BY FOLA AROGUNDADE
TO be or not to be, that is no longer the question. It is no longer if, but when this “dreaded nightmare” will land on hapless Nigerians, making life just a little more miserable. So, after all the vacillation; the undiplomatic double-speak; after all the postulation and grandstanding by senior government officials; the “plague” is now upon us.
The final nail was screwed in last week when President Yar’Adua, in an uncharacteristic frankness told the British Minister of State for Africa Baroness Glenys Kinnock that “we are committed to deregulation because we are convinced that subsidy distorts the system, encourages corruption and creates more problems than it solves”.
And with that, deregulation of the down-stream sector of the petroleum sector has become a fact of life that Nigerians must begin to live with sooner than later. Naturally, there have been a flurry of reactions from Nigerians home and abroad, high and low.
But what is this deregulation that has got Nigerians braying, wailing, praying and flailing ? Simply put, it means that the Nigerian government will cease (or reduce to the bearest minimum) fixing the prices of petroleum products; especially kerosene and petrol (premium motor spirit). Thus the prices of these commodities will be determined by the landing cost and other market indices.
So what is the problem? The government. And the government’s approach to the subject. First, deregulation is in itself not such a bad idea. In fact it could be the panacea to various lingering problems in the energy sector.
Deregulation of the down-stream sector of the petroleum sector is not unlike similar exercises in other sectors. It worked wonderfully well in telecommunication and aviation sectors such that SIM cards for mobile phones go as low as N150.00 from an initial high of several thousand Naira and a one way ticket for an hour’s flight could now be got for as low as N7,000 .
With importation of the products open to as many as qualified and are licensed for the exercise, and with proper anti-trust legislation to ensure that importers do not engage in price-fixing, the country should be awash with these essential products at quite competitive prices. There is no doubt that prices will rise ab initio. But at the end of the day, it is very likely that prices will, as it happened in the telecommunication and aviation sectors, crash even below the current prices.
So why are Nigerians not buying into the idea? As I said earlier, one can only blame the government and government’s wrong approach. If Nigerians have learnt anything from successive governments in Nigeria, it is that government is not to be trusted.
The credibility of governments in Nigeria must be lower than in China where a study has shown that prostitutes are rated higher than governments in the credibility scale.
With the probable exception of the short-lived Mohammed Murtala regime, our governments have shown a high capacity for infidelity. And each one has been worse than the one before it. Of course, Olusegun Obasanjo’s eight year misrule takes the cake.
So why should anybody believe it when the government says a particular gesture is for public good. Why should I believe anything the government says when 10million US dollars down the drain, all we have to show for such huge investment in power is uninterrupted power outage. We have so much faith in our governments promises and pledges that our first reaction its avowals is “make we hear word ‘bo”.
As if that is not bad enough, Yar’Adua’s government, like the one before it, has actually been de-marketing the deregulation idea. All we hear is ‘removal of subsidy’, ‘government can no longer subsidize NNPC’s inefficiency’, ‘government has only been subsidizing corruption’, subsidy this, subsidy that. It is as if some bodies in the government are fixated on subsidy.
There has been no concrete effort to properly sell the benefits of deregulation to the Nigerian populace. There has been no serious effort to show Nigerians that ultimately, there are immense benefits to the Nigerian masses in the deregulation of the down-stream petroleum sector.
Nobody in government has told us that this initiative will result in massive infrastructural development in the country when funds freed from subsidy (that word again) is ploughed into provision and maintenance of roads, health-care facilities, education, etc.
Nobody is addressing the fears of Charles out of University of Nigeria Nsukka who, in a letter to the Editor of the Nation (Thursday November 5, 2009) slated’. “…Rather, the thrust of the entire deregulation policy is espoused in the Nigerian context is to create a new carted of avaricious greed on Nigerians while the importer will be accountable to the likes of those in the FEC (Federal Executive Council ) and few other maximum Nigerians” or Tola Osunnuga in the same newspaper, same day”.
