Oil Industry Deregulation And Nigerian Economy

By Muiz Banire, SAN

One area of the economy in Nigeria that has been worrisome for
ages now is the petroleum industry. Like any other Nigerian, one is
worried about the state of our petroleum products pricing. For
years, the petroleum sector became the barometer to guage how much
an average Nigeria was suffering as there was perennial shortage of
supply of petroleum products to local consumers, thereby
necessitating long queues at petrol stations. This was often the
case any time there were agitations that there would be increase in
the pump price of petroleum products. In some of my write ups in
the past, I have unapologetically joined the advocates of the
complete deregulation of the petroleum sector.

Two main reasons account for my position: there is the need to
eliminate subsidy in the sector as it has become a drainpipe of the
nation’s resources and, secondly, to enable appropriate pricing of
the products. In this advocacy, I am not oblivious of the potential
hardship it would engender on the masses but I have suggested
palliatives that will neutralise the impact. For example, I have
contended that half of the savings from the eliminated subsidy be
redistributed by way of addition to workers’ emoluments while the
other half be applied to the provision of infrastructure that will
positively impact on the way of life of the masses. Regrettably,
this has not happened.

One is not oblivious of the fact that increase in the emolument
of workers has a tendency to jerk up the inflationary situation in
the country. It is apparent that consistent increase in the prices
of petroleum products without necessary cushion on the effects this
has on the workers and masses generally may lead to an uprising
just like what was experienced in January 2012. Unfortunately, the
various governments have used the issue of subsidy and the need to
remove same as points of campaign so that the people are tired of
listening to subsidy arguments anymore.

Since 1986, the various regimes have kept on removing subsidy on
petroleum products and it seems that this subsidy always re-appears
each time it is removed by way of increase in the prices of the
products. Just last week, there was an attempt to further increase
the price of petrol by the Petroleum Products Pricing and
Regulatory Agency (PPPRA).

This effort was eventually thwarted by the Ministry of Petroleum
through an overriding order. Notwithstanding this temporary
reprieve, the truth is that the increment will continue as the
current administration that led the stuggle against the continuous
payment of subsidy to marketers seems to have caved in on the
struggle and has increased prices of petroleum products more than
twice since it came to power in 2015. It is apparent that there
will be an increase, no matter what Nigerians do. From the
suggestion of the agency, this is necessitated by the increase in
the price of crude oil in the international market, a thing of joy
to Nigeria. While the logic, therefore, in the corresponding
increase of prices of refined products at the local level is
appreciated, my challenge with the whole process of importing
refined products is the exclusivity self-conferred by the Nigerian
National Petroleum Corporation (NNPC).

It is a sad epitaph on our collective underdevelopment that,
since the 1980s, Nigeria has been importing refined products from
countries like Venezuela; this process has not abated till date,
more than 30 years after. It is not surprising, since the
refineries in Nigeria have gone moribund, notwithstanding the huge
expenses incurred every year on their turnaround maintenance. It
does seem the refineries in Nigeria are white elephants that may
never come back to life.

Thank God, however, for Dangote; but I understand that most of
the products might end up being exported as contracted. On the 17th
day of March 2021, the Minister of State (Petroleum), Timipre
Sylva, was reported to have said at the 56th Annual International
Conference and Exhibition of the Nigeria Mining and Geoscience
Society (NMGS) in Ibadan, Oyo State, that there would still be an
increase in the pump price of petrol. There is speculation that it
would be increased from N162 to N206. While this is much expected
as the administration has never shied away from its inability to
redeem the promise that petrol scarcity would be a thing of the
past and the price of petrol would come down to pre-2011, it is
clear that there is a challenge that has not been addressed, which
is the causal factor of this crisis. The issue, as I have said
earlier, is the monopoly enjoyed by the NNPC in importing refined
petroleum products into the country while average marketers are at
the mercy of the NNPC. Why should it be the corporation alone
importing petroleum products on behalf of all marketers in a regime
of deregulation? Without doubt, we all know that in any monopoly a
lot of sharp practices occur. Basically, the regulator who is
supposed to monitor the quality is the same one that now procures
it.

What stops the corporation from endangering all Nigerians with
poor products by way of compromise, since there are no checks and
balances? What stops the corporation from exploitative tendencies,
which is suspected to have been happening? How do we ascertain the
costs generally associated with all the processes leading to the
delivery of the products? What, therefore, is wrong with allowing
various marketers to import directly, in line with the deregulation
policy?

The role of the regulator ought to be that of monitoring the
quality of products in the circumstances canvassed. The minister
was reported to have promised that there would be full deregulation
now and government is only working on providing alternatives to
Nigerians by tolling some roads. The federal government has also
promised that alternative and cheaper sources of energy, which I
fail to understand, will be provided for Nigerians. I am of the
opinion that the monopoly enjoyed by the NNPC cannot continue and
anyone would be talking of full deregulation.

