Fuel subsidy strike: Economy lost N420bn in 5 days

ShareThe nationwide strike, embarked upon by  the Nigerian Labour Congress and the civil society groups to protest the Federal Government’s decision to remove subsidy on petroleum products has, no doubt, begun to take its toll on both individual, corporate and the national economy. For instance, as at Friday last  week when the strike entered its fifth day, the nation’s economy was said to have lost between N400billion and N420billion as a result of the impasse. 

This was much confirmed by the  Governnor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, who on  Thursday, last week, put the total figure lost at N387billion.   

Expectedly, different sectors of the nation’s  economy have also been counting their losses since the commencement of the strike  operators in these sectors argued that  if not quickly nipped in the bud, it may toll the death knell on the nation’s economy, and frustrate whatever feats the Federal Government might hope to achieve with the 2012 budget.

From the nation’s marketing communications industry, oil and gas, real sector,  telecommunications and aviation to money market and insurance, operators have been counting their losses as a result of the impasse, which had brought social and economic activities in the country to a standstill.

Marketing Communications
Here, though it is still very difficult to ascertain the exact figure the industry has lost, in the last few days, to the ongoing strike, stakeholders are unanimous that the strike had rubbed off negatively on the industry. But a negligible few still believe it has actually been a blessing in disguise for those that might want to use the new media, especially the social media as a channel of advertising their products; since these are platforms that currently engage the attention of many Nigerians. 

The Chief Executive Officer, NextMedia, Dada Ajai-Ikhile described it as a very negative way of  starting the new year.

 ‘This is a period  meetings and presentations are supposed to be going on with clients; since this is when budgets are being prepared. Besides, you make money by offering your products and services and in a situation where that process is suspended, such as this, the industry is bound to be the worst for it.
‘The danger with our own  industry is that it is always the worst hit during economic downturns; since Public Relations and advertising budgets are usually the first to suffer,’ he argued.

Though another marketing communications practitioner, Nosa Uwadiae would not describe it as a total loss to the industry, especially given the opportunity the social media platform has for advertising. He however believes the strike must have cost brands that would have loved to use experiential marketing to promote their brands a fortune.

‘Besides, there are some brands that would be left with no options than to slow down on their campaigns at this period, and this simply means less activities and incomes   for the industry. For instance, a lot of banks now would slow down on advertisements since they know that even if the ads are able to sweep their customers off their feet, there is no way they (the customers) can have access to most of these services for now,’ he stated.

Oil and Gas
As the industrial action rages on, the downstream sector has been described as one of the worst hit.  Although, the actual billions lost cannot be estimated as at the press time; since the figure could not be accessed from the website of Petroleum Products Pricing Regulatory Agency (PPPRA),  experts in the industry have conservatively put the figure at N7billion, being the amount the downstream sector loses  on a daily basis to the nationwide strike. An industry source gave the actual consumption of petroleum products on daily basis as 30 million of litres for Premium Motor Spirit (PMS), 15 million litres for diesel and 10 million litres for House Hold Kerosene (HHK).

He argued that since the industrial action embarked upon by the organised labour had grounded the sea ports, airports, banking activities, and every other economic sector of the country, it therefore becomes impossible to lift fuel at various depots resulting in scarcity of petroleum products and a boom in black market operations.

Considering the data above, a whopping sum of seven billion is lost daily to the crises in the downstream sector. N500 million revenue is generated from daily consumption of kerosene, N2.3 billion from diesel while N4.3 billion is generated from daily consumption of the petrol when sold at deregulated price of N141 per litre.

The threat by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) to shut down crude oil production would automatically result in the nation not generating any revenue because as it is, the Federal Government is still generating $285 million per day when crude oil sells for $114 per barrel as at yesterday while the country produces 2.5 million barrels per day.

Industry
Following the Lagos Chamber of Commerce and Industry’s declaration of the N89billion loss by the nation’s economy to the strike, a group of  Small and Medium Enterprises (SMEs) had decried the removal of subsidy, pointing out that it would  generally cripple their operations, since most of them relied heavily on  petrol for their relatively smaller power generating plants.

The Chairman, Apapa branch of the Manufacturers Association of Nigeria (MAN), John Aluya, had expressed concern over the effect of the removal of the subsidy, adding that what it portended for the country were greater pains in the immediate future.

Aluya urged members to brace up for the challenges ahead, saying the economic climate left much to be desired.

