By Ochereome Nnanna
TO deregulate the oil sector or not to deregulate it is an issue. When to do so is even more of an issue. The logic of deregulation is beginning to catch on, even among sections of organised Labour. The success of the liberalised telecoms sector is a very persuasive example to cite.
However, telecoms has never been as greasy, contradictory and cult-prone as the oil sector. The evils that come out of oil are as many as the good that it serves, but telecom is a straight business that does not seem to leave pain in its trail for anyone to suffer.
To a lay person like me, deregulation means allowing market forces to determine the prices of petroleum products and giving the business completely over to the private sector. Those who attack the impending deregulation of the petroleum downstream in Nigeria have very sound, valid and emotionally appealing argument.
According to them, throwing the oil products market open at a time the country’s refining capacity is almost zero is like throwing the ordinary Nigerian citizen to the wolves.
Petrol, diesel and kerosene constitute the ordinary Nigerian’s last men in defence. Because we do not have access to public power supply, we buy petrol to power our noisy little boxes called generators.
Without petrol and diesel, most economic and domestic activities will grind to a halt in Nigeria.
There are no functional railway services and water transportation exists at the primitive level. All that we have to move on are roads, and the largest and worst maintained road network belongs to the federal tier of government.
Nigerians daily hit the roads hustling to eke a living. Deregulating the fuel products at this time will amount to crippling economic activities and subjecting the citizenry to untold hardship. Prices will not only hit the roof but the products might become scarce, especially in far-flung parts of Nigeria.
Matters have not been helped by the Federal Government’s sudden admission a week ago that its promise of upping the national electricity capacity to 6,000 megawatts by the end of this year will no longer be met.
Assuming that deregulation is introduced at the same time when power supply will climb from the current 2,000 to 6,000 megawatts, there will be a welcome cushion to blunt the bite that will descend as a result of its attendant prices increases.
It is based on these and other ideological aspects of the argument that Labour and some civil society groups have staunchly opposed deregulation.
However, based on experiences about the rapidly deteriorating capacity of the Federal Government to provide services of any sort to the citizenry, I am persuaded to sue for the end of government involvement in the fuel business, except as a regulator.
It makes no sense insisting that a government that has demonstrated its inability to repair and operate the refineries must continue to spend our money in that direction.
Government has also confessed its powerlessness to deal with the so-called cabal that freeloads on the over N600 billion it spends every year to subsidise fuel imports. Government has admitted its own failure. What is the need of insisting it must keep trying?
Must we apply the Gabriel Igbinedion dictum of when pikin fail for class e go repeat (when a child fails in his class he will repeat; his answer to charges that his son, Lucky, former Governor of Edo State, was a failure and should not go for a second term).
Let us close our eyes and remove government’s involvement in fuel supply once and for all. In any case, Nigerians in the East and far North have never really benefited from government subsidy of petroleum products. They had been deregulated in those areas long ago. Deregulation won’t be news to them. They will only welcome the rest of Nigeria to the club.
Let us go through the necessary short term hardship that will follow it. With time the forces of demand and supply will strike equilibrium. When the pricing and regulatory environments become attractive enough, investors will rush to establish refineries in Nigeria, just as we have seen in the telecoms sector. Nigeria is an investor’s gem as a result of our large population which is hungry for the provision of modern necessities of life.
Labour should stop opposing deregulation per se. Rather, they should argue for adequate soft landing, such as guaranteed supply and prevention of undue exploitation by the marketers. Labour can even form cooperatives and become an importer en route to becoming a refiner of petroleum products just like other interested investors. If government could help make Labour a major force in the transport business it can be persuaded as part of the cushioning process to assist it to become an importer and later refiner.
How should we spend the N600 billion? The answer is simple. Return to the General Sani Abacha formula- the Petroleum Trust Fund (PTF) deal. Within the three years the PTF existed, General Muhammadu Buhari, its Executive Chairman, was able to effectively intervene in critical sectors of the economy, especially infrastructure.
All we need to do is to channel the N600 billion into three critical areas: education, infrastructure (roads and railways) and power.
