The deregulation of the downstream arm of the oil and gas sector and the power sector has generated discussion among Nigerians. Assistant Editor CHIKODI OKEREOCHA examines the case for and against this action
CHIEF Toyin Amuzu, a community leader in Ogun State, is livid. He could hardly hold back his anger and frustration over the barrage of increases in the price of essential services including Premium Motor Spirit (PMS), electricity tariff, as well as the upward adjustment in Value Added Tax (VAT), and subscription price by pay-TV operators, among others.
“It is disheartening that this is coming during the COVID-19 pandemic which has disrupted economic activities and taken many people out of jobs with other attendant negative effects,” Amuzu, who is the Okanlomo of Oke-Ijeun, charged.
He lamenting that “The increases will result in an upsurge in costs of goods and services, which in turn, would worsen the biting hardship presently faced by Nigerians who are already impoverished and overburdened.”
Chief Amuzu, who spoke in Abeokuta, the Ogun State capital, said he had earlier called on government at all levels to give succour to Nigerians who are still rattled by the COVID-19 pandemic. He called on the Federal Government to lift the heavy burden on Nigerians by reversing the hikes immediately.
The distraught community leader justified his call for a reversal thus: “The price increases, no doubt, would work against the fight against corruption and insecurity, as there can be no secured society where many people are so poor, finding it difficult to make ends meet.”
But it is doubtful if the call for a reversal by Amuzu and indeed, other Nigerians traumatized by the rising cost of living and its associated hardship and misery will hit the right chord in the ears of the authorities. This is because such upward adjustments in prices appear to have come to stay, going by some of the reasons adduced for the action.
The removal of subsidy, inflation, currency devaluation, rising operational costs and other prevailing economic realities, for instance, service providers across critical sectors such as power, oil and gas, and entertainment, among others, literarily hit the raw nerves of Nigerians when they increased their prices.
In what would go down as perhaps, a season of price increases, Nigerians, still reeling from the double shocks of the Covid-19 pandemic and the plunge in oil prices, woke up to a new tariff regime in the power sector last Tuesday.
Without much ado, the Electricity Distribution Companies (DisCos) jacked up the electricity tariff payable by consumers from the original N22.30 per KWH to between N42.73 per KWH and N55.20 per KWH.
However, the tariff payable by consumers now depends on service availability in homes and offices, the quantity of supply, and the band or group into which a consumer is categorized. These, of course, vary from DisCo to DisCo.
Nigerians were yet to come to terms with the reality of paying more for electricity amid outcry over the declining quality of services when, the following day, Wednesday, September 2, 2020, the Petroleum Products Marketing Company (PPMS) also announced N151.56 as the new ex-deport price of PMS.
PPMC is a subsidiary of the Nigerian Petroleum Corporation (NNPC). And going by its current template, the price of PMS has gone up from its original N148 per litre to N151.56. However, some filling stations now dispense the product at between N162 and N164 per litre.
Even before service providers in the oil & gas and power sectors went for the kill, their counterparts in the Pay-TV segment of the entertainment industry had gone on the rampage, reviewing the prices of their products and services upward.
For instance, largest Pay-TV operator MultiChoice Nigeria announced the implementation of subscription price adjustments by 13 per cent on some of its Digital Satellite TV (DStv) and GOtv packages on August 18, 2020. It came into effect on September 1, 2020.
Consequently, the subscription price for its monthly premium package went up from N16, 200 to N18, 400, which is N2, 200 increase. Compact plus subscribers will now pay N12, 400, up from N10, 925, while compact bouquet subscribers will pay N7, 900, from N6, 975.
The South African-owned operator, however, said the adjustments only affect the Premium, Compact Plus and Compact packages, as lower-priced packages such as Confam, Yanga and Padi retained their normal prices.
Multichoice explained that the increase in fees was in line with the Federal Government’s legislation which increased VAT in January 2020, with implementation effective on February 1, 2020.
