Removing Subsidy On Kerosene Is Not Enough – Group Charges FG | Independent Newspapers Limited
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Removing Subsidy On Kerosene Is Not Enough – Group Charges FG

Posted: Aug 2, 2016 at 7:05 pm   /   by   /   comments (0)

Charles Okonji
Spaces for Change (S4C), an organization that is infusing human rights into social and economic governance processes in Nigeria, and other stakeholders in the downstream petroleum industry, have called on the Federal Government to address the challenges of kerosene scarcity in the country, saying that removing the subsidy on the product was not enough to ensure adequate supply.
According to S4C, what was evident from the current kerosene crisis was the removal of the subsidy alone, without complementary policies to address the gaps in product supply.
Nigeria’s subsidy bills, the organization pointed out, in its report, rose exponentially as policy and regulatory uncertainties foiled official attempts to remove the kerosene subsidy through a presidential directive in 2009.
By the end of 2013, records showed that the Federal Government, through the Nigerian National Petroleum Corporation (NNPC), spent ?634 billion to subsidize the retail price of kerosene in three years, precisely from 2010 to 2012.
During this period, NNPC supplied 2,515,582.44 metric tonnes of DPK in 2010; 1,922,263.56 metric tonnes in 2011; 2,622,843.20 metric tonnes in 2012, and in 2013, NNPC supplied 2,671,747.97 metric tonnes, making a total of 9,732,437.17 metric tonnes.
The Senate had noted that the kerosene subsidy amount was “more than double of the aggregate annual budget for education, health, roads, security and agricultural sectors” and only less “than 10 per cent of Nigerians benefit from this heartless massive scheme that drains the nation’s treasury.”
The report stated: “More concerning is that Nigeria’s subsidies on kerosene do not ‘necessarily lead to lower prices, therefore, taking the benefits the subsidies farther beyond the reach of the poor it intended to target. Rather, kerosene subsidies have compounded problems of diversion and product adulteration.
“While removing the subsidy was therefore necessary to reduce the fiscal burden of fuel subsidy on the government deficit, it is equally glaring that subsidy reform, without governance strengthening, without the piloting of energy efficiency schemes and energy alternatives and without promoting an enabling environment for private sector participation in energy sector development, is a journey towards ineffectuality.
“The demand for kerosene continues to exceed supply, especially as Nigeria’s four refineries function below the refining capacity required to meet local demand for petroleum products.
“Governance strengthening means concertedly taking steps to reduce importation through improvements in local refining—as well as enabling third-party companies to supply fuel throughout the country, but with consumer protection measures taken to ensure that the prices people pay are fair,” S4C stressed.
The organization noted that because women were predominantly seen at filling stations, queuing for many hours to purchase the kerosene or forced to resort to firewood and traditional biomass to cook, “we can safely hypothesize that women “are primary users of kerosene.
S4C added: “As such, they stand the most to lose if subsidy reform simply leads to higher prices and the same bad quality of supply: this will either reduce their incomes or see them, again, turn to traditional biomass fuels.
“The health burden associated with using traditional fuels falls heavily on women and their children. The World Health Organization (WHO) finds that indoor smoke is one of the underlying causes and to blame for nearly 800 000 child deaths annually, with more than one third, that is 358 000 deaths, occuring on the African continent.
“Newborns and infants are particularly vulnerable to smoke-induced child deaths because they often carried on their mother’s back while she is cooking. This grim statistic makes it quite imperative that kerosene is either affordable or available—or it is substituted with cleaner fuels or cooking technologies, such as liquefied petroleum gas (LPG) and clean cook stoves.
“Little is known about the extent to which the existing kerosene subsidies affect women, nor how women would be affected by various possible reform plans. However, there is evidence that absence of measures to absorb shocks, or lessen the disproportionate impacts of reform, could reduce the benefits that women currently receive, and threaten the already fragile prospects for supply stability.
“Because of the formidable challenges of inflation and exchange rate fluctuation posed by reforms, a strong social protection and mitigation program designed after a thorough understanding of the household distributional impacts on different segments of the population is necessary, in order to identify the hardest-hit sectors and groups—like women—with a higher degree of dependence on subsidized fuel,” he stressed.
The report pointed out that millions of consumers of Household Kerosene (HHK), especially women whose traditional use of energy revolved around domestic chores like cooking, had switched to cheaper alternatives, including biomass, coal, sawdust and firewood.
S4C said: “The lingering shortages and the increasing price have pushed the consumers to resist cleaner fuels, with the attendant implications on maternal wellbeing, deforestation and environmental degradation.
“While smaller sizes have been introduced more recently, LPG cylinders have been available in 12.5 kg sizes. LPG currently sells in the domestic market at an all-time high price of N4,000 from the initial price of N2, 300 for 12.5kg cylinder size.
“Taking the prevailing income inequalities into account, a high LPG price has implications for gender. For instance, women in low-income households may be unable to switch to cleaner fuels like LPG because it requires an upfront capital cost and continued high expenditure on refilling,” it stressed.
According to the World Economic Outlook’s 2015 Electricity Access Database, 96 million people, translating to 45 per cent of 170 million of the country’s population, lacked access to electricity.
Attacks on gas installations, information gathered revealed, had complicated gas supply constraints and infrastructure deficits, which had made the electricity generation drop to 2,524 megawatts (mw) in July 2016 from about 5,500 megawatts of power in February 2016.
According to the report, because energy alternatives had been expensive, unaffordable to the poor, kerosene dependence was one of the very few options available to them.
S4C stated: “That is why kerosene consumption is on the increase in Nigeria at a time when advances in technology are helping to expand access to modern energy services elsewhere.
“It is not clear if the government will attempt to reinstate a complete deregulation of the sector, or target a shift to a more efficient subsidy system, particularly towards cleaner alternative household cooking fuels, such as LPG and other renewables.
“As has been emphasized, subsidy reform can have positive effects if it leads to improved energy supply systems, increasing energy access to the poor and the vulnerable, especially women, in communities far-flung from distribution networks that lack access to electricity and energy-efficient services.
“Policy designers should recognize that inequalities are exacerbated when gender-based differences are ignored. With a shift from traditional fuels such as biomass through to transitional fuels – such as kerosene – and modern fuels – such as electricity – women reduce the time spent on collecting biomass and also gain access to more efficient fuels and possibly labour saving appliances.
“Beyond targeting women specifically, deliberate policy measures are needed to remove the barriers and disadvantages women face in gaining access to credit, new technologies, and marketing networks for energy products and services.
“As primary users of biomass energy and traditional cooking fuels some of which are often hazardous to human health, women’s input, expertise and perspectives are critical to the execution of innovative energy investments that have great potentials to redistribute wealth, transfer technology and expand access to cleaner fuel alternatives.
“The availability of alternative cleaner fuels not only lessens the adverse impacts of electricity shortages on vulnerable segments of the population, but is also necessary for the substantially reducing global greenhouse gas emissions,” it stressed.