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20 percent of oil subsidy unaccounted for, Esele

Peter Esele is the president general, Trade Union Congress (TUC) and former president, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN).  He is a key player in the oil and gas sector of the economy.  He speaks on developments in the sector and what government must do to propel rapid growth in the industry, especially in the area of deregulation of the downstream sector.

*Esele... The amount of waste in our system is too much

The Federal Government appears determined to deregulate the downstream sector of the economy to prevent leakages. How do you see this idea?

We want government to audit the template.  I can tell you categorically that the minimum of 15 will be taken from the N65.  What we don’t understand is why government does not want to audit the template. They make it very difficult for things to work the way it ought to in this country. As industry persons, we know the advantage that the deregulation has and we also know the disadvantage.

But what we are basically saying is, if government takes N15 out the current N65 we are paying, that brings the figures to N50.  If you multiply N15 by 30million, you will realise that N1gives you N30million per day and that gives you N450million in a day. And if you multiply N450million a day by 10, you will arrive at N4.5billion and if you further multiply that by 30days it will come to N13.5billion and multiply by 12 months will give you approximately N200billion.

Government says it wants to go into free market. If they venture into free market without auditing the template, the consumers would be at the mercy of the operators. Now, government said they paid over N300billion as subsidy. I can say categorically that 20 percent of this amount can’t be accounted for.  That 20 per cent is as a result of inefficiency, corruption in the chain. The amount of waste in our system is too much.  For example, NNPC gets 450, 000barrels of crude oil everyday, now the 450,000barrels that are realised on daily basis are sold and the money is used to import petroleum products into the country.

The first thing is that NNPC has no business with middle men. Since they get 450,000 barrels daily, why do they still deal with middle men? At this point, what NNPC needs is offshore refining until the local plants start functioning. Any refinery that knows it is getting a supply of 450,000barrels per day will jump up.

If you also look at other bye-products, because we only look at a barrel of crude in terms of fuel, diesel and kerosene, in reality, a barrel of crude oil is a lot more than these three basic things.  It has chemicals and other bye-products, even sometimes you discover that your shoes and hair shampoo are bye-products of crude. So, what NNPC is expected to do, is to get offshore refinery at what price they want. It is possible that if they go this way, after factoring the bye-products, there would be huge difference and the economy will improve greatly.

It is not even a matter of labour now, government should be happy when labour comes out to say what it has to say.  We often come out with our points to tell government what we want for the masses. If government deregulates without proper management, there will be anarchy in the society. Government also says it wants to go according to the international price. Is government saying that if the price of crude gets to N200 or N300 per litre, it will tell Nigerians to pay that money?  So, common sense must be applied in this thing.

These are the fundamental issues we keep telling government. We know what this subsidy is doing to the economy.  But deregulation must be done properly, in a way that people will feel the impact.  That is why we are talking about a functional rail system. We know that rail network can not be ready by next year.

It can’t even be done in six months. But, we want a commitment. Government said they are buying coaches and they are buying 19th century coaches at this digital age when other countries are going express, Nigerian government is taking us back to analogue rail system in this 21th century. Well, that is what you get when you have many analogue people in a digital age.

Just look at what government is buying for a rail system in this digital age. Some ugly funny looking coaches, that even the Chinese themselves are not using.  Government is bringing these ugly coaches into the country without considering the environment. Which part of this country can you go by rail, none.

Economic development is composite. That is why I have tremendous respect for Lagos State government. The governor of Lagos said he wants to make Lagos a mega city and he immediately started doing things that could transform the state into a mega city and now you have a complete change and everything now works in synergy in Lagos.

Labour wants a rail network that would transform the economy, improve the transport system in the country. For instance, if I leave Port Harcourt by 12 noon for the stadium in Abuja to watch a football match and by 8pm l’m on my way in the train back to Port Harcourt the same day. Frankly speaking, the plan for rail network has been in the pipeline since the time Ibrahim Babangida was in power.

Infact, a particular company mapped the entire country and connected the whole nation by rail. They even said they could generate power by themselves. They started the coal in Nassarawa and Benue states, because that is what they wanted to use to generate electricity. The amount of power generation capacity they needed for the project was just 4,000 mega watts (MW), but they said they could generate between 10,000mw and 20,000mw. So, if they had generated 10,.000mw, they would have taken what they needed and give the remaining 6,000mw to, NEPA which is now Power Holding Company of Nigeria (PHCN). What were they asking for? 40years right to build, operate and transfer (BOT), after which ownership reverts to government even though government would not put any money in the project.

But now, where are we? Government is now quoting billions of Dollars for a project that the private sector can drive.  What government needs in a situation like this is to provide the regulatory policy framework, not putting down money. We have the population and there is no greater agent for national integration than the rail system. The rail system in China moves on the average more than 17 million people everyday.

If Nigerian government has a functional rail system and wants to sell a litre of fuel for N200, who cares.  I will pack my car and go by rail until the price declines. Government does not need too much money to develop the economy, all it needs is vision, political will and commitment to bring the vision to reality. And commitment comes with discipline as a people and as a country, which is lacking at the moment. Look at Nigeria Telecommunications Limited (NITEL), for instance, government could not sell NITEL, instead they are selling what is productive. There are three basic things we can learn. First, if we can’t invent, we can copy, if you can’t copy, you can imitate, very simply and if we lack these three things and we have the resources, then we buy.  That is what the Arab states are doing.  For instance, someone went ahead and turned desert into a good place, that is where our leaders are now going to acquire real estates.

But Dubai in the 70s, nobody wanted to go there.    But someone came up with a vision on what he wanted to turn Dubai into and that was what he did. Now government wants to borrow over $700million to pay for deficit of the 2010 budget. Public officers alone cost approximately N1trillion. That is outrageous and not good for a growing economy like Nigeria.

Government has said that it would soon come out with a blueprint on how to develop the power sector to increase generation capacity.  Do you see it working out?

It is only blueprint? Let government also come out with red, green or even yellow print. The bottom line is for us to ask government, since 1999 till date, how many mega watts has it added to increase capacity?  Before taking about a blue print, government must first of all look at what it has done from a particular period to another, the challenges encountered during that period and how it will improve. It is true that power plants take a long gestation period. But what government should do is to multiply the capacity from the existing plants. We have rivers, dams and can also get power from hydro. Nigeria is the only country in the world where power plants are built without adequate gas supply to power them.  The president will go and commission a plant that has no source of gas supply to function. Yet, Nigeria is supplying gas to West African Gas Pipeline in Ghana and Togo.

They give what we don’t have and import what we have. Nigerian situation has become like this. We have abundance of crude and we are importing petroleum products. We have abundance of gas to supply other countries, yet our own power plants do not have regular gas supply to power them.  Domestic gas is also lacking and it is not affordable by the common man. Government promised us what it was going to do in 2007 but failed to deliver.

Last December, the same government promised to give us 6,000MW and could not meet the target. I have learnt not to take whatever this government says into heart, so that I do not suffer upset or surprise.


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