Fuel Price: Between Libya And Nigeria

BY DAPO OKUBANJO

Few weeks ago, several media outlets in the country had announced with fanfare that a litre of fuel in Libya was the equivalent of N52 at a time, Nigerians were paying close to N1,000 for the same quantity of fuel.

One national newspaper, the Daily Trust to be specific, ran the story with a simple yet effective headline, “Petrol is N52/litre in Libya’, and of course, a clear message of intent which is to make a distinction between the price of Premium Motor Spirit (PMS) in the two countries.

Coming at a time that quite a number of Nigerians have been wondering why locally refined fuel in Nigeria could not be cheaper, the media reports were seen as proof of government insensitivity to their plight.

Daily Trust quoted one Abdullahi Aliyu, a resident of Abuja, as saying that if petrol were priced between N150 and N200, it would significantly lower costs across various sectors, including transportation and food.

Citizen Aliyu urged Nigerian leaders to learn from Libya’s pricing strategy. But the question is what is the pricing strategy employed by the Libyans?

Unfortunately, there was no mention of it in the report for Nigerians to know the how and why, which for me shows that it was meant to trigger sentimental responses in the polity.

So there is a need to interrogate what a section of the media had not been telling Nigerians on the Libyan ‘fuel pricing strategy’.

For starters, it is important to note that like Nigeria, Libya has one of Africa’s largest oil reserves. In fact, some reports suggest that the North African country has the largest oil reserves on the continent. Like Nigeria (at least until recently in our case), it has little or no refining capacity.

So what the National Oil Corporation (NOC), Libya’s state oil company, does is to import fuel at market prices and sell it to citizens at a heavily discounted rate.

This is something that began when the late Moammar Ghadaffi was President in the late 1970s but according to Khaled Shekshek, chairman of the Audit Bureau, the fuel subsidy programme has increased by more than 70 percent to 62 billion dinars ($12.8bn) in fiscal year 2022 from 36 billion dinars in 2021.

This is half of the national budget for a country of 6.2 million people (approximately the same population as Rivers state) which has since Ghadaffi’s death in 2011 been in the throes of political instability.

For more than 10 years, Libya has been split between the UN-backed interim government located in Tripoli and supported by some militias, and a loose coalition headed by Field Marshall Haftar who controls two thirds of the state where most of the oil fields are.

In recent years, crude oil production in Libya dropped from about 1.6m barrels per day (bpd) to 400,000 bpd as a result of the never-ending civil war but is now hovering at about 1.1mbpd while fuel imports have continued to soar.

The subsidy regime was put in place as a social benefit for Libyans, but it has also created a lucrative business for smugglers and is now seen by the authorities as a drain on the economy.

Fuel smuggling in Libya is worth at least $5bn and incidentally, Russia, the same country where oil products are imported into the North African country is said to be the beneficiary of black market fuel.

Officials are adamant that as much as 40% of imported fuel is re-exported and smuggled out of the country at a profit.

This was corroborated by a recent investigation by Bloomberg news which was reproduced in the Libyan media, in the aftermath of the seizure of the oil tanker Queen Majeda in Albania in September 2022.

The situation is better appreciated when one considers that Libya is the world’s third largest buyer of Russian fuel and the first in the Arab world yet almost half of the imported (and subsidized) fuel is taken outside the country. So in spite of low fuel prices at the expense of half of the country’s national budget, there are still shortages.

It is therefore not surprising that the Libyan government, as recently disclosed by Prime Minister Abdul Hamid Dbeibeh is considering putting a halt to the subsidy regime on the grounds that the annual $12bn spent averagely on it, could be better used elsewhere.

He was quoted as far back as January 2024 by his media office as saying that the fuel subsidy system was “a drain on the state budget”.

Also weighing in recently was Central Bank Governor Sadiq al-Kabir who said in an open letter to the Prime minister, “How is it reasonable to use the state’s reserves to buy a litre of fuel for a dollar and re-sell it for 3 cents so that smuggling gangs can benefit from it?”

Libya’s Central Bank governor had wondered how fuel subsidies had risen from 20.8bn dinars (£3.4bn) in 2021 to 61bn dinars in 2022 and concluded on “the existence of an imbalance, distortion, and mismanagement in fuel subsidies”.

This is where Libya has found itself today but a section of the media in Nigeria prefers to paint a rosy picture to unsuspecting Nigerians.

But incidentally, Nigeria has for years been in a similar situation but that of North African country looks worse especially against the backdrop of a higher subsidy expenditure ($12bn) for a population that is not more than some states in Nigeria.

So it is not surprising that the authorities in that country have set a December 2024 timeline to put a stop to the subsidy programme.

The reality is that even the late Ghadaffi who introduced it in the 1970s had twice tried to remove subsidy on fuel according to a 2015 World Bank study by the trio of Abdelkrim Araar, Nada Choueiri and Paolo Verme, titled ‘The quest for subsidy reforms in Libya’ having realized it was not sustainable.

Hopefully, Nigerians will look beyond the facade of Libya’s unsustainable cheap fuel that is straining the budget and draining public funds in that crisis-torn country.

Okubanjo, a member of the Independent Media and Policy Initiative (IMPI), writes from Abuja