The deregulation of the downstream oil sector is the news again. If this write up were to be written four years ago, the title would still be Downstream Deregulation in the eye of Storm. If same is written in four years’ time, the title would remain unchange. This is because for more than a decade the deregulation of the downstream sector has always been in the news and would continue to be in the news, at least in the next few years.
Deregulation of downstream sector was part of economic policy of military ruler of General Ibrahim Babangida. Since the General stepped aside successive governments from interim leader headed by Ernest Shonekan to President Obasanjo has adopted the deregulation of downstream sector as one of their economic programs. Succinctly put it, deregulation is the withdrawal of the government participation in the refining, supply and distribution of the gasoline and other associate products.
Nigeria is the fifth oil producer. Oil accounts for over 80 % of its revenue. Of the four refineries with capacity totaled 445,000 barrels per day none is producing at their installed capacity due to many years of neglect and mismanagement. The turn around maintenance (TAM) of four refineries has been on since 90s with lots of public funds already sunk. President Obasanjo has admitted his administration alone committed $700 million on turning around the refineries.
The question on everybody’s lip is if it takes so many years and lots of public fund staked into the refineries to successfully repair existing refineries, how many years would it take to build new ones? Experts have consistently maintained the $700 million the Obasanjo administration spent on the TAM could have been spread on building five new medium-sized refineries, each costing about $120 million, with each a producing between 40,000 and 60,000 barrels per day.
The current opposition to recent hike in price gasoline products is not really against the hike per se but unwillingness of the anyone to own up to nothing. What Nigerians hear from the Nigerian National Petroleum Corporation (NNPC) is Nigerian government is losing more than $2.5 million daily on imported gasoline products. But the same NNPC does not consider it as a matter of necessity to inform Nigerians those who are defaulting among those awarded TAM contracts. Nobody is ready to own up anything.
Early this year fuel import racket involving $143 million was reported. Contracts upon contracts had been sealed with different companies to repair the refineries. The result has been the same. To the best of my knowledge none of these contractors has been reprimanded. Nobody has admitted any wrongdoing over the inability to make the refineries functioning. In fact the refineries are hard sell. As a further demonstration parlous the state of the refineries, notable firms in refineries management and oil majors operating in Nigeria are unwilling to stake their investments in any of the refinery.
Officials are daily accused of diverting state’s revenue for personal purposes. Recently, the deputy governor of Bayelsa State, Jonathan Goodluck, said more than 60 % of the statutory allocations are being siphoning abroad. The oil sector in Nigeria is widely seen by average Nigerians where large scale corruption is taken place almost on daily basis. Vessel illegally siphoning oil got lost on Nigeria territorial water leaving security officials to pass bucks.
In the face of all these, leaders should do what they say and preach. However, Nigerians do not see their leaders making the same sacrifices which they constantly called upon to make. They see leaders living comfortably and lining their pockets while they continue to starve. For instance, the erstwhile NNPC helmsman Jackson Gaius-Obaseki after incurring $3.9 million as hotel bills in Nigeria alone said his long stay at the five class hotel was a sacrifice to the nation. Every Nigerian would be willing to stay in a five-star hotel as part of their sacrifice as well.
Economic reform program like the deregulation of downstream sector is a policy that needs the support of all. But such policy is doomed to be met with stiff resistance if there is several concealment of material fact and when transparency is thrown into the wind. At the hint that there would be further review of gasoline products, it was vehemently denied by officials. The hide and seek continued for weeks and suddenly out of blue the price review were announced. Is falsehood and official denial part of how to nurture Nigeria’s nascent democracy?
It would have been better if stakeholders were firstly invited for consultation and dialogue rather than being called for a round table meeting after announcement had been made. Nigerians have seen the benefits of deregulation of the telecoms, banking and aviation sectors. It is therefore a misnomer to paint the current deregulation crisis as between those favoring reform and those opposing it.
The truth is that the present dispute arose out of the feelings that leaders are agents of the people and should consult the people and be accountable to them, as against the view that government is all knowing, all wise, all merciful and those demanding accountability are petulant, irrational and enemies of the nation.
Experience has shown that the cost of fuel scarcity is more than upward review of the price. But such upward review must be transparent and must not be seen as being imposed. If the people are sidelined, no matter the gains and the good intention of the downstream deregulation, it would tantamount to lording it over the same people whom the elected officials have sworn to “serve.” Consultation, we are told, is one basic ingredient that differentiates democracy from dictatorship.
*Thompson Ayodele (Thompson@ippanigeria.org) is the Coordinator of the Institute of Public Policy Analysis based in Lagos