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.

They tell us that in a fully deregulated downstream sector foreign investors, who have been suspicious of the Nigerian market, will be encouraged by a better pricing regime determined solely and fully by market forces. Marketers in the downstream sector will also be happier as the margins of profit will increase. The Federal Government under the new dispensation wants to privatise the country's four refineries, and it is convinced that investors will jump at the opportunity. To please us, they say as investors make more money, pump prices will reduce and the scope of price differentials will widen, enabling choice. But what is more important, the profit motive of investors and marketers or the interests of the Nigerian people?

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.

Robot  # 1 | 01.03.2009 07:46

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...Read the full article.

konkomitant  # 2 | 01.03.2009 08:34

Lamentation! You better be a prophet, otherwise I don't see why you should be trekking because 3 Naira is going to be added to the pump price. So, why did the marketers refuse to reduce the pump price to 65 Naira? The oil companies that are benefiting from the current system of subsidy are the one complaining to Financial Times about the dangers of deregulating the industry. Privatise the refineries and stop wasting money on it without any tangible result. Deregulate the industry. A lot of countries I know are getting taxes from the petrol pump instead of burning billions through the exhaust pipe. I am not a Chicago Boy, but the current mode of operation is just not right.

LAN  # 3 | 01.03.2009 09:06

@Konkomitant The writer is sceptical that FULL deregulatrion will ultimately pass hardship to the masses. The savings of N640billion that Govt. is talking about will as usual end up in private pockets. From perspective of firms and small businesses, it will be difficult to plan because prices of fuel will highly fluctuate due to total deregulation; companies may prematurely close shop due to sudden jump in prices of fuel. This is the way I will like you to see it. Also, the tax you mentioned will still not be spent on infrastructures, it will be packed in Ghana-Must-Go :D Hope you get it

LoveNigeria  # 4 | 01.03.2009 09:38

=Robot;331610>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. .........Read the full article. Worse still, I foresee the price of oil will go down to $20+ a barrel sometimes in '09. Hard to predict exactly what will happen when people are pushed to the wall -but it's never pretty. Welcome to the beginning of the end. Everyone will share the pain one way or the other -even in diaspora. Our native villages may turn out to be the safest place to live eventually. This might actually lead to the revolution some people at NVS have been talking about. Perhaps we'll see sample if the PDP rig the rerun in Ekiti.

konkomitant  # 5 | 01.03.2009 10:58

Abegi, my people, rest that case. Make them deregulate make we see wether the whole Nigeria will go bankrupt. You people cry wolf wolf, but I can't see any wolf. Did you read that in Ghana, petrol sells at 92cents/litre, that's after tax of 47.5cents/litre? While in Nigeria the same petrol sells for 51cents/litre after subsidy. So where's the subsidy money going? Private hands or ghostly hands. Let's wait and see sha.

Tafia  # 6 | 01.03.2009 12:18

for me, na the "stoning" part na him konsan me; wen we go start? The whole idea might be intended for the greater good but the savings from deregulation is likely to go the way of public funds. But beyond all the rhetoric is the fundamental question; what can we do about it when our systems of socio-political/social regulation are hijacked and parvenus and chalatans hold us hostage? When we can answer this question personally and in our small groups, is when we really begin.

Enyi  # 7 | 01.03.2009 13:19

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? This is a pertinent question that FGN should answer. Can we for a minute ask why US and EU countries have not withdrawn agricultural subsidies despite the prevailing global economic crisis. Can this be related to the fact that these countries have leaders that were truly elected and not selected in a do or die affair? Why are the Middle-East countries not considering increasing fuel price? 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. This is a valid point. Muhtar says privatisation of the refineries is important and that government is determined to get it right this time. We must be very careful with this. In any case, why can't the government run these as profitable ventures or in partnership with the private sector? Rather than full privatization of the refineries, the government should encourage individuals to set up refineries. We may not necessarily end up trekking but the fact remains that an increase in fuel price will trigger off increases in cost of transportation, food, manufacturing, house rent and a host of others. A government is supposed to ameliorate, not exacerbate, the plight of the citizens.