“To provide some relief for customers, Multichoice Nigeria has absorbed the cost of an increase in VAT for the past four months, keeping its products and services at the old five per cent VAT. However, this is no longer possible and the mandated 7.5 per cent VAT will be applied accordingly,” the company said.
Second largest Pay-TV operator StarTimes also raised prices of its subscription plans by an average of 22 per cent effective August 1, 2020, with its Brand and Marketing Manager, Viki Liu, also citing increased VAT as well as the foreign exchange rate which has impacted its cost of operation as reasons for the price increase.
“Our business is not exempted from the effect of the naira depreciation affecting all businesses in the country. All of our foreign content is bought in dollars and to continually serve our subscribers the best content, the subscription price has to be reviewed upwards,” Liu explained.
Nigerians scream blue murder
Expectedly, the increase in the price of essential services has not gone down well with Nigerians. For instance, Amuzu described the price hikes as “Anti-people and insensitive to the plight of Nigerians.”
He said: “It is so disturbing that while responsible governments all over the world are giving out succour through tax relief, grants, free electricity and other benefits, the present government has chosen a low time in the lives of Nigerians to further elevate their sufferings.”
According to him, Nigerians provide virtually everything they need, thus the least any responsible government can do is seek to lessen their burden and not add to it. “If protecting the wellbeing of citizens is part of the duties of any good government, our government has failed in this regard,” he stressed.
Lagos lawyer and public affairs analyst Obiora Akabogu could not agree less. He said the government has failed in its duty to enhance the lives of its citizens and protect their interest.
“It is the duty of the government to take measures to stabilise the prices of goods and services. If it were in more civilized countries, the government would have resigned,” he told The Nation.
As far as Akabogu is concerned, there are no justifications for the increases because “the quality of services has been declining; quality of life of the Nigerian worker is on the decline; the average Nigerian worker’s purchasing power has been on the decline, too. I don’t see how the masses will cope with the fact of the crashing value of the naira.”
“Nigeria is heading to nowhere. Yet, they (National Assembly) is incapacitated or at best, compromised,” Akabogu charged, regretting the docility of Nigerians in the face of the untold hardship foisted on them. “Nigerians seem to be happy with the increases otherwise civil society groups and the labour movement would have been blocking the road to Aso Rock, the nation’s seat of power, challenging the increases and demanding for immediate reversal,” he said.
Former Vice President Atiku Abubakar lent his voice to the growing outcry against the increases particularly electricity tariff. His grouse stemmed from the timing of the price adjustment, which, according to him, was wrong.
He said instead of an increment, Nigerians deserved a “stimulus”, especially in the face of COVID-19 pandemic currently ravaging economies across the world. “I reject the increased electricity tariffs. Coming out of the lockdown, Nigerians need a stimulus, not an impetuous disregard for the challenges they face.
“Many Nigerians have not earned an income for months, due to no fault of theirs. This increase is ill-timed and ill-advised,” Atiku said.
ActionAid, a non-governmental organisation in Nigeria, brought the scary situation nearer home when it said Nigeria is dealing with too many increases at the same time, and the increases came at a wrong time when a lot of people have lost their jobs because of COVID-19.
For the Registrar/CEO, The Institute of Business Development, Dr. Paul Ikele, the COVID-19 and the slump in oil prices, which contributed to the increase in the cost of essential services is not surprising because “They are global issues that are not peculiar to Nigeria.”
While admitting that the multiplier effects of the increases are far-reaching and dangerous, Ikele, however, said the nation’s economic managers and planners failed when they could not foresee or forecast the price increases and put measures in place to cushion their effects on the citizenry.
“Our mono-economy is no longer sustainable,” Ikele emphasized, adding that the current crisis is a call for Nigeria to look inwards and take advantage of her rich human and natural resources to reset the economy.
Dr. Ikele recalled, for instance, that before the discovery of crude oil, palm oil, cocoa, textiles and groundnuts, among others, were major export products.
