D-E-R-E-G-U-L-A-T-I-O-N : Distilling Facts From Fiction
By Alabi Williams (Assistant Political Editor)
WHEN Umaru Yar'Adua was sworn in as President in May 2007, he quickly reversed the disputed sale of the Kaduna and Port Harcourt refineries, in the twilight of the Olusegun Obasanjo administration, to Blue Star Consortium, a firm of private investors. The former government, in the spirit of offloading unviable economic ventures, had sold a long list of investments in which the Federal Government had controlling equity.
The explanation government gave for embarking on sales of major public utilities was that they had become liabilities. For decades, these public institutions had been poorly and corruptly administered, to the extent that they could no longer function as profitable ventures, in spite of huge government funding.
But in response to the public outcry that greeted the lack of due process that had characterised the entire privatisation exercise, and the hurried sales of the refineries in particular, Yar'Adua ordered a reversal of that action, and promised to revisit government's divestiture policy.
The action left a strong impression that, perhaps, Yar'Adua would listen to the people and lessen their economic woes.
In the eight years of the previous administration of the Peoples Democratic Party (PDP), the most constant economic policy of government had been the regular increase in the prices of petroleum products. It is on record that prices of petroleum products were increased for a record 13 times under President Obasanjo.
The argument had always been that government was spending too much money to subsidise the importation of petroleum products. Even at that, as brutal as that regime was, it did not summon the courage to introduce full-blown deregulation in the downstream sector of the oil industry.
From the look of things, President Yar'Adua seems on the verge of reversing himself. Not only has his government been unable to fix local refineries, which he is reluctant to give to private investors to acquire for optimum performance; he also wants to be on record as the President under whose tenure total deregulation of the downstream sector was implemented.
According to government, deregulation, as a policy, would allow private importers and marketers to make petroleum products available to the people at prices to be determined by market forces. In that case, government would be saving about N600 billion annually, which it purportedly spends on subsidy.
The debate whether to deregulate is an old one. The Nigerian economy walked its way into recession since the early eighties and has not found its way out of it. The over-dependence on crude oil led to the gradual neglect of other sources from which foreign exchange could be earned.
And when the global oil market experienced severe glut, the economy became endangered because oil was the leading export commodity. Austerity measures were then introduced to reduce government's recurrent budgets, in order to have funds for developmental projects.
Successive governments from that period had tinkered with various blueprints on how to fix the economy and had submitted to several recommendations from the International Monetary Fund (IMF) and the World Bank.
Privatisation and commercialisation, one of the end products of economics of liberalism, found its way into the country during the military government of Gen. Ibrahim Babangida. The idea was for government to mind its business of governance and allow the private sector to manage government's commercial interests.
Government's four refineries are in the category of businesses that have been frustrated and unable to perform at installed capacity. This poor state has left the option of fuel importation as a convenient alternative. Instead of refining locally and saving cost, the country has become largely dependent on imported fuel to meet local consumption. Sometimes, what is imported is adulterated and sub-standard. On this, no other oil exporting country, apart from Nigeria, has found itself in this embarrassing state.
This comes at a huge cost. Government now says it is tired of paying extra money on behalf of its citizens. After incessant fuel price increases by the previous government, the Yar'Adua leadership insists that as from next year, government, through the NNPC, would leave the business of fuel importation and pricing to the private sector.
Last Thursday, the organised Labour challenged government to a public debate on the issue of deregulation. As far as the Nigeria Labour Congress (NLC) and other stakeholders are concerned, government is simply talking to itself on this matter.
Already, there are jingles issued by government-owned media to convince Nigerians to accept deregulation. Information and Communications Minister, Prof. Dora Akunyili, has appealed to Labour to exercise utmost restraint over the protest on the proposed deregulation of the downstream oil sector. According to her, the Federal Government remains open to negotiation, debate and constructive dialogue on the whole issue of deregulation.