Opening up the growing and dominant petroleum sector, such as downs-stream petroleum is important in dealing with the key economic engine of the country but the awkward approach the government in adopting is just a further confirmation of government prided with leadership failure” or Ike Ohia of FESTAC Town, Lagos. “The Federal Government is pursuing the deregulation of the oil sector in a very bad way. People are not being carried along.
All the government is doing is simply trying to force down our throats the bitter pill…
Deregulation has not been defined in the Nigerian context. It is a broad thing and a good economic principle. See my understanding: http://ikeigbokwe.blogspot.com, http://www.facebook.com (thoughts about Nigeria).
Most Nigerians can afford to avoid using the phone or travelling by air. There is no Nigerian that does not use fuel energy daily. That is how important it is! There is obvious need for reforming the sector for effectiveness and efficiency. But govt cannot stop protecting the consumers and ensuring that the supporting structures for socio-economic stability are maintained. If deregulation is used wrongly, the recession it will instigate is obvious; all the sectors of the economy depending on it will stall drastically. Move with caution!
I charles C Mereole, aware of the defference in deregulating Telecoms and the down stream sector of petroleum? Becaues there is no supporting structures, like refineries, availability of power and good business climate in the country. Deregulation is going to result in price increases. The import of this, is increase in the prices of good and services in the country which will make things unbearable. This may not be the best for this country. What sense does deregulation make, when Nigeria imports refined products from outsie the shores of this country? Does deregulation mean removal of landing cost and other cost associated with importation?
Mark it, deregulation of petroleum sector can not i repeat, be like the Telecommunications.
Nigerian factor will come into play, that is people will form cartel to hoard the products. Scarcity will alway give room for increase in the price of transportation and all what not.
If sincerely that is what deregulation is all about then let us face it, the initial hike not enough excuse not to deregulate, nothing good comes easy. Also I concur with what Nonso said above let there be new players as to create competition in this sector, our government should have employed people like you to sell this idea to Nigerians of all carders. Like one man said last week whenever government want to increase fuel, they will mention subsidy, dear that is the understanding of any average NIGERIAN. thanks.
Please dint lower the character of prostitutes to that of government officials have some respect they at least sell themselves whereas our governments serve themselves
Government deregulation of both the telecommunications and aviation sectors of the national economy worked successfully in Nigeria. The success is basically attributed to the policy of unfettered competition, which the government allowed in the two sectors. Consequently the country witnessed more reliable availability of the products and services of the sectors. The country also saw an eventual crashing of unit prices of the products and services of the two sectors from very high to low and more affordable levels. And many Nigerians are currently happy with the operation of the two sectors.
If government allows free market forces to operate unimpeded in the country’s down stream petroleum sub sector, there is no way the prices of petroleum products will not eventually fall to affordable levels in the country. One veritable way of achieving this end is by Government officially abolishing the necessity of obtaining licences for the importation of petroleum products into the country. The government should also spare the local refineries from unnecessary control of their affairs. There is no doubt that free market forces and profit motive will ensure that importation of petroleum products into the country will only be necessary if supply by the local refineries does not satisfy domestic demand for the products.
If the down stream petroleum sub sector is successfully deregulated, the only aspect of the sub sector to which the government should restrict its role should be quality control of the products, either locally manufactured or imported into the country, for consumption by individual Nigerians and businesses. It will, however be naïve to expect that the deregulation of the country’s down stream petroleum sub sector will not have unfavorable implications, particularly on some of the employees of the sub sector. The ongoing negotiation between the FG and organized labor on the consequences of deregulation is very much in order. Both sides should therefore quickly and patriotically reach agreement on the necessary palliatives to be put in place, which, will effectively soothe the inevitable short term consequences of the policy, not only on labor but also, the national economy in general.
There seems to be a grey area on exactly what the government means by deregulation. They mostly refer to it as the removal of subsidies but that alone will do nothing but raise the price of crude products. More important than the removal of subsidies is the removal of the restrictions and licensing protocols that make it virtually impossible for new players to participate in the downstream oil sector both in terms of importing crude products and refining. The entrance of new players like Globacom was the key factor in the fall in prices in the telecommunications sector. Removal of subsidies without the “freeing up” of the protocols for participating in the sector is like handing over from a bad government to a monopoly. It is not clear which is the lesser evil