Govt’s response
As things are, the Federal Government’s hands appear tied. Minister of State for Petroleum Resources Timipre Sylva conveyed this sentiment when he said the government had stepped back in terms of price-fixing for petrol. He added that crude oil price, as well as market forces, would continue to determine the cost of PMS.
The minister said the introduction of the deregulation policy had saved Nigeria about N1 trillion, which came after the subsidy was removed and N500 billion mapped out for subsidy payments in the 2020 budget removed.
According to Sylva, Nigeria spends over a trillion naira yearly as subsidy payment. So, the high cost forced the government to allow market forces to determine the prices of the product since the country cannot sustain petrol subsidy payment.
“Government has stopped subsidising petrol at the pump. It will now play its traditional role of protecting consumers from exploitation by ensuring that marketers do not profiteer at the expense of ordinary Nigerians and consumers of the product,” the minister said.
The Federal Government seems to have allies in Manufacturers Association of Nigeria (MAN) and Lagos Chamber of Commerce and Industry (LCCI), which said the fuel price increase was in line with their advocacy in favour of deregulation.
For instance, MAN Acting Director General Mr. Ambrose Oruche told The Nation that the fuel price increase was expected, as the Organised Private Sector (OPS) has long been requesting for full deregulation of the petroleum industry.
While noting that deregulation remains a sure way of opening the floodgate of investments into the sector to grow the economy, Oruche said the era of fuel subsidy breeds corruption, as the subsidy does not get to the intended citizens, but to those he described as “briefcase billionaires.”
The MAN chief said deregulation means that the fixing of prices is no longer in the hand of the government, as market forces now determine the prices of petroleum products.
He, however, pointed out that what government is trying to do with the new fuel price increase is to control the hands of market forces, as “They are now taking the cost of PMS beyond the reach of ordinary Nigerians.”
The LCCI also weighed in on the matter, saying that the development was in line with its persistent advocacy on the need to deregulate the downstream sector of the petroleum industry to allow investors come in and develop the industry and by extension, the economy.
Sound economic argument no doubt, but most consumers have refused to be swayed. For instance, a banker at United Bank for Africa (UBA) in Malam Aminu Kano International Airport (MAKIA), Kano, Mr Oluwole Johnson, kicked his heels in, insisting that “The hardship caused by the increases will affect a lot of people especially those who earn a low income.”
A printer at Beirut road, Kano, Mr. Jilani Usman, corroborated the claim, saying that the hike in tariff should have been delayed till 2021. “The whole thing is wrongly timed because the entire world is just recovering from the COVID-19 blow. Many businesses were shut and so many suffered huge losses.
“So how can you increase tariff now when businesses are just trying to pick up, I think it will only lead to massive inflation,” Usman said.
Labour, civil society spoils for war
Eighty workers’ unions and civil society groups under the umbrella of Alliance on Surviving COVID-19 and Beyond (ASCAB) are said to have concluded arrangements to stage protests across the country this week. They will be protesting against the recent increase in electricity tariff and the petrol price.
Speaking on the planned strike, Femi Falana, a Senior Advocate of Nigeria (SAN), described the hike in electricity tariff and fuel price as an anti-people development. “Other nations are giving cash to their citizens, cancelling rents, but Nigeria is imposing taxes and all other levies on its citizens. We will fight against it,” he said.
Nigeria Labour Congress (NLC) President Ayuba Wabba also said the group would mobilise Nigerian workers to protest the hikes. “NLC seriously frowns at, completely condemns and rejects any plan to inflict further pain on Nigerians at this very time of great economic distress,” he said.
The Federal Competition and Consumer Protection Commission (FCCPC) said it has begun an investigation into competition and possible consumer rights violations by DStv, Gotv, and other Pay Tv service providers in the country.
It remains to be seen whether the planned protests by the labour movement and civil society group, as well as inquest by the consumer protection agency, would force the hands of the services providers to reverse the price increase.