
were driven into His wrist. Not
Into His palms as is commonly
portrayed. There’s a tendon in the wrist that
Extends to the shoulder. The Roman guards knew
that when the nails were being hammered into the
Wrist that tendon would tear and
Break, forcing Jesus to use His back
Muscles to support him so that He could
Breath.

Both of His feet
were nailed together. Thus He was forced to
Support Himself on the single nail that
impaled His feet to the cross. Jesus could
not support himself with His legs because of the pain
So He was forced to alternate between arching His
Back and using his legs just to continue to
Breath. Imagine the struggle, the pain, the
Suffering, the courage.

Jesus endured this
Reality for over 3 hours.

Yes,
Over 3 hours! Can you imagine this kind of
Suffering? A few minutes before He died,
Jesus stopped bleeding. He was simply pouring water
from his wounds.

From common images
we see wounds to His hands and feet and even the spear wound
To His side… But do we realize His wounds
were actually made in his body. A hammer
driving large nails through the wrist, the feet overlapped
and an even large nail hammered through the arches, then a
Roman guard piercing His side with a spear. But
Before the nails and the spear Jesus was whipped and
beaten. The whipping was so severe that it tore the
Flesh from His body. The beating so horrific that His
Face was torn and his beard ripped from His face. The
Crown of thorns cut deeply into His scalp. Most men
would not have survived this torture.

He had no more blood
to bleed out, only water poured from His
Wounds.
The human adult body contains about 3.5 liters
(just less than a gallon) of blood.

Jesus poured all 3.5
Liters of his blood; He had three nails hammered into His
Members; a crown of thorns on His head and, beyond
That, a Roman soldier who stabbed a spear into His
Chest..

All these without
Mentioning the humiliation He suffered after carrying His own
Cross for almost 2 kilometers, while the crowd spat in his
Face and threw stones (the cross was almost 30 kg of weight,
Only for its higher part, where His hands were
Nailed).

Jesus had
To endure this experience, to open the
Gates of Heaven,
So that you can have free
Access to God.

So that your sins
could be “washed” away. All of them, with no exception!
Don’t ignore this situation.

JESUS
CHRIST DIED FOR YOU!

He died for you! It
Is easy to pass jokes or foolish photos by e-mail, but
When it comes to God, sometimes you feel ashamed to forward
To others because you are worried of what they may think
About you.

God
has plans for you, show all your friends what He experienced
To save you. Now think about this! May God bless your
Life!

60
Seconds with God…

For the next 60
Seconds, set aside what you’re doing and take
this opportunity! Let’s see if Satan can stop
this.

All you have to do
is:

1. Simply
pray for the person who sent this message to
you:

2. Then, send this
Message to people. The more the better.

3. People will
pray for you and you will make that many people pray to God
for other people.

4. Take a
Moment to appreciate the power of God in your life, for
doing what pleases Him.

If you are not
ashamed to do this, please, follow Jesus’ instructions.
He said (Matthew 10:32 & 33): “Everyone therefore
Who acknowledges me before others, I also will acknowledge
before My Father in heaven; but whosoever denies Me
before others, I will deny before my Father in heaven.

PRESS STATEMENT Joint Action Front (JAF)

Joint Action Front (JAF)

10, Afolabi Lesi Street, Anthony-Ilupeju, Lagos

08035068524, 08033347962, E-mail: jnt_action@yahoo.co.uk

 

Tuesday, January 17^th 2012 

PRESS STATEMENT

IG of Police Should Stop Threatening Nigerians with State Violence

THE STRUGGLE FOR REVERSAL OF FUEL PRICE TO N65 MUST CONTINUE!

1.    The Joint Action Front (JAF) - the pro-labour civil society partner in the Labour and Civil Society Coalition (LASCO) condemns the Inspector-General of Police, Mr. Hafiz Ringim for his unguarded utterances of unleashing untold state violence on Nigerians who dare to peacefully protest the wicked imposition of the fuel price of N97.

2.    The uncivilised and provocative statement suggests a premeditated plot by the IGP and his band of trigger-happy cops to not only repress the legitimate expression and freedom of assembly of Nigerians against this cruel anti-poor policies by the insensitive Jonathan presidency; but his malicious intention to criminalise patriots and the fighting organisations of the people such as the Joint Action Front (JAF) with triumphed-up charges of treason and act of subversion.

3.    Nigerians home and abroad and the international community must be told that the Jonathan presidency is already drifting into dictatorship with its recourse to blackmails and frame-up of dissenting voices with treason; but also the brutalisation of peaceful protests across the country between 9^th and 16^th January 2012, which have resulted into executive lawlessness, arrest and threat of it by the Police and security operatives, and the unprovoked and extra-judicial killing of scores of peaceful protesters.

4.    The Federal Government and the IGP must be told that the rights of Nigerians to dissenting views and protest is constitutionally guaranteed and legitimate, and can therefore not be subjected to the dictate or benevolence of a trigger-happy IGP or his puppeteers.

