Economic Confidential, May, 2009

FEATURES

The Politics of Fuel Scarcity and Re-Deregulation in Nigeria

By Kola Ibrahim

Current Bosses’ strike and Re-deregulation

The current fuel scarcity clearly manifests the treachery of the deregulation policy. Despite government’s cover-up on the current fuel scarcity, media reports have fingered oil marketers in what can be termed bosses’ sabotage – an attempt to force deregulation and price increase on the people. While many media organizations were quick to condemn tanker drivers for protesting against extortion by Lagos State government in the guise of maintaining law, hardly is anyone condemning oil marketers’ sabotage in defence of fraudulent profit.

Yar’Adua government is ready to allow these oil marketers free reign in exploiting the country. To government, deregulation is necessary because the subsidy on fuel pricing has led to huge corruption and looting of the treasury by unnamed people. How many of these public looters have been probed or prosecuted? None! What an irony: an “anti-corruption” government accepting the superiority of gangsters. Actually this irony only reflects the character of every capitalist state, which in defence of big business, will violate its own rules

and use every illogic to justify its somersault.

The argument of Yar’Adua government to justify deregulation is a continuation of the old worn-out excuses. The excuse of the Obasanjo government for incessant increase in fuel prices is that government is spending tens of billions on fuel subsidy; therefore the poor people must bear the brunt through fuel price hike. Yar’Adua government has only stepped this up by exposing that the subsidies have only gone to the sharks in big oil marketing business and government. But, what are government’s alternatives to this obviously maddening scenario painted by the government itself: arrest the looters? Stop the financial

hemorrhaging of the nation? Obviously not – but making the people direct victims of the looting: more deregulation.

According to Prof. Sam Aluko, oil marketers make at least $160,000 on a ship-load of refined fuel to this country. This is aside profit to be made by shipping companies and private port managers, among other sundry charges that will add up to extra 40 percent of fuel cost. With the country’s refineries working at less than a third of its capacity, Nigerian government has already privatized fuel production and deregulated its importation, while only using public resources to subsidize the profit of the oil marketers. Therefore, the latest

attempt is only a re-deregulation of this obvious robbery. In the “subsidy” deregulation system, the Nigerian government use public resources meant for the development of social infrastructures to service the profit interests of fuel marketers, their bank creditors,

shipping companies, private port managers, etc. In the planned re-deregulation, the poor people are to directly bleed out billions in profit for these fat-cats while government also doles out billions through other means to these fat cats.

Private Refinery: Sheer Mirage

Worse still, whenever there is crisis for oil importers, government will immediately intervene on their behalf (tax break, special offer, price flexibility, cheap credit, etc) the same way that it fixed the price of petrol at N65, even when crude oil price has necessitated a decrease of petrol prices to about N50. Therefore, the planned re-deregulation is a cover to protect profit. Some have argued that ultra-deregulation will ‘encourage’ private investors to invest in oil refining. But, funny enough, while tens of persons were given licences

by Obasanjo government to build private refineries, these shylocks have converted these into licence to import refined fuel, no thanks to the connivance by the pro-capital Obasanjo government. In fact, Shell Nig. Plc, Nigeria’s biggest multinational oil company, while excusing itself from investment in oil refining claimed that it will cost around $2 billion to build a refinery. How many local investors can commit this amount to a long term project like refining?

The main reason why these oil companies (both local and international) will not build refinery is simply the fact that they depend on short term profits and not long-term investment that will tie down their capital. This explains why the financial sector of world capitalism overtook the industrial sector (in US, manufacturing share of GDP fell from 25% to 12% while financial share increased from 12% to 20.5% from 1973-2008), which led to the current global economic crisis that has foreclosed any tangible investment especially in the third world.  Nigeria’s case is worsened by the terrible state of the nation’s infrastructures which has mae investment in the country costly. Nigerian capitalists are parasitic, who like their Russian counterparts, only mushroomed on the decays of mismanaged national economy. They are the beneficiary of government’s hand out of public

resources to private hands – privatization of public corporations/oil wells, commercialization of social services, official corruption cum nepotism, etc. They only care about how to sustain this arrangement.

This is why they will prefer to buy the nation’s refineries, cement companies, telecomm companies, oil wells, etc at token where they can easily sell their estates to make quick profits. Therefore, the likes of Adams Oshiomhole, (a former labour leader) who want oil refineries to be sold should stop deluding themselves; no tangible investment can come from these fat-cats.

Can Private Refinery Resolve Energy Crisis?

However, assuming without conceding that private individuals invest in oil refining, as is being hoped by some pundits, can this alleviate the suffering of Nigerians? In the first instance, the refining will be hijacked by a clique as most of these moneybags can hardly bear the risk alone thus leading to formation of cartel and monopoly – the example of NNPC privatization in 2007 where a cartel of big companies, banks and foreign firms bid to buy less than a third of NNPC at fraction of its value is instructive. Thus, the question of competition and consequent price reduction is out of it as demand and supply will be manipulated for price increase. Moreover, these companies (both local and foreign or both) will have to provide their own power, transport system, etc, as the nation’s infrastructures are dilapidated, which will bear on the cost and availability of the products. Furthermore, multinationals will have to hike prices to meet international profit level. A useful example is the deregulation of the telecomm industry, where private telecomm companies hiked their

tariffs to multiples of international tariff in the guise of covering cost, yet, one of these companies in 2002 had profit worth more than profit of the whole insurance industry.

