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Why deregulation is the way forward

   By Kunle Fafiada
From the portents and  signals, Nigeria seems not far from the throes of another contrived eruption. Already, there’s a lot of sabre rattling that reminds one of those days in school when the aluta continua slogan was ‘we no go gree o, we no go gree!’ Self appointed champions of the people are already positioning themselves for talk shows, interviews, even street demonstrations where they will rail against the evil of deregulation.
In truth, they are not all doing this for the purpose of self aggrandisement. A lot of them are well intentioned but merely ignorant of the facts. They are understandably unhappy that ordinary Nigerians are holding the short end of the stick in spite of Nigeria’s massive oil fortune. They do not like the perennial tag of Nigeria as underdeveloped. They believe it is unfair for government to abdicate its role as both sole operator and regulator of the petroleum downstream sector. All things considered, nobody can convince me that everyone not in favour of deregulation is an enemy of Nigeria’s progress.
I maintain it’s more a matter of facts available and how open minded we are.

It is also about a good understanding of our recent history and a rigorous analysis of our current position vis a vis other oil producing nations. If we do all of that, we are apt to find out that we will remain perennial losers if government continues on the populist policy of oil subsidy.

I will even go so far as to say that government, by its lack of political will all these years to effectively deregulate the downstream sector has been patently unfair to Nigerians.
How do I mean? By refusing to do what it ought to have done so long ago, Nigeria has been moving around in circles, not making any progress whatsoever.  Because every time prices of petroleum were increased, subsidy was retained, we have a situation on our hands where government has found it increasingly difficult, owing to budget constraints, to develop or even sustain Nigeria’s infrastructure.

The roads have stayed deplorable, power has acquired the adjectival epithet epileptic, water has become, if you like, deregulated by force (individuals sink their boreholes and sell water to those who can not – water corporation can keep its water, thank you!), many schools are in bad shape while teachers are carping about poor salaries; many hospitals are unwitting sights for sore eyes, the railways are grounded; you can go on ad nauseam.

Our well intended progressives need to take another look at the facts and change their minds. The fact is that Nigeria is losing too much to subsidy.

The fact is that the subsidy does not trickle down to the common man. Facts from government agencies reveal that over N 1.2 trillion was spent on fuel subsidy between 2006 and 2008. Can you imagine that? Now, if you check our budgets for the same period, you would find, to your consternation I assure you, that N 1.2 trillion is 117 per cent of the entire moneys budgeted for Power, Transport, Aviation and FCT Infra structural Projects.

It is also 186 per cent of the entire figure budgeted for critical areas like Health and Education and other Millennium Development Goals Projects. How can any country in its right mind, with the right people at the helm spend more money on subsidising one industry than they spend looking after the health and education of its people as well as its infra structural development? Failure, the kind we have experienced through the years, is the end result of that kind of policy.

Now, where does the fuel subsidy money go to? Presumably, it’s supposed to help keep down prices of petroleum products, so that for instance all over Nigeria you can be sure to get fuel at N65.

Well, in spite of the subsidy all these years, how many times have you bought fuel at the same price in Lagos that you could buy it in Enugu? Or Minna, or Maiduguri, Kaura Namoda, Mbiri, Ikot-Ekpene, or Port Harcourt, Ihiala, or wherever. Prices are hardly ever the same.  At various stops, marketers up their prices, in spite of the subsidy. In fact, if our press men visited the hinterlands more often, more Nigerians would have been aware of this fact and just maybe there would have been organised demonstrations against this ‘injustice’ of fuel marketers despite the massive subsidy.
Add to this is the issue of scarcity.

 It has become unfortunately, a sad reality of our times. For a country desirous of becoming a permanent member of the UN Security Council, that is a sad picture. Think of the man hours missed, the aggravation and even the sheer embarrassment of fighting with touts for fuel. That is not to mention other indignities that accost the common man such as inability to cook the daily meal due to lack of kerosene.

Rather than fight deregulation, men of goodwill ought to thank government for admitting to its inability to manage the oil industry as both operator and regulator.

Aren’t you angry every time you remember that we have four refineries and all they can do is produce a grand total of 10 per cent of Nigeria’s fuel consumption? Imagine the billions that have been spent in turn around maintenance which came to nothing. Imagine that thousands employed by these refineries are most times idle because the refineries are idle. Yet, government must pay them at the end of every month. And where does that money come from?
No doubt, the case of the oil workers is a major reason why some people are against the policy of deregulation.

 But just think about it. The oil industry is still relatively closed in. The new operators would have to source from the current crop of oil workers for them to commence operations.

These new hires will command better salaries.
In fact, one thing government can do under the regime is to put the local content issue on the front burner insisting that Nigerians must make up a specific percentage of downstream operators’ staff strength, and they must also be a specific percentage in the technical area of the operations.
This is the only way Nigeria can become masters of their, if you like, oil destiny.

Kunle Fafiade a freelance journalist wrote in from Lagos
Anybody still afraid of deregulation only needs to look at the telecoms sector where NITEL used to be the alpha and omega until the previous government decided Nigeria was ripe for private participation. The difference between now and the days of NITEL monopoly is the difference between night and day. Not only is communication a lot easier, it has become cheaper, less cumbersome and no longer a status symbol.

Whether we believe it or not, market forces (allied with government regulation, of course) help bring prices to their realistic value. And although prices tend to be steeper than under a protectionist regime, additional competition – and not to discount regulation – helps drive prices down eventually, while upping value derivable.

Additionally, I am personally tired of Nigeria importing fuel. How can we be the 8th largest producer of oil and be one of the major importers of refined oil? If deregulation will bring in the players who will build refineries that will serve our domestic needs,

I am all for it. If it will make fuel available nationwide and eliminate black markets, I am all for it. If it will create jobs like it did in the telecoms sector, I am all for it. If deregulation is what we need to free up funds for infrastructure development, I am all for it. I may not know all there is to deregulation, but my understanding of the inefficiencies in the downstream sector and how they can be plugged has convinced me at least to give deregulation a try.

There’s a whole lot of money locked up in the oil industry which needs to be opened up for the masses. Who could have predicted where the telecoms industry is today? How many people remember where we used to be? Suddenly, a lot of young upwardly mobile Nigerians have emerged from that sector and strengthened the re-emerging Nigerian middle class, the bedrock of every society’s progress.

The oil industry, being the source of 90% of our foreign exchange is an even greater bet to deliver more Nigerians out of poverty and ensure they live better, more productive lives.


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