Deregulation: The gulf between

(By Loretta Okafor)

Nigeria has systematically failed to grasp the necessary palliative measures rolled out by the governments of the respective countries aforementioned, towards a collective acceptability of the policy.  Every other country that embarked on deregulation, met with stiff opposition from the anti government groups, but they were able to strategically woo them over to the extent that the activists could see no more ground to stifle the efforts of the government towards the introduction of the policy, probably, because of the packaging of the palliatives.

DEREGULATION trends definitely are sweeping over all the energy industries in the world. The ultimate reason for deregulation globally is economic efficiency. However, while the economic benefits of deregulation are desirable, there could be implications, though surmountable, if there is collective responsibility. Deregulation, as one of the economic reforms of governments becomes rather imperative since it is geared towards reviving the ailing sector.

Deregulation has globally been embraced by several countries, in order to lessen public sector dominance and for developing a liberalised market, while ensuring adequate supply of products. Such is the story in Peru, Argentina, Pakistan, Chile, Philippines, Thailand, Mexico, Canada, Venezuela, Japan, USA, and all the Asian countries. In most of these countries, the oil refining industry is dominated by private sector participation and pricing mechanism is market based, subject to a monthly price adjustment to reflect the current international prices. All of which have systematically dismantled their state-owned oil companies, for a significant turning point in the success story of their oil industry reform efforts.

Nigeria has systematically failed to grasp the necessary palliative measures rolled out by the governments of the respective countries aforementioned, towards a collective acceptability of the policy.  Every other country that embarked on deregulation, met with stiff opposition from the anti government groups, but they were able to strategically woo them over to the extent that the activists could see no more ground to stifle the efforts of the government towards the introduction of the policy, probably, because of the packaging of the palliatives.

In 2003, Federal Government opted for deregulation with the overall objective of introducing competition, enhancing and improving supply, removing government control on pricing, allowing market forces to determine prices, and opening up of the sector for private participation, which will create more jobs for our teeming youths. It is curiously obvious that over a long period of time, government’s deregulation policy of the downstream petroleum has not been accepted by Nigerians. This is in spite of the persistence and consistence efforts at which preceding governments had pursued deregulation policy of downstream petroleum sector. For instance, when the late President Yar’Adua, announced his commitment to deregulation, he set up a Presidential Committee on Deregulation with the responsibility of dialoguing with the stakeholders and fix the date for commencement of deregulation in the downstream sector. Despite its good intention, the civil society kicked against it, given the deplorable state of the refineries and other socio-economic infrastructures.

In continuation, the Jonathan administration also showed commitment to the policy, by ensuring availability of petroleum products to enable him carry on with deregulation, but the move was still resisted especially by the organised labour and civil societies, on the condition that there were no palliatives on ground for the commencement of deregulation. However, the two attempts by President Jonathan to deregulate the sector, was trailed by discordant voices, heating up the airwaves and pages of newspapers.  This was to forestall any upward review of pump prices and likely protest that most often than not, snowballed into a national strike.  A typical example was the unprecedented protest that happened at the beginning of the incumbent President’s early days in office, when there was a nationwide strike that lasted for complete seven days, paralyzing the nation’s economic activities, until a compromise of N97 per litre was reached to appease strong public oppositions.

Indicatively, it is obvious that the government has consistently and continuously, brandished the notion to revamp the sector to cut down cost.  As long as the downstream oil sector is not deregulated, setting up new refineries will not be a profitable because the refineries will not achieve full capacity. Deregulating the downstream sector, will not only save the nation money but could also do to the sector what deregulation did to telecoms in Nigeria. It is stating the obvious that the amount spent subsidising fuel is absolutely unnecessary. The intent of fuel subsidy has been defeated as its administration is beset by ineffectiveness, leakages and corruption. Again, it’s not as though the Federal Government is not aware of the negative impact of regulated prices on the downstream sector as well as the huge burden it poses on government finances, but it appears that the will to implement deregulation is lacking.

In view of the recent hullabaloo that the President’s speech has generated, and to close up the gulf between the deregulation and public acceptability, and for the purpose of this piece, Public Hearing Committee was inaugurated recently to criss-cross the country in order to sell deregulation to Nigerians.  The Committee was saddled essentially, with the responsibility of touring the six geo-political zones in order to further enlighten the people, as well as, give each zone equal hearing on their views on the deregulation, before full implementation. The Public Hearing, to an average Nigerian is an effort in futility based on their past experiences of unfulfilled promises. It is worthy to note that the reason for the unacceptability of the policy does not rest with the “product” but could be with the packaging.

Nevertheless, government can still garner confidence from among Nigerians, if, the Committee members are made up of people of proven integrity, rather than people of questionable personalities, so that the Committee will not be seen as a “wild goose chase”. Hence, the product “deregulation” must be properly repackaged to make it saleable to the generality of Nigerians. This is because, the acceptability or otherwise of the policy becomes the onus of the government. No change has been smooth sailing, thus, sacrifice is inevitable between the two parties for concessions to be reached to usher in the desired change. On the contrary, it will be a near impossible attempt for government to initiate any project, if the people the change is meant for are not carried along. The antagonistic antecedences that usually coloured deregulation since its birth should be of great lesson to the government.

As a  matter of urgency, Nigerians should have a rethink so that the present scenario that encourages sharp practices and makes Nigeria the only OPEC member that still imports refined petroleum products does not continue.  While expecting to see a functioning industry, creating the much needed atmosphere for an industrial boom after best practices, creating favourable investment climate for local and foreign capital in a manner that would ensure optimisation of the nation’s downstream potential, a self financing and self-sustaining sector as well as a downstream sector that promises return on investment, is a necessity.

In the light of the above, we should endeavor to borrow a leave from the success stories of the countries that have arrived at the destination port of deregulation, and their achievements. In addition, Nigeria should not only learn how these countries had forgotten the scares of the initial experiences, but endeavour to accept a little discomfort to achieve results. Nigerian government should not only be cautious with deregulation in terms of selling state-owned enterprises, rather, should also opt to opening up of the sector to private  and foreign indirect investment as in other countries of the world.

• Okafor wrote from Abuja.

“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”

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