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Plan for deregulation falters yet again

By Hector IGBIKIOWUBO & Victor AHIUMA-YOUNG
FEDERAL Government’s plan for deregulation of the downstream petroleum sub-sector in Nigeria has faltered yet again with indications that payment of subsidy to petroleum import marketers may remain the order of the day for some time.

Meanwhile allegations of racketeering in the supply and distribution chain of petroleum products imported into the country continues to fly back and forth between petroleum importers and marketers on one hand and the Nigerian National Petroleum Corporation (NNPC) and its subsidiary Pipelines and Products Marketing Company (PPMC) on the other hand.

Sweet crude gathered that following pressure mounted by organised Labour, the Federal Government chose to jettison plans to commence full blown deregulation of the downstream sector.

Government had announced a November 1 deadline for commencement of full blown deregulation but had to back down when organised Labour threatened to embark on an industrial action.

Although government through the instrumentality of the ministry of labour and productivity and that of finance had engaged organised labour in a bid to negotiate an understanding of government’s position, several such meetings end up deadlocked.

Indications government may have finally backed down emerged when Prince Adetokunbo Kayode, the minister of labour and productivity pointed that government had never mentioned any specific date for implementation of full blown deregulation.

Government spent about N1.802.4 trillion on subsidy payments in the last two years – official figures indicates that N255.7 billion and NN290 billion in 2006 and 2007 respectively, another N654.7 billion was spent in 2008 and indications are that about N602 billion has been spent this year alone, at least quadruple the total expenditure on the budgetary vote for capital projects in the last four years.

While speaking on government perceived lack of political will to follow through on the implementation of full blown deregulation, Mr. Austin Avuru, former president of the National Association of Petroleum Explorationists (NAPE) and managing director of Platform Petroleum decried non-implementation of the policy in the last 15 years.
He noted that those who argue against the policy as detrimental to the welfare and interest of the common man should note that the price of diesel on which large commercial buses run has been deregulated for the past three years.

“For the past three or four years, the prices of AGO (diesel) has been deregulated. Everybody buys diesel at market driven prices. So while you are buying PMS (petrol) at N65 per litre, diesel is N125 per litre. And yet the main mode of transport of the masses, the big busses (Molue) all drive on diesel.

So if all you are struggling to protect with the argument against deregulation is just those who buy PMS at N65 per litre only in Lagos and Abuja whereas the rest of the country buys PMS at market price and the entire country including Lagos and Abuja buys diesel at market price just for that little protection for people in Lagos and Abuja to buy petrol at regulated prices, this country is spending N700 billion per year to pay those who import PMS for them – N700 billion as subsidy for a country that spends less than N700 billion on its entire capital budget. I don’t think the numbers add up, I don’t think it makes any sense whatsoever,” Avuru said.

Labour position:
Organised labour insists among others, that the deregulation policy is exploitative and will not only worsen the poverty in the country, but also lead to more factory closures.

Led by the Nigeria Labour Congress (NLC), Trade Union Congress of Nigeria (TUC), and their civil society allies have continued to argue that the alternative to deregulation can be seen in the cancellation of demurrage on petroleum products in transit, dredging of the of the ports, rehabilitation and expansion refining capacity in Nigeria and the fight against corruption associated with fuel import and distribution in the country.

“As we have seen, demurrage constitutes a substantial part of the landing cost of petroleum products in Nigeria. The charge of demurrage on products in transit is fraudulent; government claims ignorance about this. Government should take immediate steps to stop this. When this happens, government will pay less in subsidy to marketers.

“We have also seen that an additional cost is added to petroleum products’ prices because of the way in which products have to be evacuated at the ports. This cost will be totally eliminated if government provides for the dredging of the ports.

This measure will also reduce the amount that government pays in subsidies to marketers.”
“Of course the clearest path of honour for government would be to rehabilitate and expand refining capacity in Nigeria. The NLC maintains that it is the height of irresponsibility for government to spend trillions on subsidy while neglecting the one and only sure way to make sure that petroleum products are available in the required quantity and at lower costs in Nigeria.

Since government claims that deregulation is meant to remove corruption from the transaction costs in petroleum products, the onus is on government to resume and intensify efforts to curb corruption.

These efforts, however, cannot be through the deregulation of oil prices; they will be seen in the determination with which government actually pursues corrupt public and private officials in the various spheres of national life. Unfortunately, the current record of government in this direction indicates that corruption has returned as a normal feature of public and private life.”

However, the oil industry based unions, the National Union of Petroleum and Natural Gas Workers (NUPENG) and its Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) counterpart said deregulation as a policy is not bad if all necessary conditions are in place, especially local refining capacity.

For, them if government must deregulate, it must have a time frame for private refineries to come on board to end importation, the pipelines must be upgraded and expanded, receptive capacity must be increased through dredging of the coastal lines, among others.

Sounding a note of warning on the planned November 1 commencement of full blown deregulation, President of NUPENG, Comrade Peter Akpatason advised government to jettison the idea of deregulation in 2009 and even in the nearest future to avoid deregulating the nation’s crisis.

“Even the government has admitted that it is faced with several challenges which needed to be addressed. They have not addressed any of the identified challenges. There is the problem of the pipelines, the port facilities and dredging, bad roads and above all, Nigerians cannot even afford to pay additional fuel price now. We have told government that if they must deregulate, it must not be import driven. If you deregulate now, you will definitely deregulate the nation into crisis.”

President of PENGASSAN, Comrade Babatunde Ogun, has also corroborated the position of its NUPENG counterpart that government cannot deregulate the sector now unless it wants to incur the wrath of Nigerians who have been going through hardships for a very long time.

Racketeering allegations:
It was gathered that the Petroleum Products Pricing and Regulatory Agency (PPPRA), an agency of government has for yet undisclosed reasons refused to grant import licenses for Premium Motor Spirit (PMS) and Dual Purpose Kerosene (DPK).

This development has left the Pipelines and Products Marketing Company (PPMC) a subsidiary of the NNPC as the sole importer of both petroleum products, with the petroleum marketers left at their mercy.

Disenchanted by the turn of events some major oil importers and marketers have accused an unnamed clique within the corporation of feeding fat from millions of litres imported into Nigeria through the daily collection of $500,000 (about N75 million) cut from international commodity traders, comprising Trafigura, Glencore and Vitol to sustain the importation contracts awarded by its subsidiary the Pipelines and Products Marketing Company Limited, PPMC.’

The marketers also claimed that given the current turn of events there is an impending scarcity of petroleum products, adding that the corporation cannot attend to the growing petroleum products needs of the citizenry.
In a reaction, Dr. Levi Ajuonuma, the group general manager in charge of NNPC’s group public affairs department dismissed the allegations and described as rumour the insinuations of an impending scarcity of petroleum products.


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