Of course, importing charges may be reduced; the reality is that such monies will find their way back to the profit of these companies through government incentives and widespread corruption. The fact that despite over $280 billion that has accrued to the nation’s coffer has

resulted in little or no improvement in the living standard of average Nigerian while big businesses, banks, politicians, etc continue to multiply in values, speaks volume of the class the nation’s resources serve. In fact, the so-called private sector cannot even refine up to

a quarter of the nation’s oil, even if the country’s refineries are sold to them. If at all private refineries are built, I’m more than convinced that their only consumer will be Nigerian government which has been budgeting billions for fueling generators and cars every

year. At least this is a way of encouraging private investment.

Labour’s limited opposition to deregulation

In a statement by the NLC – the central bulwark against deregulation, it tasked government to in the immediate refine petroleum products from neighbouring countries (so as to reduce landing cost) and then start the process of building new refineries. This may sound pragmatic, but it is also unrealistic. This NLC’s position fails to take into cognizance, the political economy of Nigerian ruling class.

It assumed that the government is acting independent of big business. The question we must ask is: who will import and distribute the refined fuel? The demand for building of more refineries is correct but limited. The labour movement must be aware that many of the Nigerian politicians at all levels are directly linked up with the business class. If at all Nigerian government commit itself to building new refineries it will result from either government’s intervention to restore oil oligarchs’ falling profitability or a product of intense mass political struggle which tend to overturn the system.

The labour union also stated that it is opposed to privatization unless it is necessary and transparent. The question is what determines the necessity of privatization, and what transparency is needed for a policy that is in itself robbery of the whole country by a tiny clique? If NLC believes that privatization leads to worsening living standard; why then must it be necessary in any form? Comically, the same government that failed to probe into hundreds of billions wasted on refurbishing the country’s refineries, aside unaccounted-for

billions of revenue, is now planning to privatize the refineries to their plunderers, in the name of encouraging private sector.

A case for democratic Public Ownership

Without working class movement, through organised mass political movements, opposing not only deregulation but also demanding public ownership of the oil industry under democratically elected representative of working people and consumers’ organizations, building new refineries will become another conduit pipe for massive looting of public treasury, collapse of these refineries (through nepotistic and corrupt managements) and their eventual privatization. This demand which will draw up the plan of building new refineries on sustainable basis will also need to be linked with developing other sectors of the economy. This will require public ownership of the commanding height of the economy in order for the planning to be meaningful. The tens of billions of dollars in the nation’s foreign account will be used to undertake a long term development of all sectors of the economy and energy resources. This will means among others, free, quality, massively funded and democratically-run education and healthcare system, provision of employment for all able bodied citizen, efficient social infrastructures – cheap, efficient and environment friendly transport system (road, water, rail and air), communication system, energy system (electricity and fuel supply), mechanized and poor-peasant-oriented agriculture, potable water, public housing and massive industrialization.

For a new social order

The rot in the oil industry is also glaring in other sectors of the economy – social services, power generation, industrial sector, etc. Despite current economic crisis, Nigeria’s and third world ruling classes still believe that they can use public resources to entice big business to develop their economy. This reflects the weakness and parasitic nature of local capitalist class. So, the working class movement must understand that deregulation cannot be achieved by appealing to Yar’Adua government or to any other state government. It needs political struggle which must start with building a mass organization of the working people that will combine economic struggle for job creation, N52, 200 wage without retrenchment, massive funding of education, healthcare, etc, (mass campaign and enlightenment, rallies, protests, pickets and strikes) with the political struggle to take over governance. The labour movement need to call an immediate summit of all working people’s organizations, pro-poor organizations, student/youth movements, peasants/market women organizations, socialist movements, leftwing political parties, self-determination groups, etc to draw up plans of building a radical mass working people’s political platform that will champion the struggles. Such platform while it is built from the grassroots will have to adopt a revolutionary democratic socialist stand against the degenerate social democracy, that has been absorbed by neo-liberal capitalism.

A genuine socialist system will combine nationalized economy with workers’ democracy (as against monstrous bureaucracy of Stalinism that collapsed the nationalized economy of Soviet Union and Eastern European countries in the 1990’s) while taking an internationalist outlook as a nationalized economy cannot operate in isolation. A successful movement of the working people in Nigeria will resonate all over the world. This is the lesson for the labour movement and the pro-working people organizations and activists.

Kola Ibrahim (08059399178, kmarx4live@yahoo.com)

Obafemi Awolowo Univeristy (OAU), Ile-Ife.

P.O.Box 1319, Enuwa, Ile-Ife, Nigeria