That is yet to be seen because, so far, there has not been any public debate on deregulation. Not even the National Assembly has been fully on deregulation. The last discourse on matters relating to reforming the petroleum industry was at the Assembly-organised public sitting on the Petroleum Bill.
Shouldn't a serious oil industry reform Bill take on all issues at both the up and down stream sectors of the industry? Why is government pursuing reforms in the National Assembly on one hand and acting unilaterally on deregulation? To test the popularity of deregulation, government should instigate a public sitting and listen to all sides.
Government, through one of its spokespersons, said in 2006, the entire PMS refined locally was 1.623 billion litres, while NNPC and other marketers imported 7.701 billion litres of PMS. In 2007, because the refineries were working at their lowest capacity, the quantum of their contribution to local supply had dwindled to 356 million litres of locally refined PMS, while NNPC and other marketers imported 9.867 billion litres of the same product to the country. Government said in 2008, 1.227 billion litres were refined locally with 10.867 billion litres imported.
"The big challenge has to do with the integrity of these numbers on which subsidy, amounting to hundreds of billions of Naira, are (sic) paid on a yearly basis and whether such opaque system should be sustained," the government said.
The fact that the refineries are not working points directly to the failure of government to apply principles of accountability in its businesses. And that government is not sure of the figures it is quoting again points to the fact that its claims on subsidy are dubious.
Government does not have the integrity and technological capacity to know the quantity of crude it exports and the quantity of refined products imported. Therefore, government should blame itself for paying huge and unverifiable bills to contractors.
In another vain attempt, government equally struggled to explain the need for deregulation because it alleges that some subsidised imported fuel find its way across the borders. Is it the fault of the citizens when there is gross failure on the part of government to check smuggling?
Government cannot even claim not to know the highly connected smugglers of petroleum products. In most parts of the Northeast and Northwest, fuel is mostly dispensed from surface tanks, while filling stations are largely empty. This is a thriving environment for smugglers. Yet, the NNPC and its relevant subsidiary know the number of litres allocated to these zones monthly or quarterly.
Government should be thoroughly worried that locally refined fuel is faked for imported so that subsidy could be paid on it. That is the hallmark of failure and the liability should be on those put in charge of these government institutions and not the toiling taxpayers. This is the position of Labour and other stakeholders.
Government also claims that it would now re-direct the fuel import subsidy to provide infrastructure for the people. This is another excuse that is hard to sell. There is a kind of government that will not be able to lift its finger even with all the money in the world.
This government promised to deliver so much in the 2008 and 2009 budgets. At the end of the fiscal year, monies are returned unspent, either due to lack of capacity in the various ministries and agencies, or owing to sheer bureaucratic wickedness. It is not likely that an additional N600 billion per fiscal year will do any magic for this government.
The deregulation programme is supposed to be in its last lap. So far, government claimed that kerosene and diesel have been deregulated. Yet, kerosene is a scarce commodity in Lagos, not to talk of other markets in the hinterland.
Marketers have expressed worry over the poor state of depots and pipelines. They also fret over the poor state of roads through which fuel is transported in the absence of reliable railway. They have list pre-conditions for deregulation. Government has not bothered, or is unable to tackle these pre-conditions. Will these conditions change overnight post-deregulation, or will the fuel importers be allowed, like the GSM operators, to add extra charges for failed infrastructure?
Petroleum Minister, Rilwanu Lukman, has promised that government would build more refineries. He, however, did not explain what will be the price differential between locally refined products from government-owned refineries and imported products in a fully deregulated regime. How do you segregate and monitor the two parallels in a porous market like Nigeria's?
Why is government insisting it would build more refineries when it should be selling the ones that are not performing? Is it mere political talk to escape prying eyes of a reluctant legislature?
Government's main concern seems to be limited to the issue of subsidy. It is true that the challenges in post-amnesty Niger Delta are daunting. Government needs resources to implement its numerous promises. It is also true that politicians will need resources to ply their trade between 2010 and 2011. But it will be unfair to deregulate and make life uncomfortable for millions at the expense of a few who feed fat on recurrent budgets.