Danmeka  # 8 | 01.03.2009 19:49

Please read this book "The Next Gulf;London, Washington and Oil Conflict in Nigeria by Andrew Rowell, James Marriott, and Lorne Stockman (Paperback - 3 Nov 2005). It's a must read for anyone looking to understand Nigeria's myriad problems. It shows how the political profiteers, the swindlers, the men in high and low places with their foreign collborators are trying to fully deregulate the downstream sector and remove the remaining subsidy on petroleum products just tells us our greedy our political elites have become.They would use any means to protect their status quo even if the Nigerian millitary fails they would use Foreign based private security outfits to protect their oil interest in the Niger Delta The picture gets even clearer.

kvin33  # 9 | 01.03.2009 22:55

The late Sonny Okosun once asked "Which way Nigeria", but a more important question may have been: How long can this continue? Can Nigeria continue on its current path for the next 10, 20, 50 years? If so what will it look like? If you ponder this for a few seconds, it will become clear that it is bound to come crashing down, maybe in 5 days, 5 months, or 5 years but definitely. Oil benchmark 2008 budget, $53, 2009 budget, $45. Oil price expected average 2009, $43, current price $44. Nigeria OPEC quota cut 13% to 1.67 million barrels. Clearly we have a problem. Removing the subsidy is a major change but a secondary effect. Note the pump prices will not just rise it will fluctuate wildly. Serious as this is, it is but a symptom of a massive underlying problem that serious people are trying to manage. Nonetheless, this is clinical insanity! These people are mad and must be removed from their positions before they kill us all. The way to destroy a country is to induce them to destroy themselves -who are these mad people listening to? The giant sucking sound you hear is the pocket of all Nigerians being drained. Starvation on mass scale is about to be unleashed across the country and these men are making academic arguments. This is incompetent economics, we have set the fuse that will blow up Nigeria. I guarantee you, this is the end. Nigeria is finished. The final phases of the collapse has begun, and it will proceed to its logical conclusion. At what speed, one cannot say precisely but it will continue, sector by sector, month by month, the collapse will be complete and it will be unstoppable. Take the banks, the balance sheets of all the major banks have gaping holes. These banks are technically insolvent. If these banks honestly write down their losses, depositors will find out in short order that their money is gone. For instance, look at the direct and indirect investments in the stock market where prices were artificially driven to unsustainable levels, this has resulted in massive margin loan losses for the local banks as prices deflated over the past 24 months while foreign capital fled. FG bailout will bankrupt the country therefore is unlikely, IMF bailout is undesirable. In addition, the massive collapse in oil prices in the last 20 months has led to significant revenue shortfalls for both the FG and all states. As a result, states will either have to slash jobs, or cut pay, or default on their debts to the banks. The extra liquidity provided by the central bank to offset some of these losses over the last 12 months has resulted in a 20% depreciation in the Naira exchange rate with gold, foreign currencies and local purchasing power (price inflation). Clearly, that was not enough as further layoffs, austerity policies are being instituted to tax Nigerians to death. Subsidies are being lifted, capital contracts will be cancelled, strikes will paralyze education, transport fares will sky rocket, food prices will chase the dollar and still it will not be enough. Non-security government services, then security services will be cut back. Riots, clashes will erupt all over the country, of course we'll be told it is tribal, religious, anything to distract from the incompetence and mad men who will run us to the ground. Take remittances, If you look at remittances which ran at $18 billion last year, 90% of which came from the west including over 50% just from the US, the center of the global credit crisis. The south, especially the south east survives on these remittances. A decline of 20%-40% over the next 12 to 24 months coupled with the exploding prices as the Naira plummets, will set the stage for a major catastrophe. In the west, population flows toward Lagos from all over the west and mid-west will swamp and overwhelm the city state, anarchy will reign. Take Northern Nigeria, the problem in the north is scary. Many northerners have been reduced to the level of human cattle by a bunch of mad men who think they are God. In their quest to maintain power, less than 500 families have systematically looted the people of their wealth, their history, their future. Induced a gigantic population to set themselves on a path to destruction, to abandon all industry, trade, commerce, education, everything in exchange for an imperial system of dependency that is unsustainable and immoral. Genocide in the old eastern region is used to maintain this unholy system of mental slavery, but it has come to an end. There isn't enough money to go around! There is only but so many easterners to kill before you'll have to feed your people, when you can't, they'll turn on you. When that time comes, many will stand with the masses in the north. Look at Jos, Bauchi, Adamawa is about to blow. One by one, and it will escalate in the coming months. The true revolution some of us have been waiting for must start in the North, anything else is just a joke. Watch the headlines as they chronicle the collapse of a nation. In the end, the scarcity of food will be the unstoppable force that will bring this era of governance to an end. 140 million people without food and "governors", "senators" etc think they will enjoy their loot, ha! These people should read up on the french revolution. My people, there will be blood. Judgement day is here. The time to plant is over, now we reap what we have sown. No retreat, no surrender. In the next 12 to 24 months, Nigeria as we have known it will cease to exist!

akuluouno  # 10 | 02.03.2009 08:40

Na waooh. Some optimists argue that the deregulation is a vicarious outcome of the global economic meltdown.:kiss:

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