Soon, We Shall All Be Trekking
By Reuben Abati
It must be a joke, right? The proposed plan by the Federal Government to fully deregulate the downstream sector and remove the remaining subsidy on petroleum products. When the news first broke during the week, Nigerians were told that a committee had been set up to be led by the Governor of Bauchi State, Isa Yuguda, with a mandate to work out an action-plan and a time-table for implementation and consult with stakeholders.
The mischief and dishonesty are obvious: why set up a committee to seek the input of stakeholders when a final decision has already been taken? By yesterday, The Saturday Punch newspaper had reported that a pump price of N73 per litre may be announced within a week. The assignment of the Yuguda committee had been completed even before it had a chance to sit. A Petroleum Industry Bill, and another bill seeking to change the Petroleum Producta Pricing Regulatory Agency (PPPRA) template have also been sent to the National Assembly. Why not wait for the bills to be considered by the National Assembly?
The so-called complete deregulation of the downstream sector and the removal of subsidy may seem like a purely economic policy decision, but it is so tied to larger Nigerian questions that it ought to be more rigorously debated, and government should make haste slowly. As at this moment, Nigeria operates a partial deregulation regime in the downstream sector. Petrol and kerosene prices are regulated while diesel is fully deregulated. The regime is corruption-ridden, it is badly managed. There is no indication that a complete deregulation regime will be better managed. The problem is not one of form, but leadership.
The arguments being advanced to justify the proposed full deregulation do not make sense. All the arguments have a ring of deja vu. They are taken from the same textbooks that the economists have refused to update, the same ideas that led to the collapse of the global economy. Other countries are making a U-turn and subjecting textbook knowledge to the test of reality, Nigerian policy makers are still holding on to old paradigms. One of these days, we shall start stoning the economists in official corridors.
Deregulation will not automatically guarantee the happiness of marketers and investors. Who wants to buy Nigeria’s run-down refineries, with their obsolete technology anyway? And if anyone does, the profit that they seek will be automatically abbreviated by other challenges in the environment including transportation and the violence in the Niger Delta. I’ll like to see those investors who would like to take on the refineries in the Niger Delta at a time when oil mutlinationals are scaling down operations and relocating their expatriate staff due to the menace of kidnapping in the Niger Delta. Besides, the Nigerian investment environment is unstable and uncertain and it is increasingly so. What if another government shows up in the future and introduces a different policy? Full deregulation as proposed translates into only one thing: higher pump prices of petroleum products and greater hardship for the Nigerian people.
It is curious that the recommendation is coming from the Federal Government Committee on the Global Economic Crisis. Elsewhere, recession has resulted in government becoming friendlier towards the people. Countries are introducing packages to stimulate the economy and to inspire hope. Prices are being slashed in order to encourage more spending, government is intervening to play a bigger role in the lives of the people in order to save nations from anomie. These same blind market forces that Mansur Muhtar and co are reinventing as the cure-all for the downstream sector is the devil in the global economic setback. Don’t they know this? If PMS now goes up to N73 per litre, with the Naira exchanging as at yesterday at N173 to the dollar, with the stock market now a penny shop, with no regular power supply and no jobs, starvation wages are still being paid, companies are cutting jobs, and public officials are living large and bank directors are junketing about like a yo-yo in expensive jets, and the refineries are down, and there is very low capacity utilisation in the real sector, the only losers will be ordinary people. What should come first: full deregulation or house cleaning? I think the latter.
One major excuse offered by the Minister of Finance is that in the face of huge budget deficits, the Federal Government can no longer sustain an annual subsidy of about N640 billion in the downstream sector. In the past three years, a total of N1. 6 trillion has reportedly been spent. The question to ask is: How? Where is this subsidy that government talks about? How was it disbursed? It is not enough for government to talk about huge subsidy, it must explain what constitutes that subsidy. Now, they argue that if government can have access to this N640 billion per annum, it can then use it on infrastructural development. Well, we have heard that before.
