August 19, 2018

Cheap petrol is about to become history – Tunde Gboyega

Cheap petrol is about to become history – Tunde Gboyega

May rise to N88.00/litre

Just when we thought we had said bye-bye to petrol subsidy and the 2.86trillion spent on fuel subsidy since 2012 – its back… not necessarily with a bang… but back all the same!

According to the Petroleum Products Pricing Regulatory Authority (PPPRA) template, the Expected Open Market Price (EOMP) as at April 2, 2016 is N92.34. That’s a N5.84 differential (subsidy) to the retail pump price of N86.50. Now if we estimate Nigeria’s daily consumption of petrol to be about 34m litres – that means we’ve started subsiding petrol to the tune of N198.56m daily! This would come to a yearly subsidy of N72.474Billion… na waa ooo

As large as N72.474 billion is… in the former scheme of things it would come to a less than a tenth of the over N737billion that was spent on subsidy last year. Fortunately for us, the Minister of State for Petroleum had earlier indicated that with the price modulation of the PPPRA template the EOMP should range between N87.00 – 97.00 and not greater. This means even at an EOMP of N97.00 at a current retail prices of N86.50; daily petrol subsidy would be N357m and 130.31Billion yearly… that’s N15billion more than the entire personnel cost of the National Assembly in the 2016 budget.

Thankfully, the current government has realised  the multiplier effect of petrol subsidy on the plight of the masses and the overall economy and has not allowed/will not allow the differential to balloon out of hand. We are already subsidising the dollar (Official = N197; Unofficial N320) by about N123/per dollar for each official transaction … so do we really need to bring subsidy back?… I don’t think so.

 

N58Billion Electricity Bill owed by MDAs

According to the Association of Nigerian Electricity Distributors (ANED) spokesman, Barrister Sunday Oduntan, a total of N58billion is being owed to the 11 Distribution companies (DISCOs) as at December 2015; this figure has purportedly risen to N60billion as at Feb 2016.

The military is the largest debtor with about N15.1billion outstanding in December 2015; a breakdown of the figures currently owed to each of the eight DISCOs by the Military is given below

DISCO Amounted Owed (N’ millions )
1 Kaduna DISCO 6,600
2 Benin DISCO 2,300
3 Jos DISCO 2,000
4 Eko DISCO 1,800
5 Ikeja DISCO 1,600
6 Port-Harcourt DISCO 1,300
7 Yola DISCO 435
8. Kano DISCO 301
TOTAL N16,336

 

We should remember that Ibadan, Enugu and Abuja are yet to submit their full-year figures for 2015, so the N58billion outstanding is projected to rise and so is the debt owed by the Military. The remainder of the debt is owed by the 774 Local Governments, police and paramilitary barracks in the country.

The major issue for the DISCOs is how to pursue this debt recovery drive with the involvement of the Federal Government. I honestly do not foresee the DISCOs being able to enforce collection from the Military on their own… I might not know much… but I know never to argue with a man that has a gun! I would advise a scenario where the outstanding debts are deducted from source based on Government allocations.

The other challenge I foresee with the collection of the outstanding debt from the Military is this: total overhead for the Ministry of Defence in the 2016 budget is N23.61billion – I seriously doubt the military would use 70% of their total overhead on settling electricity debt! Nor would they consider using their capital expenditure allocation of N134.57Billion.  

So this leaves the DISCOs in a penkelemesi (peculiar mess), but if they can agree to structure payment of the outstanding debt in a manner that is a win-win for both parties (installmental payments would probably be ideal) then the DISCOs will be fine.

We should remember that since the DISCOs are mainly owned by private investors, the ability to judiciously utilise and invest monies/debts recovered that would most likely have been previously provided for in their books would not be an issue.

Now if only the military owned a DISCO….

 

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