• Monday, May 20, 2024
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BusinessDay

Deregulation: Rising above parochial interests

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Audu Usman

The issue of deregulation of the downstream sector of the nation’spetroleum industry has been generating heated activity. The Federal Government’s declared intention to “deregulate” that segment of the petroleum business early this year has triggered intense debate, even cited by the Nigeria Labour Congress (NLC) as a reason to take strong action. Clearly, the word deregulation has many meanings for the ordinary Nigerian. Some of us know that it does not mean government “will not have control” over the downstream sector. Implicit in any policy is the fact that government will still play its role as a regulator of the downstream sector as well as the giver and taker of Licenses through institutions such as a modified Department of Petroleum Resources (DPR). Similarly, government will still own, manage and control assets and facilities such as the depots; the pipeline networks and the import reception jetties.

The divide
Apparently, we have two groups locked in this confrontation: The anti-deregulation clan and the pro-deregulation clan. The first group seems to have the labour unions on its frontline (until recently when the Petroleum and Natural Gas Senior Staff Association (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) endorsed the policy). Those against the reforms, who profess to have the interests of the common man at heart, would have us believe that Deregulation will increase hardship. We can call them the humanists. The second group is supposedly comprised of government people and profit-mongers. However, as is always the case with this great country, all is not always as it appears.
Some of us know the positive potential of deregulation and are well aware that, if handled the right way, it can engender competition and efficiency in the industry and rather like has happened in the communications sector, it can have far-reaching favourable implications not only for Nigerians but also for the global petroleum industry as a whole. If handled right- and this is imperative- deregulation reform can create an atmosphere of business viability and operational sustainability. If handled right, multi-national companies with world-class expertise in downstream operations will be attracted to the downstream-space and this will positively impact on economic life in varied dimensions. For these pro-deregulation optimists DEREGULATION HAS FABULOUS POTENTIAL. Let us call this group the OPTIMISTS.

Read Also: Why full downstream sector deregulation may not happen

A dispassionate look at the motives behind the two positions leads us only in one direction. Both the humanists and optimists seem to be saying “LET’S MAKE LIFE GOOD FOR ALL NIGERIANS”. However, the point of disagreement is that The Labour Unions and The Humanist-School are seen to be saying “WE WANT LIFE TO BE GOOD NOW, DEREGULATION WILL MAKE IT BAD IF NOT WORSE”. Government and the optimist-school seem to be saying “DON’T WORRY, LIFE IS GOING TO BE GOOD, DEREGULATION WILL BRING SPLENDID EFFECT”. The first seems to look backward, the latter, forward.
At a time like this, we need to rise above narrow clannish pontification and come up with solutions that can achieve a balance between the short term concerns of the humanist school and the long run optimism and vision of the optimists. At the end of the day, the only thing that matters is what we can do to make life better for Nigerians now and in the future. The government therefore needs to handle the deregulation brouhaha more smartly.
For one, there is a slight difference between the concepts of liberalisation and deregulation. Policy-makers need to be aware of this difference and temper their policy framework accordingly. Essentially, deregulation without liberalisation is a recipe for social catastrophe and economic repression. Where rules are relaxed without opening the doors of opportunity to all well-intentioned players, only disaster will follow.
Secondly, government must build a good argument. It should focus more on the benefits of liberalisation and deregulation and less on the trillions of Naira it is hoping to save. ONE IMPRESSION THAT MUST NOT BE ALLOWED TO CRYSTALLISE IS FOR THE PEOPLE TO SEE GOVERNMENT AS UNCARING. Government must talk honestly about the initial hard knocks and what it plans to do to serve the low and middle income Nigerian, while the industry squares up for competition. Government must equally talk very loudly, resolutely and consistently about what is in it for Nigerians.
Why must we do it?
Thirdly, Nigerians need to be aware that a rational decision has to be finally made for the progress of this great country. What should government do? Deregulate and liberalise or continue with the clumsy bazaar called subsidy? The truth is, we cannot continue to run the downstream sector on eternal subsidy, amateurish regulation and never-ending government monopoly. It is very glaring that that sector of the petroleum industry is bleeding badly. Add militancy, bombing and kidnapping to the decades old profiteering and bunkering that has been going on and you have an accurate reflection of current realities. The government-backed and funded monopolies do not have any obligation to tame cost or embrace innovation since high cost and poor product can easily be passed to consumers or to government.
When the below-cost pricing regime is discontinued and market-driven but well- regulated pricing is adopted, the concomitant expansion in supply-side activity will bear extensive fruits for all Nigerians. Jobs will be created. More Nigerians as the population of actors in the industry grows, will acquire oil industry skills and technology. Many expatriate jobs will be passed to Nigerians as the market movers and shakers reposition themselves for competition and profitability. This definitely is how the whole scenario is going to play out.
Fourth, the government should tell the truth about our kind of subsidy. It is an enemy of growth. A small number of giant marketers bring in oil cargos in addition to what the government imports. The costing is worked out and the product is then sold at a sub-cost price fixed by the government. The government absorbs the difference with NNPC. Non-government importers are similarly settled by government for the gap between the official-price and their profit-price. A very good and easy business indeed! They don’t have to develop local capacity. They don’t have to build local refineries. They make money without much hassle and why not? The ultimate losers in the current set-up are Nigeria and Nigerians. The prospect of development and advancement in the downstream sector will remain bleak. This is our kind of subsidy.
How about an Energy Fund for our money?
The huge sums, nearly 2 trillion naira in the past 3 years, spent to finance this subsidy will be available for other programmes and projects. An ENERGY DEVELOPMENT AND SECURITY FUND could be created. This may be used to generate, transmit and distribute electric power. Local refining is currently not very cost effective. Even if crude oil is sourced at a concessionary price from the Nigerian National Petroleum Corporation and freight cost is eliminated, we still do not have cheap and constant electricity. Turn-Around Maintenance comes at an exorbitant price. Local expertise is deficient making many services to be sourced from foreigner-owned companies. The energy fund can be utilised to deliver relevant downstream-related infrastructure and build capacity in order to bring down operational overhead. Many companies have already been granted refining licenses none has yet been built or completed and we know why. The government must create the enabling environment for profitable local refining and such a fund may be applied to create atmosphere far removed from the import-driven nightmare currently going on. Anything else would deny Nigerians the full benefits of deregulation.
This may be a season of anti-government sentiment, if one were to look at our newspaper headlines. It may not be the best period to argue in such a manner. Government apologist or an anti-people campaigner I may be called. But it is time for some of us to speak up, for by keeping silent things will surely never change. The public should debate about a policy that promises a better future for fellow compatriots. Only by such frank debate will we get at the truth. Nigerians need to be forward-looking. We need to rise above fear. We need to make the right decisions. We must demand and ensure that government acts correctly: that a deregulated and liberalised private-sector driven industry is the best way forward.