On its part, the LCCI, in a statement by its President, Mr Goodie Ibru, said in spite of the enormity and dimensions of its impacts  on the economy and the citizens, the policy, if well implemented, might benefit the economy and the citizens in the medium to long term.” 

Some of the expected outcomes of the policy, according to Ibru, will include increased private investment in the downstream oil sector, with corresponding impact on the creation of quality jobs, reduction in the pressure on foreign reserves, a huge chunk of which is being used to fund fuel importation, and a better fiscal space to ensure macroeconomic stability, with a resultant positive effect on the economy. 

Also commenting on the issue, the President, Nigerian Association of Chambers of Commerce and Industry Mines and Agriculture (NACCIMA), Dr. Herb Ademola Ajayi, said  the policy would certainly increase the hardship that many Nigerians faced.

According to him, most Nigerians are already hard pressed and this new step will place many more in greater suffering. “So, the government has to know what it is doing. They must understand that the frustrations that will result from the pangs of this subsidy removal can burst into chaos if the people get the impression that the government is not managing their interest properly.”

Money Market
Experts here believe that the strike has dealt a  heavy blow on the economy.

Chief Executive Officer, Financial Derivatives, Bismarck Rewane, said the strike, which had shut down banks, businesses and ports across the country might have cost N320 billion in economic output.

“The negative impact is huge on the economy, The foreign-exchange markets are down and the stock market is operating at about less than 5 or 10 per cent of its optimal turnover and transactions.”

Speaking in the same vein, a university teacher and economist, Dr. Osaro Obobaifoh, noted that though the impact of the strike was difficult to quantify in financial term, it may have caused the country trillions of naira.

According to him, every available avenue for revenue has virtually been shut, warning that if the labour’s threat of stopping the oil export was carried out, the economy would collapse.

“Even the informal sector is prostrate. My fear is that if the oil export is sabotaged as being threatened by labour, no oil subsidy proceeds can revive the economy,” he said.

The stoppage “continues to effectively shoot down the economy,” Leon Myburgh and Coura Fall, Johannesburg-based Africa strategists at Citigroup Inc., wrote in an e-mail note to clients yesterday. “Both the interbank foreign exchange and money market are effectively closed, even as the Central Bank of Nigeria continues with its normal operations.”  

The Chief Executive Officer of Lagos-based Valuechain Investment Ltd., Tunde Ladipo, which trades currencies, said: “Trading remains lull on the demand and supply side of the foreign exchange market” as there are hardly import and export activities.

Meanwhile, the naira trading was limited for a third day on the interbank market as a general strike to protest the end of fuel subsidies shut banks for a third day.

The currency was little changed against the dollar at N162.05 in Lagos, the commercial capital, according to data compiled by Bloomberg.

Yields on Nigeria’s 6.75 percent Eurobonds due 2021 declined 10 basis points, or 0.1 per cent, to 6.015 per cent, the lowest since Nov. 8, as of 9:43 a.m. in London, according to data compiled by Bloomberg.

Insurance 
Though industry practitioners have not been able to actually quantify the loss in terms of the money  the industry had lost, they, however, argued that  since the protest had affected every other sector of the economy, the insurance sector could not be an  isolation.

According to the Director General, Nigerian Insurers Association (NIA), the umbrella body for registered insurance companies in Nigeria, insurance generates its income from premium paid by the insured.

 ‘Our clients include government and private organisations. For the past one week, activities in the sector have also been grounded. Although, the good news about the industry is that premiums are collected annually, so, when the strike action is called off, definitely, those companies and parastatals will still pay their premium eventually.

‘One of the effects is that it may eventually increase total claims payout at the end of the day, that is not good enough for insurance business.Already, terrorism is having a toll on the claims profile of life insurers. Many companies have paid claims running into millions this year, and lives and properties lost during these protests, if insured, will surely be indemnified. That is part of loss to the sector,’ he noted. 

Maritime
The Federal Government may have forfeited on daily basis, revenues which experts conservatively put at N7 billion as a result of the fuel subsidy removal strike.

Industry  experts,  consisting of freight forwarders, importers and analysts, who computed the figure from what they termed ‘daily runs’ specifically noted that, while close to N5billion would have come from the ports operations in Lagos, not less than N2.2 billion would have been garnered as Customs revenue, into the Federation Account.