5.    JAF wishes to note that the irresponsibility and failure of Governments at all levels to address the basic needs and aspirations of the majority Nigerians constitute enough grounds for Nigerians to protest not only against the untold hardships arising out of the bad economic and failed policies of a desperate Federal Government; but to struggle for SYSTEM CHANGE.

6.    The IGP and his puppeteers and class of looters and profiteers must be told in clear term that the Joint Action Front (JAF) is a patriotic social movement that is at the heart of Nigerian people and has a history of engagement with the bad policies of Government, in partnership with the Nigeria Labour Congress and Trade Union Congress, that include struggle against perennial hike in fuel prices, wicked policies of privatisation and deregulation, and for a living wage for the Nigerian working people, among several other struggles.

7.    Also, the IGP must be properly informed about the goals of JAF which are well articulated in the open and well circulated in its bulletins across the country. Hence we in JAF are not in any way deterred by the threat of frame-up for treason and subversion charges, which is characteristic of any regime drifting into fascism.

8.    Therefore, JAF demands the unconditional withdrawal of the military occupation of protest venues across the country that include Lagos, Kano, Ibadan, Kano, Port Harcourt, Abuja, etc. The military occupation if not disbanded immediately has implication for executive lawlessness and anarchy.

9.    JAF remains committed to the legitimate demand of the Nigerian people on REVERSAL of FUEL PRICE to N65 and we urge Nigerians to continue the MASS ACTION in the streets and neighbourhoods until the REVERSAL to N65 is achieved. Nigerians must know that the N97 imposition is just a smokescreen, and that prices of fuel will continue to rise as long as the policy of deregulation is in force and life will become more unbearable, hence the imperative need for Nigerians to continue to mobilise and organise for resistance.

·         JAF is focused on the goal of SYSTEM CHANGE which means that Nigerians must struggle to bring about a POLITICAL AND ECONOMIC ORDER that will end the era of Privatisation, Deregulation, looting and exploitation by the corrupt capitalist ruling cabals and ensure that wealth of the country is judiciously applied to benefit the majority working population (formal and informal sectors) and the poor.

Aluta Continua

 

COMRADE ABIODUN AREMU

JAF Secretary

Press Statement WHY LABOUR—FG TALKS STALLED AND STRIKE/PROTESTS CONTINUE MONDAY

 15^th January, 2012

Press Statement

WHY LABOUR—FG TALKS STALLED AND STRIKE/PROTESTS CONTINUE MON

The talks between the Federal Government and Labour represented by the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC)  in Abuja on Saturday 14^th January, 2012  stalled due to differences on the methodology in finding a solution to the crisis.

Labour’s analysis of the situation is that tension is very high in the land following the fuel price increase, the resultant strikes, rallies and street protests and the human causalities that have followed. And thata suspension of the new petrol prices will reduce tension and return the country to normalcy.

We decided to make a plea to President Goodluck Jonathan in the overriding interest of the country to suspend the PMS (petrol) price increases and direct that talks between government and Labour be concluded on the petroleum industry especially at it affects fuel subsidy and pricing within a short time frame.

We made a pledge that once the price increase suspension is announced, Labour and its allies will immediately suspend the strikes, rallies and street protests.

The summary of Labour’s position at the meeting was that talks and consultations were on-going before government aborted them by announcing the 120-220 per cent increase in the price of petrol, and that it is necessary to return to the status quo in order to douse tension, return the country to normalcy and allow for a conducive atmosphere for consultations and talks.

However, Government’s only offer was to reduce the new prices while declining to allow a phased price increase. We think that the government position will not return the country to normalcy. The Labour Movement pledges that whenever and wherever government invites us for talks, we shall be there without any conditionality.   

Objectives of the Strikes and Protests

The Labour Movement once again reiterate that the strikes, rallies and streets protests must be peaceful and that the objective is the reversal of the petrol (PMS) prices to their pre-January 1, 2012 level.  We are therefore not campaigning for ‘Regime Change’

The Labour Movement is wedded to democracy, therefore, anybody or group that wants a change in the political leadership of the country at whatever level, should do so through the ballot box.

The Labour Movement and its Civil Society allies are also saddened by the unprecedented loss of lives and injuries sustained during the indefinite strikes, rallies and streets protests that commenced from Monday January 9, 2012.

We reiterate that those who visit violence on protesters and their masters who gave such evil orders will individually be brought to justice.

We in the Labour Movement have done our duty to our country; we have made tremendous sacrifices including loss of lives; we have carried out the mandate of the Nigerian people; we can do no more.

For the avoidance of any doubt, the indefinite strikes, rallies and protests continue nationwide from Monday 16^th January, 2012.

Owei Lakemfa                                               John Kolawole

Acting General Secretary                             Secretary General

Nigeria Labour Congress                             Trade Union Congres