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DEREGULATION TANGO – Lamentations of Dr. Barkindo (NNPC/GMD)

By Adisa Adeleye
Of late, the Group Managing Director of NNPC has joined on the side of the protagonists and the apostles of Deregulation of the Downstream Sector of the Nigerian Oil Industry.

This is surprising, if not amusing, because the NNPC itself by its operation, has led the government into massive importation of a commodity profusely produced at home.

The debate has been cleverly shifted to the money pocketed by the licensed importers of petroleum products only, thus making objective critics of deregulation as presented by government, look like unpatriotic citizens.

Subsidy of the petroleum products has acquired such notoriety that the government or its agent might be caught unawares in its cheap propaganda to mislead the nation. There is nothing wrong with subsidy if the government is sincere about its objective.

I believe in the sincerity of the then military government of the 1970s in introducing subsidy into oil operations in the belief [ even if erroneous ] that uniform price of petroleum products would encourage and ensure even economic development of the country.

To ease availability and distribution of products, more refineries and many depots were built and pipelines were constructed in many parts of the country. Also, to minimize subsidy [where it is absolutely necessary], Price Equilisation Fund (PEF) was introduced.

It was a simple device – it took care of distribution envelopes, zones and distances between the supply sources and the consumption zones. The magic is that, if you take from a source of supply, you pay a token sum into the Fund, if you move products into the hinterland, the further you go, the more the allowance you get. The arrangement worked until the whole system broke down.

The NNPC whose responsibility is to ensure free flow of products could not do so because its refineries were breaking down constantly and when operational, were working at less than full capacity. The amount in the Fund could not sustain the allowances due to oil marketers moving products to the hinterland.

The unhappy scenario continued until the refineries collapsed and the surging demand has to be met by massive importation which has necessitated higher movements of prices, especially the white products – gasoline, diesel (gas oil) and kerosene.

In analyzing the problems of the downstream sector (or NNPC‘s own failure), Dr Birkindo came forward with a strange but irrelevant theory that ‘in all developing countries, their national oil companies operate across the supply chain, including the strategic downstream sector and it is not only seen from commercial perspective but also from national security implication‘.

One fails to understand the specious argument of Dr Birkindo in the context of NNPC as the sole supplier of petroleum products before the free for all importation policy approved by NNPC. The NNPC controls all the four refineries, it controls all the supply depots and it gives the marketers only discounts from government fixed prices.

If the NNPC which at times, acts like commercial outfit, and most of the times, as a government agency, could not perform its allotted functions effectively, who is to blame? The oil marketers or hapless and impoverished citizens?

Perhaps in his carefully guarded speech, Dr Birkindo has pointed out the deceptive action on deregulation when he said; ‘you cannot hand-over that sector to a group of people, private individuals, whose political coloration you cannot predict, cannot predict the decision they make, take and the implication of such decision‘.

There is little doubt that the Group MD of NNPC does not support free enterprise or private initiative in the petroleum industry but complete government involvement. Dr. Birkindo appears to be either a very poor student of history or a discoverer of deceit, however, cleverly covered.

Some decades ago, the government took 60 per cent shares in the major foreign oil marketing companies – Shell, Mobil, Total, Texaco, AP, Agip and Unipetrol (100%) and in 1977, NNPC formulated that policy of licensing indigenous private entrepreneurs as Independent Marketers. These are patriotic Nigerians involved in petroleum operations.

It is not a long time that the governments divested their interests in oil marketing companies. The question is, WHEN DO NIGERIAN OIL MARKETERS BECOME SABOTEURS whose ‘political coloration you cannot predict? Does it mean that all Nigerian Oil marketers should carry party badges to ensure their loyalty to the government in their day to day activities.?

Nigerians should be told that before the creation of NNPC, supply of refined products [prior to 1963 when Port Harcourt was built], was mainly from imports. Marketers jointly built installations and depots close to the jetty or what later became known as the Oil Marketers Jetty.

An interesting pipeline network was built from the jetty to carry different grades of petroleum products to the individual storage tanks of the marketers within the installation.

[Today, there is the NNPC AtlasCove Jetty and many private jetties]. Refined petroleum products were then distributed from the marketers‘ installations to the rest of the country in Bulk Road Vehicle (BRV) and Rail Tank Wagon (RTW). All major oil marketers have rail sidings to their installation/depots – all these have disappeared with the appearance of NNPC jetties and depots.

It is also to be remembered that in 1963, the privately owned Port Harcourt Refinery [Shell/ BP] handled internally consumed products. Under its production pattern, each marketer brings its purchased crude, refined it according to its own required products specification, pay refining fees and carry its products to its assigned depots and send them to its outlets.

Then the distribution and movement of refined products was from South to the North and that was reflected in the different prices of products in the different parts of the North, until the introduction of Uniform Price and now, the regime of oil importation.

In my Layman‘s view, the new National Oil Company (if NNPC is scrapped) should limit itself to the upstream sector (exploration and production) while its self sustaining subsidiary should compete in the downstream sector with other marketers under a level playing ground.

This, after the supply problems – ailing refineries and rusty depots – have been sorted out with existing oil marketers and government had improved road and transportation infrastructures.

Hasty deregulation is an invitation to economic disaster. Dr Birkindo and his NNPC has a major role to play in the transformation. There should be no romance with the past gloomy period of absolute government control.


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