Where there is full deregulation, average marketers would not be
subjected to this kind of control and we expect them to comply with
government regulations of sales at particular prices without
resistance. Government has argued that the landing cost of petrol
is N202, which is fuelling the speculation that there will be
increase up to N206. This is a reasonable conclusion, anyway, as no
one expects the pump price to be lower than what the government is
claiming to be the landing cost to justify its threatened increase
in the pump price. The monopoly must be broken. Except this is
done, Nigerians will continue to have the impression of some people
profit from the sole importation, a fact not far-fetched. Nigerians
would probably have been indifferent to this seeming scam but for
the fact that they remain victims of such a monopoly. I personally
believe, if the importation is liberalized, landing costs much
lower that that will obtain. I, therefore, plead with those
responsible, particularly parliamentarians, to step in and break
this undue monopoly of the NNPC importing refined products.

This will be in the true spirit of leadership. Nothing other
than granting access to others for the importation of the refined
products will add up. This will bring competition and the masses
will be at liberty to patronize whose product is cheaper.
Competition in this wise will control the greed of marketers and
whoever is not able to meet the expectations of the masses is bound
to fall out of the market. We cannot be pretending to be socialist
while we lay claim to the benefits of capitalism.

A deregulated economy will not hold the prime of its product
under the control of a government agency and continue fuelling a
perpetual regime of subsidy, which is rotten with unfathomable
quantum of sleaze. Our experience of the probe of the subsidy
regime in this country has shown that the subsidy claim is a huge
racket by which some people became wealthier than their wildest
imagination with the poor masses at the receiving end. While we do
not know how much of this has been exploited under the current
administration, it is certain that once it leaves office we might
have to contend with the narratives of what transpired,
particularly when even the current importer, the NNPC, is still
asserting existence of subsidy. One is getting impatient with this
subsidy regime and its sad narratives.

The argument that petrol is an important product has become
hackneyed and the earlier we review the national position the
better. Thank God, the government claims to have fully deregulated
kerosene and diesel. The same is better allowed with respect to PMS
so that we relieve ourselves of this recurring decimal of subsidy
fight.

The monopoly enjoyed by the NNPC has expanded beyond mere
control of importation of petroleum products to immunity from any
meaningful probe to unearth the sleaze that goes on there. While
strikes by the marketers have reduced in recent times, it is
certain that the only way to end their perennial agitations too is
to fully deregulate the pump price of petrol. One hopes and expects
the powers that be will listen to this and allow sanity to
reign.

By Muiz Banire, SAN

One area of the economy in Nigeria that has been worrisome for
ages now is the petroleum industry. Like any other Nigerian, one is
worried about the state of our petroleum products pricing. For
years, the petroleum sector became the barometer to guage how much
an average Nigeria was suffering as there was perennial shortage of
supply of petroleum products to local consumers, thereby
necessitating long queues at petrol stations. This was often the
case any time there were agitations that there would be increase in
the pump price of petroleum products. In some of my write ups in
the past, I have unapologetically joined the advocates of the
complete deregulation of the petroleum sector.

Two main reasons account for my position: there is the need to
eliminate subsidy in the sector as it has become a drainpipe of the
nation’s resources and, secondly, to enable appropriate pricing of
the products. In this advocacy, I am not oblivious of the potential
hardship it would engender on the masses but I have suggested
palliatives that will neutralise the impact. For example, I have
contended that half of the savings from the eliminated subsidy be
redistributed by way of addition to workers’ emoluments while the
other half be applied to the provision of infrastructure that will
positively impact on the way of life of the masses. Regrettably,
this has not happened.

One is not oblivious of the fact that increase in the emolument
of workers has a tendency to jerk up the inflationary situation in
the country. It is apparent that consistent increase in the prices
of petroleum products without necessary cushion on the effects this
has on the workers and masses generally may lead to an uprising
just like what was experienced in January 2012. Unfortunately, the
various governments have used the issue of subsidy and the need to
remove same as points of campaign so that the people are tired of
listening to subsidy arguments anymore.

Since 1986, the various regimes have kept on removing subsidy on
petroleum products and it seems that this subsidy always re-appears
each time it is removed by way of increase in the prices of the
products. Just last week, there was an attempt to further increase
the price of petrol by the Petroleum Products Pricing and
Regulatory Agency (PPPRA).

This effort was eventually thwarted by the Ministry of Petroleum
through an overriding order. Notwithstanding this temporary
reprieve, the truth is that the increment will continue as the
current administration that led the stuggle against the continuous
payment of subsidy to marketers seems to have caved in on the
struggle and has increased prices of petroleum products more than
twice since it came to power in 2015. It is apparent that there
will be an increase, no matter what Nigerians do. From the
suggestion of the agency, this is necessitated by the increase in
the price of crude oil in the international market, a thing of joy
to Nigeria. While the logic, therefore, in the corresponding
increase of prices of refined products at the local level is
appreciated, my challenge with the whole process of importing
refined products is the exclusivity self-conferred by the Nigerian
National Petroleum Corporation (NNPC).