“The statistics from the Lagos ports are to the effect that the ports generate about N5 billion on daily basis.  That should give us close to N25 billion, for the five days that the ports had remained closed,” noted an importer, Mr Thony Emeordi, who felt the government should not have allowed the strike to hold in the first instance.

Corroborating this, a stakeholder, Dr Olu Ologbese recalled that with its revenue feat of over N602 billion for only 10 months, and bearing in mind that the Service had kept the good work on, it was safe to assume that the nation, through the Customs Service was indeed daily recording billions.

But another stakeholder, a freight forwarder and National President of the National Council of the Managing Directors of Customs Licensed Agents, Mr Lucky Amiwero cautioned against working on statistics sourced independently from the country.

“You know Nigeria doesn’t have reliable statistics. And that is why we cannot tell you at every given point, how many containers for instance, are lying in the point.

“But on the basis of reviews, we can safely arrive at around N4 or N5 billion losses, on daily basis. So, if you multiply that by the number of days that the ports have remained shut, you may then be able to get a somewhat reliable figure” he stated.

When asked to give his view, the National President of the Association of Nigerian Licensed Customs Agents, Prince Olayiwola Shittu explained that while he would not want to specify on what the ports generated on daily basis,  the government – labour face-off which entered day five at the weekend might have cost the industry nothing less than N35 billion.    
    
Aviation
There are indications that Nigerian airlines, aviation agencies, ground handling companies and other companies within the country’s aviation industry may have lost about N10billion to the ongoing strike.
Information gathered by the Nigerian Tribune shows that airlines such as Arik, Air Nigeria, Dana, FirstNation, Associated, Landover, IRS, Aero and Chanchangi may be losing, on the average, N1 billion daily to the strike.

Breakdown of the loss indicated that on the average, each of the airlines generates at least N70million on air ticket sales on all their route networks while airlines like Arik Air, Air Nigeria, Dana Air and Aero generate higher revenues daily.

For instance, daily ticket sales of IRS, according to its Media Manager, Mr Yemi Dada, was N50million on all its routes while that of Dana Air, according to the Corporate Affairs Manager, Mr Tony Usidiamen, was over N100million.

Also, the aviation agencies like the Nigerian Airspace Management Agency, Nigerian Civil Aviation Authority, Federal Airports Authority of Nigeria, Nigerian College of Aviation Technology, Accident Investigation Bureau and Nigerian Meteorological Agency are not exempted from the huge losses.

The agencies get five per cent ticket sales, en route and navigational charges, airport charges and fuel surcharge, among others from the airlines.

While those spoken to could not ascertain the daily revenue losses to their agencies, information gathered revealed that on the average, the agencies get over N100million on the above charges from the airlines and other users of the airport facilities.

Also, the two ground handling agencies in the country’s aviation industry, Nigerian Aviation Handling Company (NAHCoaviance) Plc and the Skyway Aviation Handling Company Limited would also suffer some losses in their revenue generation.

Telecoms
Computers and Allied Products Dealers Association of Nigeria (CAPDAN) has raised an alarm on the ongoing strike action embarked upon by NLC and TUC following the sudden withdrawal of the subsidy on the price of petrol, saying it has been impacting negatively on its members.

According to Mr Godwin Enamoh, PRO, CAPDAN, the umbrella association of traders plying their businesses in computer hardware, software and other IT devices and accessories at the popular Compuer Village, Ikeja, the losses are unquantifiable.

“All business activities have come to a standstill. People can’t visit the market just as our members are observing the sit-at-home directive of NLC and TUC.”

The market has remained shut down since Monday.
“You know what four days of inactivity means to us at
the computer village. We just can’t quantify the losses,” he added.

Meanwhile, the strike action is not being observed by telecoms workers, indicating that the sector is enjoying a sort of immunity as an essential service.

While how much telecoms operators are raking in at this critical time is not known, a stakeholder has said that Nigerians now depend on telecoms services more than before the commencement of the strike.

“Movement is restricted, and those who still want to get some things done are now making use of the Internet and voice call services,” he said.

Property
 Experts in the housing sector have voiced their opinion and frustration on the ongoing melee, saying it is time the government found an urgent solution to the impasse.
The immediate past president of the Nigerian Institute of Architect (NIA), Mr Tunji Bolu, disclosed that the removal together with the subsequent increase in the pump price of Premium Motor Spirit (PMS), popularly known as petrol from N65 to N141, like in other sectors, would affect housing delivery in the country.

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Fuel subsidy strike: Economy lost N420bn in 5 days