Let ‘Yar’Adua Kerosene’ Flow Around!

No Comments » July 3rd, 2008 posted by // Categories: General Articles

Let ‘Yar’Adua Kerosene’ Flow Around!

Simon Kolawole Live!, Email: simonkolawole@thisdayonline.com, 06.29.2008

Ahmed, the Pakistani taxi driver, chuckled. I had just asked him the pump price of petrol as we drove past some filling stations in Jeddah, Saudi Arabia. “One riyal for two litres,” he said, demonstrating with his fingers, looking incredulous. I did a quick mental calculation. One riyal is N40, so that would be N20 per litre. At a time people are groaning under high cost of crude oil, this is almost criminal. No wonder Ahmed chuckled. But he has to realise that Saudi Arabia is rich in oil, and most oil-exporting countries often sell cheap at home as part of the benefits to its citizens.

Back home in Nigeria, I was greeted with the news that African Petroleum Plc had launched a N50-per-litre sale of kerosene. I chuckled, like Ahmed. I can’t remember the last time Nigerians got to buy kerosene at that price directly from a filling station. You could hardly get the product at any fuel station anyway. In the black market, you needed about N100 to buy a litre or between N350 and N400 for a gallon. So the N50 price naturally caught my attention.

Pardon my ignorance, but I used to think only the poor used kerosene. I had taken it for granted that well-to-do people in urban areas use gas, while poor rural dwellers used kerosene and firewood. I love to pride myself as someone who knows the minute details of the standard of living/quality of life of Nigerians, so I was a bit shocked recently to learn that even “big boys” use kerosene. I had done a random survey early this month and discovered that the price of gas has forced many Nigerians, who cannot be strictly classified as “poor”, into supplementing gas with kerosene. I joked with one of the respondents: “No wonder, your shirt always smells of stove smoke!”

Marketers usually shy away from selling kerosene. There are lots of excuses. In the first place, kerosene for domestic use is going out of fashion in other parts of the world. People are now on gas, piped to every home in advanced countries. Metres are installed to monitor consumption and bills are pre-paid or post-paid, depending on the plan the consumer settles for. The implication of this is that not many refineries are producing kerosene again. It is not a commodity as popular as PMS (petrol) or diesel. The world has moved ahead while we seem stuck in pre-history.

Also, the pump price of kerosene is regulated in Nigeria. So, the regular neo-liberal argument about scarcity, black market, smuggling, opportunity cost, etc etc, will always be drummed into our ears. More so, you’re dealing with a motley, sometimes unruly, crowd of fish sellers and street vendors when you sell kerosene.  Indeed, there is no lure for marketers to sell kerosene in Nigeria, unlike diesel which guarantees immediate, big returns with a fully deregulated pricing mechanism.

I find it therefore quite interesting that Mr. Femi Otedola, who controls the diesel market through Zenon Petroleum, has also entered into the kerosene market with AP Plc. President Umaru Musa Yar’Adua, who has a “socialist” background (and at the risk of offending my boss, Kayode Komolafe, I want to ask again if socialism still exists), is said to have endorsed the N50-a-litre sale as part of his larger policy of alleviating the economic pressure on the ordinary people of Nigeria.

Given that 50-70 per cent of Nigerians are classified as poor, leaving us with a figure of between 70 million and 100 million abjectly poor people, Yar’Adua cannot but keep the interest of the poor at heart. Keeping petrol price at the current level till at least January 2009, for instance, is obviously an attempt to maintain some stability in the cost of living. Otedola’s “N50 kerosene” (which has now been dubbed “Yar’Adua Kerosene”) falls in line with the president’s pro-poor plans, I guess.

There are several ways of looking at this. Having conquered the diesel market, Otedola can afford to crash the price at any time as he clearly has volume on his side. Zenon’s price is currently the cheapest, at N130 a litre. But there are suggestions that if the electricity situation improves today, his diesel business will suffer. I heard him crack a joke about this before, at this year’s THISDAY Annual Awards to be specific. After collecting his awards, he said: “We are praying that power supply will become stable soon!” It sounded like a suicide wish, but he must have done his market analysis. I don’t have any statistics but I won’t be surprised if trucks, buses and vessels form a significant percentage of his diesel customers.

Having taken over AP Plc and re-positioned it, Otedola may be seeking to replicate his Zenon exploit in the kerosene market. By selling kerosene at N50, he could be targeting large volume as the masses flock to AP stations. (You need to see the queues for petrol at NNPC Mega Stations simply because of a mere N1 pump price difference). In that case, kerosene price may be low at N50 and AP’s margin may be little, but the market will be big. I don’t see the majority of Nigerians switching to gas in the nearest future, so AP stations may continue to be flooded with kerosene buyers for a long time to come. All things working well, AP may soon become the dominant player in the kerosene market.

Otedola will be killing two birds with a stone; one, establishing AP as the Zenon of kerosene market – which, if you ask me, is a deft marketing move; two, being a multi-billionaire who has often been accused of enjoying favourable government patronage, he would be putting something back into the system – and making kerosene available to the poor at such a low price cannot hurt his case! Many will rate Otedola high as a philanthropist – he has spent over N300 million on scholarships for Epe indigenes, while his contributions to the building of National Mosque and National Ecumenical Centre, both in Abuja, total N500 million. Nevertheless, the N50 kerosene, in my view, is bigger because it will impact on the lives of millions and millions of Nigerians.

However, beyond the euphoria, Otedola has his work cut out for him. To start with, we are watching him. He has to make sure the N50 kerosene is available not only in the major cities but all over the federation, especially rural areas. That way, the product will get to those who really need it, not only my friends whose shirts smell of stove smoke. Also, he must sustain the momentum. If in another six months, Nigerians can no longer get “Yar’Adua Kerosene” to buy at AP stations, then the whole idea would have been defeated. The “socialist” in President Yar’Adua should keep Otedola on his toes.

I am also hoping there would be “Yar’Adua Cement” soon. If, as projected, cement price crashes to less than N1000 a bag in the next one to two years following several measures being adopted by the government, we would all be better off for it. Chief of all, we are eagerly awaiting “Yar’Adua Electricity”. If at the end of Yar’Adua’s first term in office, Nigeria can boast of uninterrupted power supply, he would have accomplished more than any other president or head of state in the history of Nigeria. You think I’m exaggerating things? Then you don’t know how the power situation is damaging our economy and psyche!

Finally, I believe wealth must be re-distributed in practical ways. You tax the rich to cater for the poor through provision of affordable or free social services. You reduce the cost of living through subsidies and benefits. In advanced countries, they understand these principles very well. That is why Nigerians, and Africans, are flocking to Europe and America on a daily basis. Whereas they may never become millionaires over there, they know that the society makes provisions for the poorest such that they will never go to bed hungry, no matter what.

All my life, I have always canvassed and supported pro-poor policies. Not that I’m particularly a nice guy, but a country that does not cater for the majority of its population, who are poor and vulnerable, is a country that will never achieve social balance and stability. It is in the interest of the rich and the powerful that the poor people have access to the basics of life. Most of the crimes we experience everyday arise from people’s lack of access to the basic things of life.

The Saudi government understands this too. That is why fuel price is so low. The kingdom’s citizens are benefiting from the oil boom. Ahmed can continue to chuckle on N20 per litre, but the people are not complaining. Just like I am chuckling over the N50 “Yar’Adua Kerosene” and I have no plans to complain either!

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