It is a sad epitaph on our collective underdevelopment that,
since the 1980s, Nigeria has been importing refined products from
countries like Venezuela; this process has not abated till date,
more than 30 years after. It is not surprising, since the
refineries in Nigeria have gone moribund, notwithstanding the huge
expenses incurred every year on their turnaround maintenance. It
does seem the refineries in Nigeria are white elephants that may
never come back to life.

Thank God, however, for Dangote; but I understand that most of
the products might end up being exported as contracted. On the 17th
day of March 2021, the Minister of State (Petroleum), Timipre
Sylva, was reported to have said at the 56th Annual International
Conference and Exhibition of the Nigeria Mining and Geoscience
Society (NMGS) in Ibadan, Oyo State, that there would still be an
increase in the pump price of petrol. There is speculation that it
would be increased from N162 to N206. While this is much expected
as the administration has never shied away from its inability to
redeem the promise that petrol scarcity would be a thing of the
past and the price of petrol would come down to pre-2011, it is
clear that there is a challenge that has not been addressed, which
is the causal factor of this crisis. The issue, as I have said
earlier, is the monopoly enjoyed by the NNPC in importing refined
petroleum products into the country while average marketers are at
the mercy of the NNPC. Why should it be the corporation alone
importing petroleum products on behalf of all marketers in a regime
of deregulation? Without doubt, we all know that in any monopoly a
lot of sharp practices occur. Basically, the regulator who is
supposed to monitor the quality is the same one that now procures
it.

What stops the corporation from endangering all Nigerians with
poor products by way of compromise, since there are no checks and
balances? What stops the corporation from exploitative tendencies,
which is suspected to have been happening? How do we ascertain the
costs generally associated with all the processes leading to the
delivery of the products? What, therefore, is wrong with allowing
various marketers to import directly, in line with the deregulation
policy?

The role of the regulator ought to be that of monitoring the
quality of products in the circumstances canvassed. The minister
was reported to have promised that there would be full deregulation
now and government is only working on providing alternatives to
Nigerians by tolling some roads. The federal government has also
promised that alternative and cheaper sources of energy, which I
fail to understand, will be provided for Nigerians. I am of the
opinion that the monopoly enjoyed by the NNPC cannot continue and
anyone would be talking of full deregulation.

Where there is full deregulation, average marketers would not be
subjected to this kind of control and we expect them to comply with
government regulations of sales at particular prices without
resistance. Government has argued that the landing cost of petrol
is N202, which is fuelling the speculation that there will be
increase up to N206. This is a reasonable conclusion, anyway, as no
one expects the pump price to be lower than what the government is
claiming to be the landing cost to justify its threatened increase
in the pump price. The monopoly must be broken. Except this is
done, Nigerians will continue to have the impression of some people
profit from the sole importation, a fact not far-fetched. Nigerians
would probably have been indifferent to this seeming scam but for
the fact that they remain victims of such a monopoly. I personally
believe, if the importation is liberalized, landing costs much
lower that that will obtain. I, therefore, plead with those
responsible, particularly parliamentarians, to step in and break
this undue monopoly of the NNPC importing refined products.

This will be in the true spirit of leadership. Nothing other
than granting access to others for the importation of the refined
products will add up. This will bring competition and the masses
will be at liberty to patronize whose product is cheaper.
Competition in this wise will control the greed of marketers and
whoever is not able to meet the expectations of the masses is bound
to fall out of the market. We cannot be pretending to be socialist
while we lay claim to the benefits of capitalism.

A deregulated economy will not hold the prime of its product
under the control of a government agency and continue fuelling a
perpetual regime of subsidy, which is rotten with unfathomable
quantum of sleaze. Our experience of the probe of the subsidy
regime in this country has shown that the subsidy claim is a huge
racket by which some people became wealthier than their wildest
imagination with the poor masses at the receiving end. While we do
not know how much of this has been exploited under the current
administration, it is certain that once it leaves office we might
have to contend with the narratives of what transpired,
particularly when even the current importer, the NNPC, is still
asserting existence of subsidy. One is getting impatient with this
subsidy regime and its sad narratives.

The argument that petrol is an important product has become
hackneyed and the earlier we review the national position the
better. Thank God, the government claims to have fully deregulated
kerosene and diesel. The same is better allowed with respect to PMS
so that we relieve ourselves of this recurring decimal of subsidy
fight.

The monopoly enjoyed by the NNPC has expanded beyond mere
control of importation of petroleum products to immunity from any
meaningful probe to unearth the sleaze that goes on there. While
strikes by the marketers have reduced in recent times, it is
certain that the only way to end their perennial agitations too is
to fully deregulate the pump price of petrol. One hopes and expects
the powers that be will listen to this and allow sanity to
reign.