It was the same argument that was used to raise the pump price of petrol from N11 all the way to N70, that was in those days when they used to tell us that a litre of petrol in Nigeria was cheaper than a bottle of Coke, and there has been no improvement in the quality of infrastructure since then. Muhtar says privatisation of the refineries is important and that government is determined to get it right this time. The Group Managing Director of the NNPC, Mohammed Barkindo says with local refining, cost associated with importation will be eliminated and retail prices will become cheaper. We don’t think so. Because even if all the refineries were to work at optimal capacity, Nigeria would still have to import refined petroleum products to satisfy local demand. And can anybody rely on government’s promise? The reality is that Nigerians no longer trust their governments.
The Minister of Finance put his finger on the matter when he lamented that the bane of the oil and gas sector is that government has been subsidising inefficiency and corruption. The PPPRA is to be reviewed because under the new arrangement, its role would have to change, but even more so, the Federal Government says, the body has been compromised. Also, the rehabilitation of the refineries, we are told, ended up putting money in private pockets, and so the Federal Government does not intend to spend one extra kobo on those refineries anymore. If the government knows all of these, why is it lamenting? It should immediately arrest those who have encouraged the inefficiency in the PPMC, the NGC, the NNPC, the PPPRA and let Nigerians know who and how the subsidy of N640 billion vanished annually without any impact on the economy and the people. The Obasanjo government once tried to audit the accounts of the NNPC. It couldn’t come up with reliable figures. A proper audit of the present, operative template is advisable. Yes, there are leakages, but what exactly is wrong? First, the Federal Government must determine the actual cost of petroleum products, from production to the market. This will enable it to know the exact amount of subsidy that is required, and exactly how much has been frittered away, and by who. Perhaps if it knows the actual required subsidy, and plugs the leakage pipes, it may be persuaded to seek scapegoats elswehere. Second, sanctions must be meted out to the saboteurs when identified. Into whose pockets did the N640 billion disappear every year?
It was further argued that government intends to ensure open and free licensing in the downstream sector in order to break an existing oligopoly. But, if we may ask, who are the members of the cartels that Mansur Muhtar is complaining about? Can they be named? Could they possibly be the same persons who donate money to PDP political campaigns, or Presidential libraries and who are so neck-deep in PDP politics that their names show up every year on the National Honours List for services rendered to (sorry, for damages done to) Nigeria? Independent marketers in the downstream sector complain daily about the dominance of these powerful forces who alone exercise an undeserved monopoly in the sector. Is there any guarantee that government as it is can protect a regime of free competition? With 2011 around the corner, won’t the Yar’�dua government still need the cartel in the downstream sector when it decides to raise funds for a second term project?
Again, government wants to do offshore refining. This had been recommended many times in the past, but even if the option is now adopted, has government thought its way through it? Or has this been thrown in merely as a convenient slogan after a fashion? To further simplify this matter: by cancelling subsidy for petroleum products, government wants to free more resources for its own use. I don’t want to believe that the Nigerian government is cash-strapped. Is this not the same government that returns unspent money every year to the treasury? And if the lifestyle of government officials and the politicians is any measure of reality, government remains the most profitable business in the country today. If the Federal Government is looking for more funds, why doesn’t it look elsewhere and try to cut its own costs and reduce the extravagance of government?. A salary cut for public officals was proposed recently, but one after the other some state Governors are already saying: “Pay cut? Count me out?” Why don’t they cut the fat allowances and estacodes then? And strengthen the mechanism for checking corruption in official corridors?
About a month ago, the PPPRA had suddenly announced a surprising reduction in the pump price of petrol, from N70 per litre to N65 per litre. With the present development, it is now clear that government was playing games with the feelings of Nigerians. The reduction was meant to last for one month only. A month later, now the plan to remove “subsidy.” The Nigerian Labour Congress has said that it will resist any increase in the pump prices of petroleum products, but it should do more than that. It should provide strong counter-arguments to expose the folly of the proposal and the wrongness of the timing. The National Assembly should be persuaded to act in the interest of the people and say to the Federal Executive: “No, not now”.
Other countries of the world provide subsidy for their citizens. Nigerians ask: if they remove petroleum subsidy compeletely, then what is it that we are expected to enjoy as citizens? Yet, Nigeria is a petroleum producing country. The Global Recession Committee should take another look at its proposal, it should pay clozse attention to public responses. No matter how attractive the removal of subsidy in the downstream sector may be, this is not the time to do it. And this is not how to go about it. Now again we pay the price for poor leadership. What is being planned is provocative. It is an invitation to chaos.