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Poverty and begging: The oil doom (7)

In response to my examination of the issue of poverty and begging in the country, I received numerous comments and contributions from readers. One of such was received from a young Nigerian named Okoli O.G. I found his view very enlightening and for this reason I have decided to publish some portions of it. He wrote as follows:

“After reading your article on “Poverty; The role of Government…” I felt compelled to send this piece I had written earlier, to you.
It is no secret that the average Nigerian is suffering from the many failings of the Nigerian Oil industry. These failings have directly led to the unavailability and in-affordability of petroleum products and indirectly has led to the loss of opportunities, extinction of jobs, and reduced economic returns for the government, among others.

“The first step towards the consolidation of the current progress within the Nigerian Oil and Gas sector is to re-evaluate the journey so-far. The result of which would set the stage for us to reinforce or improve on the strategies and actions that have yielded positive results, as well as, change or modify actions or strategies that have failed to yield the intended results.

To put this into perspective, the brief flirtation of Nigeria with recession is thankfully over. In line with the above, while we celebrate finally exiting the recent recession, it is important that we identify the mistakes of the past and how a country as blessed as Nigeria fell into recession in the first place. Then we can decide, looking at the facts, if those mistakes or deliberate errors have been corrected so as to avoid a repeat. It is also important to acknowledge that as a result of the currently employed policies that govern the Production or Importation, Distribution, and Sale to the final consumers of Petrol in Nigeria, the supply framework is rather too complicated and easily entangled in economic disagreements to be of any real benefit to Nigerians.

I therefore start the problem-search by stating that, chief of our problem is the attitude of our great nation and its managers to the Oil revenue. We have grown too reliant on the proceeds from this sector; an unfortunate circumstance that has led to an unhealthy addiction of the government (both at federal and state level) to “sharing the money”. This habit has so far discouraged states from passionately seeking greater economic independence from the federal government. Efforts of most states towards creatively generating local revenue are insincere or at best abysmal. Sadly, this also has led to a systematic abandonment of other important sectors and industries, leading to a gradual extinction of revenue generating opportunities, jobs, and important skill-set. ….
Devoid of ethnic, religious, or political affiliations, there is a common consensus on the fact that the status quo needs to change. It has to change for the better, for our economic fortunes to positively turn around.

Tried and tested

The consensus is therefore that we must embrace tried and tested world class solutions and in the same vein, abandon the “local” practices that have so far resulted in; recurring union/workers strikes, non- functional or underperforming refineries, un-affordability and unavailability of petroleum products to consumers, environmentally degraded and polluted oil producing communities, intellectual/skills drainage and migration, exit of foreign investments, a mass retrenchment or redundancy of workers, etc.

I therefore suggest a two-prong approach for tackling this challenge;
1. Firstly, that the pricing of petroleum products in the downstream sector of the industry be largely left to market dynamics with private marketers freely competing against each other for market share as successfully implemented in the Nigerian telecommunication sector. The government however would retain its oversight role/function.

2. Secondly, the NNPC maintains its 50-60% presence in the downstream sector & sustains a reasonable level of its product’s subsidization as an alternative to the common man; therefore serving as a government-backed active participant/competitor in the downstream market. This suggested subsidization is to be wholly financed by the interests of the NNPC with the economic intention not to incur losses but reduced profit margins.

Also, considering that a significant portion of the pump price of PMS is the cost of importation, storage, and other related costs, we must work towards becoming self-sufficient as a nation through increased local refining capacity.

With the first approach on one hand primarily focused on providing security as regards product availability, while also guaranteeing a best price scenario in the long term; resulting from a rapid increase in the rate of supply, unmatched by a more steady increase in demand. The second approach on the other hand is primarily focused on ensuring affordability by guaranteeing price security in the form of an alternative for the common man. All of these would once and for all put a stop to the incessant strikes and agitations of these oil importers, producers, or distributors as the problem had always revolved around profitability. The other benefits of these measures include that; it takes away from the government, the burden of subsidizing about 50% of the nation’s consumption need, while also arresting the fraud perpetrated by some of these marketers who export these subsidized products to other neighbouring countries (thereby contributing to commodity scarcity) or those that away from the prying eyes of regulators still sell at exorbitant prices. Also, this approach will serve as a welcome catalyst for further encouraging local private participation in the sector and as a result, the economic interest of the common man is further protected.

With this recommendation, the subsidised products would only be distributed at NNPC terminals/ Gas stations, at the fixed prices, and directly to the final consumers. All other marketers would source for and sell at their discretion but restricted by competitive market forces. In situations where the NNPC, through maybe its refineries decides to sell to other marketers, the commodity would be priced at the international or standard price (not subsidized and with all the factors and cost of production considered). These marketers also would be forced to sell at a fixed price that accommodates a reasonable and fair amount of profit.

Government’s role/function

In implementation, the Government’s role/function would include, but not be limited to: the discouragement of any form of monopolisation within the Oil and Gas sector/market through the enactment and implementation of policies that encourage small and medium scale private sector participation; the prevention of any manner of exploitation by petroleum marketers; and, the assurance of maximum economic recovery for the State.

Another recommendation has to do with the sharing of the oil revenue. The current system has largely encouraged two scenarios:
3. The looting and mismanagement of these funds at Federal, and State level.

4. The gradual abandonment of other formerly lucrative sectors leading to a gradual extinction of certain skills, opportunities, and jobs, and by extension, a lack of diversity in our economy.

The solution to this is to ensure that the proceeds of the Oil and Gas sector are strictly injected into building human capacity and boosting other important and profitable but less financially viable sectors such as Agriculture, Healthcare, Education, I.C.T., Sports, Entertainment, etc. Backed by the necessary laws and policies, the money should be invested and not “spent”, as is sadly the case today. By so doing, the government would have created various industries that in turn, create new jobs and opportunities, Tax returns for the government, and encourages Local investments.

Thank you very much indeed Okoli Esq, I hope that someday, those in charge of policy formulation and implementation will give our views some serious consideration.

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