• Personalities
• Voices

Channels

A Letter to Mr. President:

Making Sacrifices for Progress and the Price of Petrol

Dear Mr. President,

I can easier come to terms with necessary sacrifices for progress if:

1. I truly understand the need for the sacrifice.
2. I am involved directly or indirectly in the search for solutions.
3. That new ideas and possibilities have been exhaustively debated and considered with Nigerians.
4. I am convinced there are no less painful alternatives to suggested sacrifice.
5. That the leaders that make the suggestions are honest about their intentions.
6. That the Government is considerate and empathic about decisions that will stress and weaken us.

I was not satisfied with your reasons for the fuel price increase as explained in the news of June 4, 2000. I need to know the real reasons and will welcome some education in this regard. If I am to go by your explanation on said date, my views are as follows:

Fuel pump price must increase because:

1. Government sells crude oil to NNPC at $9/barrel.
2. In the international market, crude oil is sold for $28/barrel.
3. Government therefore looses or subsidizes the product to the tune of $19/barrel.
4. Petrol pump price must increase to discourage smuggling of the product.

However:

1. The marginal cost of producing a barrel of crude oil is unknown.
2. The marginal cost of refining a liter of petrol is unknown.
3. It is therefore unknown if $9/barrel is greater than, equal to or less than the marginal production cost of crude oil.

From above we can infer that:

1. If marginal production cost is more than $9/barrel, then we can justify an increase. The problem then will be how to cushion the strain on Nigerians.
2. If it is equal, then the Government is neither gaining nor loosing anything. An increase therefore may be means for more revenue but will be more difficult to justify.
3. If marginal cost of production is less than $9/barrel, what the Government is referring to as Loss or Subsidy is no loss or subsidy in real terms. It is Opportunity Cost which is the quantum of profit Government could make as against the profit it is actually making.

The reasons stated for the increase appear rather weak which has led me to speculate on possible stronger unspoken reasons such as:

• To curtail fuel smuggling so that there is never scarcity of fuel in Nigeria.
• To assist NNPC while waiting for all refineries to get functional again.
• To improve the quality of life and social welfare of Nigerians.
• To create a conducive environment for foreign investors.
• How best to service, repay, reduce or cancel our external debt.

My views on these are:

To Curtail Smuggling:
As you pointed out, fuel in Cameroon is N75/liter. Smuggling to this place will only become unattractive if our fuel is increased to at least N50/liter and in any case if we increase price, Cameroon's price will simply increase as has happened in the past.

If the problem is smuggling, why not just deal with that. I think if our security network can be made more effective, this problem could reduce.

It might be much better to invest in improving Nigeria's security operatives which will ultimately improve the social wellbeing of Nigerians as against an alternative that causes hardship.

Based on your figures, 25% of Nigerian fuel is lost through smuggling. The naira value of this loss is estimated at N50 billion. If improved security network can achieve a 50% success rate, N25 billion will be saved.

To Assist NNPC:
No Nigerian would want NNPC to die. That is probably why there are never protests on allocations to this body within and outside the budget.

• We know the current budget was prepared on estimated crude oil revenue of $18/barrel.
• We know that the increase in international market price of crude oil to $28/barrel represents a windfall for the Government.

It is confusing that the reason for this windfall is the same for which we are being called upon to make more sacrifice for NNPC's comfort. Meanwhile, fuel prices have never been known to reduce in response to falling crude oil prices.

To Improve Quality of Life & Social Welfare:
United States of America is probably the world's largest capitalist state and they run social security programs that cost billions of dollars.

They also run all sorts of schemes to ensure that every American has access to decent food, shelter, health facility, education, use of basic infrastructure etc.

In Nigeria, no such social security exists.

The aged and young are all reliant on the working age group for survival, putting immerse pressure on this group whose age limit is compelled to keep increasing.

The Government seems to concern itself, albeit inadequately, with those of this group in it's employment, ignoring the fact that they form a minute proportion of the group and indeed the productive populace.

The rest which are the majority are on their own, forced to comb the streets for survival without Government infrastructure to assist their efforts. Yet, they are the ones looking after the old, young, handicap and sick and constantly being called upon to pay higher bills to assist the survival of mismanaged Government establishments and parastatals.

Perhaps if your Government wrote off the N200 billion (opportunity cost) it claims to loose through subsidy as a social security fund for petrol, maybe the foreigners (IMF & others) that pressurize you to remove subsidy will be compelled to accept your difficulties in increasing fuel price.

Let us not forget that these foreigners spend much more than that in their various countries to take care of the helpless and jobless and to ensure decent standard of living for their people.

Sir, the wealth of Nigeria is owned by Nigerians.

The Government are those that Nigerians choose to manage their resources on their behalf. It is patronizing to give the impression that Nigerians are being done a favor by any benefit from their natural resources.

You spoke about the opportunity cost losses to Nigeria but not of the ripple effects of price increase to people and how you propose to cushion the regression that comes with it - which should be the most important consideration.

If one considers this increase alongside the perks of office of public servants, one is inclined to wonder if we are not different Nigerians from those in public offices and that sacrifices are only for the Governed to bear.

What I mean is that the President, the Vice President, his advisers, ministers, legislators etc. do not pay for fuel, food, accommodation, health, electricity, water, telephone etc. from their salary.

We are also aware that provisions have been made for at least the President never again to bear these expenses in his lifetime whether in office or not. Whereas, it is the lot of his fellow Nigerians to keep paying whether or not they are employed and can afford to.

Creating Conducive Environment for Foreign Investors:
Doing this is improving facilities such as electricity, water supply, security, communication network, sanitation, the legal system etc. This I believe your Government intends to do and we know it is not hinged on increased price of fuel according to your budget for this year.

Promises from you have assured us that by the year 2001, most of these problems will be a thing of the past. Furthermore, I believe it will be beneficial to the investor for fuel to be cheap as this will lower his cost of production, consequently making him more competitive abroad.

Debt Servicing, Repayment, Reduction or Cancellation:
This is for me probably the greatest burden on you.

Canvassing for debt reduction or cancellation puts us in a weak position which allows for suggestions such as fuel price increase to enable us pay back.

No responsible Government can neglect to pay it's debt. Just as efforts must be intensified for debt reduction, means by which we can pay must be fully investigated.

We cannot expect an anemic patient to donate blood. We must therefore examine the alternatives we have.

If we were not to increase fuel price, what can we do to raise the amount of money to pay what we owe? This is a challenge to all Nigerians under the supervision of dynamic and forward thinking economists.

If this position was made public, you would be able to choose from an avalanche of proposals that will besiege your abode. It will not be difficult to find honest and dedicated Nigerians to sort out the most brilliant and expedient of these proposals.

For instance, your figures show that 25% of locally supplied fuel goes to the West African Coast. What if the Government is able to supply these Countries directly at say N60/liter, thereby making most of the profit that the smugglers would have made.

Mr. President Sir, you are the first president in a long time that has convinced me and indeed a very high percentage of Nigerians that the safety of our resources is guaranteed in your custody.

You rightly desire to generate revenue for us but fuel price increase is not the only way. Other means of generating revenue can be sort out. I know you have the will and we (Nigerians) will assist to find a way.

Government is not strictly a profit making enterprise. It's main focus and priority should be the survival and well being of it's people. Care must be taken therefore not to loose this focus in the process of trying to provide for us.

Your response to this will be appreciated.

Yours faithfully,

Juwon Adenuga
Lagos, Nigeria
June 10, 2000

Post Comments About This Article | View Posted Comments

Originally sent as e-mail to Mr. President
Published with the permission of the author.