We must not use it to increase the salaries of civil servants who add little or no value to the economy. Let us take away the money from the cabals and channel it to areas where it will have multiplier effects.
Failing to deregulate now amounts to postponing the evil day and greasing the vicious circle. Once we enter February 2010, deregulation should come into full effect.
As you mentioned the issue is largely ideological. To better understand the position of those against,
I recommend you read Naomi Klein’s book on the Disaster Capitalism complex if you have not done so already. You may better understand the self fulfilling nature of our current mindset that government cannot manage anything. We have chosen gangsters to govern us and their obvious failings have been interpreted as an innate property of governance
If we follow the trail of government’s contrived failing in almost every sector we may arrive at the outrageous position of outsourcing government to the private sector!
It is misleading to use the success of GSM as a measure of the desirability of the unrestrained deregulation and free market ideology that has caused so much havoc. GSM was successful because of the amenability of standards based wireless technology to private sector participation. This would not have been possible if the European Union (we are talking governments now) had not masterminded the standardisation of technology that created the economies of scale necessary for the success of the technology.
The other reason for the success of course was the internationalising of the process. Successful privatisation is predicated on two critical items, injection of equity and expertise. If the MTN’s of this world had not come in to set the standards heaven knows what we would have had.
Ask yourself why Globacom, six years after obtaining the SNO license is yet to roll out any wired infrastructure to the home. The answer is simple and straight forward – it is not as profitable to do so in spite of the obvious strategic need to develop this critical information infrastructure.
One must not also fail to acknowledge the very important role played by Ernest Ndukwe whose appointment was more an accident of history than any conscious effort by OBJ to do good. For me he is the most accomplished public servant of the last decade.
The clique masquerading as the private sector in Nigeria that dominates the distributive end of the energy sector understand market forces not in terms of competition but more in terms of creating dislocations and opportunities for excessive rent seeking
In conclusion not even the deregulation and privatisation process will be well managed by a government that has been hijacked by this same cabal that has inflicted so much pain on us
free importation is the answer ,since we are not ready to refine our crude oil. issue import licence to as many importers as interested. for your information, the present N65 per liter is a full world price for the product (not subsidized by any FG whatsoever). Let FG sturbonly go ahead to increase the price of petrolum products in the name of deregulation. what will follow is inflation, total stagnation of the economy.
The success of the liberalised telecoms sector is that the rich are getting richer and the poor poorer. just look at profit the telecom companies are making but how does this reflect in the life of average citizen?. we are operating a looters and speculators economy, otherwise telephones would have amount to nothing since we have no power (be it electric or gasoline) to run, industries and businesses.
If the FG is looking for money for infrastructure, it should first ask about the monies expended on same since 1999 without which any money set aside now or in the future will never make it to infrastructure.
The solution is not as straight forward as you think.The cabal that refuses to allow the repairs of the refineries would also not allow the building of new ones.They are only interested in the continuous importation of petroleum products.As long as we dont have local refining capacity we would not have control over the prices because they are shaped by forces beyond our making such as the fluctuation in prices of crude and exchange rate of the US $.If we dont refine our crude locally,a time would come a liter of petrol would cost N200 and the problems would remain.WE MUST HAVE LOCAL REFINERIES WORKING if we are to solve the issues of petroleum products subsidy and any other thing – fertilisers,cement etc.
I totally disagree with this capitalist agenda. Is government really up to their responsibility in regulating telecom sector, the answer is no. So, oil sector is too fragile to be deregulated.
I couldn’t agree with you more.But from what i understand to be the Organised Labour stance,they are not against the deregulaton of the sector per se,their disapproval stems mainly from the anticipated inability of the Fed Govt to channel the gains of deregulation to ameliorate the suffering of the masses by providing some form of basic infrastructure.I am sure if the Govt can establish a Fund and appoint a credible Nigerian(charged with overseeing its functions) to head such,it would go a long way in assuaging Labour’s fear about mismanaging the gains of deregulation.
I agree with you totally!!
http://wayforwardnaija.blogspot.com/2009/04/nigeria-plc.html