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Deregulation: I Weep for my country, says Esele

The Trade Union Congress of Nigeria (TUC), a central labour organisation opposed to the deregulation of the downstream sector  to , name and bring to book those who manipulated, abuse and illegally benefitted from the fuel import subsidy before embarking on its planned total deregulation of the downstream sector of the Petroleum industry.  This story is an edited version of the TUC statement

TUC in a statement by its President-General, Comrade Peter Esele,  punctured the government’s subsidy claims and posited that officials of government  have perfected the art to rob the poor masses to pay the fat cat importers in the name of subsidy while at the same time driving manufacturers away from Nigeria to neighbouring countries with the high cost of personal power generation while we export jobs and increase  the unemployment queues in leap and bounds.

According to the statement: “We have  proved over and over again that we are a nation that does  not plan for tomorrow. Since 1990, the Nigeria economy has expanded and the population has grown, but it is now clear to all discerning observers that our successive governments have failed to plan for our future. They have failed to create the infrastructural growth commensurate with our population growth. It has been said that those who fail to plan, are planning to fail.

Our governments, since 1990 did not build roads, they did not build schools, they did not build hospitals, they did not build our infrastructural base to support the growing population and ensure a reasonable quality of life for the people.

No where is this failure to plan more evident than the energy sector. In the absence of new power plants and the epileptic performance of the old plants, Nigerians are now living with candles and kerosene lanterns, a throw back to the dark ages. Again, despite the rising demand for petroleum products over th
e years, no new refineries were built whilst the existing four refineries were left to suffer an extensive decline in performance, and have therefore not been able to meet demand for products for some time.  In the

circumstance, the country has chosen, by default, the relatively  expensive option of importing refined products. However, in choosing this option, no serious attempt has been made to substantially upgrade

the facilities at the ports for the reception of such imports.”

What govt pays as subsidy

“For example, current import reception facilities in the country were  never designed for the level of product imports that are needed to meet well over 90% of the country’s petroleum product demand.  The facilities are overwhelmed and the delays in vessel product discharge at the import jetties result in heavy demurrage payments. The shallowness of the Jetties means that products have to be removed from big vessels by small ones to the depots (littering).

All these mean a high landed cost per litre of each product consumed and an extensive outflow of scarce foreign exchange not to mention the now regular product shortages in the country when there is a small hiccup in the importation process.

Why should a country so well endowed choose the difficult and wasteful route when there is a simpler and better way to comfort, I weep for my country.  To make matters worse, government continues to argue that the petroleum products that we consume are heavily subsidised. According to government, subsidy payment applies when the Landing cost of a petroleum product based on the import parity is in excess of the approved Petroleum Product Price Regulatory Agency (PPPRA) ex-depot price for the product.

According to government statistics, the annual amount spent on petroleum product subsidy is now almost twice the Federal Government capital expenditure. According to government statistics, in three years, 2006 to 2008 government payments to NNPC and other marketers importing petroleum products was estimated to be over N1.173 trillion. Painful as this is, it is only half of the story.”

“The other half of the story is that a substantial part of this payment is a subsidy of inefficiency, fraud and corruption. We subsidise inefficiency and corruption when the PPPRA pricing template is not based on the cost of the importer that is ready to offer the consumer best price. We subsidise corruption when we cannot procure products for importation from international refinery gate instead of relying on spot market and greedy trading middlemen.

We subside fraud when we pay demurrage for product vessels on the high seas that should not be there.
We subsidise fraud when a 15 day demurrage is automatically paid at the rate of $25,000 per day amounting to almost $400,000, on each import vessel that attracted perhaps, only a three day demurrage or may be did not attract any demurrage at all. We subside fraud when we assume that every product is littered and therefore attract a littering fee when only a fraction of the products are littered.

We subside fraud when we assume that all products are assumed to be littered to Calabar and or Port Harcourt whereas only a small fraction of imports go that  far; we subside inefficiency and fraud when we cannot make our pipelines and depots function and we have to move products across the length and breadth of the country despite the damage they do to our already death-trap highways.

We subsidise inefficiency when government allows NNPC to use an armada of ships on the high seas as strategic reserve thus attracting millions of dollars in demurrage on a daily basis. I can go on and on but it makes me weep and weep for Nigeria.”

TUC added: “Our government seems to have perfected the art to rob the poor masses to pay the fat cat importers in the name of subsidy while at the same time driving manufacturers away from Nigeria to neighbouring countries with the high cost of personal power generation while we export jobs and increase  the unemployment queues in leap and bounds. The President was equally very concerned about the subsidy of inefficiency, corruption and fraud when he, on announcing the intention to remove subsidy on petroleum products, vowed to audit all  transactions in the sector to bring about sanity and efficiency.

He particularly vowed to look critically into the activities of the Petroleum Products Pricing Regulatory Agency (PPPRA) over fuel pump pricing in the country over the years. Powerful interest groups and the cartel that have dominated the importation of refined petroleum products and have engineered the corruption, fraud and inefficiency discussed above seem to have thwarted the plan to audit the rot that has characterised the subsidy quagmire.

Investigations reveal that seven months after the government promised to commence investigations into the monumental fraud nothing is on ground to suggest that the government is serious about the issue.  It is strongly believed that the audit will not see the light of day because very top and influential Nigerians are involved. Although  senior government officials explained that the audit process had begun but has been bogged down by due process requirements.

We doubt this statement and believe that government has developed cold feet on the issue in deference to the powerful petroleum importing cartel.  Yet, this audit just as Mr President thought from the onset, is a necessary pre-requisite to a successful deregulation. Nigerians need to know the extent to which the subsidy payments of the last few years have gone into private pockets so that restitution can be fully made.”

“We can only have a clean and successful deregulation after we name and shame the cats that have fed fat on poor Nigerians through fraudulent and corruptive rent seeking at the expense of millions of struggling Nigerians while making it difficult for our industries to function, make a profit and put Nigerians to work.. More importantly, it is important to ask ourselves whether we want to carry over the historical inefficiency, corruption and fraud of the regulated era into the proposed deregulated era.

We, in the labour Unions say NO and Nigerians in collective unison say a capital NO. We should NOT and must NOT allow the ills of the past be carried into the future.

IT  is important to ensure that the future deregulated or not is not polluted by fraudsters parading as petroleum product importers. We must ensure that the current importation and product reception regime and processes are carefully studied and their inefficiencies and corruptive elements are highlighted so that they are not transferred to a deregulated environment.

The PPPRA template needs to be empirically reviewed so that consumer friendly standards are set out for importers beyond which government will not allow them to go even in a deregulated environment. This is important particularly in the short and medium term after deregulation when the Adam Smith perfect market invisible hand is not yet fully engrained to ensure the protection of the consumer.”


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