Economic Confidential, November, 2009

EDITORIAL SUITE

Odds against downstream deregulation

By Chijama Ogbu

President Umaru Yar’Adua wants Nigerians to see the economic benefits of deregulation and embrace it with open arms. A whopping N600 billion plus will be saved annually by simply allowing petroleum products prices find their own levels. This money when freed up, as his government’s argument goes, will used in solving the festering problems of infrastructure in the country.

But Nigerians, quite plainly, are in a restive or perhaps angry mood. They cannot understand why one product, which God Almighty in his infinite mercy, has bestowed aplenty in the womb of the country, should not be kept within affordable prices for the citizens. It is within this prism that the argument moves back and forth with no side willing to let up. 

It is not a today’s matter. Since the 1980s, what has come to be known as appropriate pricing of petroleum products has been a touchy issue. All previous attempts at such increases, either direct or wrapped up in the gab of deregulation had been stoutly resisted by the organized labour and civil society organizations.

However, the government has through this period moved the prices of petrol from less than N1 in 1985 to the current price of N65. In almost all cases, all attempts failed to slam increases at the level originally planned, but the people however ended up paying higher.

The build up to total deregulation as being canvassed by Yar’Adua government actually commenced in 2000, when the Federal Government carried out a massive campaign to push through total deregulation of the downstream sector. It failed. But since then, it has become a recurrent decimal in government’s revenue plans. There argument is simple: we can do more for the people if money spent on infrastructure is channeled to other pressing needs of the people.

Unfortunately, the government’s position is premised on a very weak and fragile ground. Long years of horrendous misrule have made it well-nigh impossible for Nigerians to believe their government. Each year billions of dollars are budgeted and frittered away: hardly any tangible evidence of government activities. Litany of broken roads everywhere symbolizes the innumerable government broken promises. People live at the mercy of desperadoes, who are becoming more daring by the day.

Nigerians provide their own electricity, provide their own security, take their children to private schools and do practically everything by themselves. To most people, government exists only on paper.

So when government is talking about freeing up money to enable them provide services they are talking bunkum. And the people are right. After all, Nigeria has earned over $200 billion from crude oil sales in the past decade, but is still unable to provide the most basic of amenities. Public schools are in sorry state; hospitals are ramshackle; roads are replete with potholes and in most cases impassable, especially during rainy season.

Service to the people is the last thing in their minds.

Yet they talk about appropriate pricing of petrol and are reluctant to talk about approprioate wages and remunerations for the workforce. This is a government which pays a minimum wage of N7,500 (about $50) a month.

What they fail to tell the people is that most of those countries they often cite as examples of oil producing countries that have deregulated their downstream sector pay their workers minimum salaries above $1000.  Those countries pay allowances to their jobless citizens, their health system are in excellent condition, their schools are exemplary, their electricity does not blink in months, and their security system is good, among others.

Without disputing that deregulation is good, it should not be carried through under the current horrendous misrule that is the lot of this country. The cost implications will just be too much for ordinary Nigerians to bear. As a major commodity in the economy such price hike will definitely trigger inflationary spiral in the system and worsen the predicament of the people.

The burden of fuel import would have been less on the government if the country’s four refineries were to be functional most of the times. But ineptitude and wanton corruption in the Nigerian National petroleum Corporation has made it impossible for them to work. They deliberately keep refineries down in order to create import opportunities for high-ranking government officials and their cronies, who rip off the citizens of this country through spurious oil import contracts.

For now, odds are stacked up against the deregulation plan. The Federal Government should first of all tackle these basic challenges of the people, which it has more than enough money to do before this deregulation. Otherwise, it will be difficult to make the people accept full deregulation of the product.

Chijama Ogbu

Managing Editor,

Economic Confidential