So much has transpired in the oil and gas industry ever since the exploration of crude oil in Nigeria began. One of the mistakes our past leaders made was their inability to invest the proceeds from crude oil into enhancing and improving other viable sectors for further development.
Fuel scarcity in Nigeria is no longer a new experience. For more than three decades, the citizens of this oil producing country have been held hostage by scarcity of petroleum products. Subsidization of petroleum products began as a temporary measure to cushion the consequences that were to arise as a result of the shutdown of the nation’s refineries for maintenance purposes during the Babangida years but eventually snowballed into a never ending g circle for 3 decades. Suddenly, marketers who were saddled with the responsibility of importing petroleum products realized that with the subsidy regime, it was more lucrative to import the products into the country than to build private refineries. They didn’t have to sink in huge funds to build refineries and employ a large workforce that will be paid as long as importation of the products gave them more money or as much money as they would make if they had built structures that will take years to recoup before any profit is made. What was more? It was a faster way to ‘make it’, so why stress themselves?
And so it was, that sabotage and corruption led to the deterioration of our refineries to the benefit of the cabal regardless of the year in year out Turn Around Maintenance (TAM) carried out on the refineries. The more money was sunk into maintaining the refineries, the less output the nation got in terms of production. So importation thrived and subsidy continued. A select group of marketers became the greatest beneficiaries to the detriment of the masses. The masses were brainwashed that subsidy was in their interest. Government was paying the cost they would have borne if the product was not subsidized. The masses bought the story hook, line and sinker and the Nigerian Labour Congress (NLC) saw an opportunity to be seen as pro masses who were out to serve the interest of the Nigerian worker whose minimum wage was barely enough to send his children to school. The mass media bought into it and propagated subsidy as the only benefit the common man was getting from the government. And BOOM! Everyone was in support of the subsidy so much so that when in january2012 the government of Goodluck Jonathan announced the removal of subsidy, Nigerians took to the streets en mass protesting the action in what was to be known as the #occupyNigeria protest. Not until the government was forced to revert the policy, did the people retreat from the streets. The government had to announce a partial removal of subsidy and pegged the price of PMS at N97. It also set up the Subsidy reinvestment program SURE-P, which was a shamble attempt to portray that the savings accruing to the nation from the “partial removal of subsidy” were being channeled to improve the lives of the citizenry. Nigerians saw no impact.
Of a truth, the action of the then government was borne out of the fact that they knew that subsidy was more harmful to the collective interest of the country and that only a few people benefitted from it yet it was proving to be a heavy burden of government. It was the most patriotic thing to do in order to put the country back on track. The difficulty arouse from the fact that previous governments had been the ones who earlier manipulated the minds of the people into believing that subsidy was in the national interest. The situation was worsened by the general lack of trust in the government of Goodluck Jonathan. Nigerians suspected every move of the administration and had no much confidence in their ability to turn things around in the interest of all. For that, they out rightly rejected the move. Today, most of us who were part of the occupy Nigeria protest know better.
Now back to the point I am trying to make. The continued regulation of the downstream sector of the petroleum industry is more detrimental to national interest than deregulation. As I write this piece in Kaduna, there are endless queues in the very few petrol stations that sell the products. The black marketers are having a field day. Nigerians waste so much man hours that should be channeled into fruitful ventures and activities to boost the economy and improve their general standards of living at these petrol stations with no guarantee that they will get the product.
The problem however is that the government does not have petroleum products to sell to marketers. The NNPC does not have products in its storage and the refineries are not producing. Instead of the government to tell Nigerians the truth, they choose to shift the blame to petroleum marketers. There is no way the marketers can get these products at official government prices if the government does not have stock. They insist that the marketers are engaged in sharp practices when in fact, there are filling stations in Nigeria that have not gotten products from the NNPC for more than a year. A marketer who sinks his money to build a petrol station wants to be in business. He wants to sell the products to customers and make some turnover to make a living. If the government pegs the price at N86.5 and cannot give him the product, he would likely seek it elsewhere. This is why some petrol stations sell above the pump price. As much as they are willing to sell at the government control price, his means of livelihood will be cut off if he were to wait for months for government to supply him a truck of the product at the official rate. Let us not forget that he also has a family, staff and bills to pay. How long does the government wish to put him out of business just because of its inability to provide product for such a Nigerian? The option for such a marketer is to seek the product from unofficial outlets at unofficial prices and sell at unofficial prices to make a living for himself and his family. The government, through the Department of Petroleum products (DPR), will on the other hand, clamp down on such a marketer and paint him black in the eyes of the world when all he is actually doing is struggling to make a living. What the DPR is supposed to do is to regulate the activities of the importers and depots who sell these products to marketers at unofficial prices when the government does not have these products. Again, they will do well to ensure that the refining capabilities of our refineries are improved and sustained to make the products available instead of always blaming the marketers who only depend on government or depot owners for products. As long as the policy of regulation is in place and the government through NNPC, cannot provide products for marketers, there will always be scarcity of petroleum products.
For this problem to be tackled, the government should allow the forces of demand and supply to dictate the price of petroleum products. The billions they dole out to a few importers who may even forge documents to claim subsidy payments can be channeled into other areas of national importance. Marketers should be allowed to source their products and sell as dictated by the market forces. The logic here is that most of the petrol stations that have been shut down for months or even years can come back to business and this will lead to availability of the product which is more important than the price. The customer on the other hand will have choices open to him. If the price of Mr. A isn’t ok for him, he has the option of going to Mr. B. Mr. A on the other hand, will begin to seek his supply from cheaper depots because of the completion that will emerge as a result of the deregulation.
The government on the other hand will no longer be responsible for the transportation cost it bears through the Petroleum Equalization Fund (PEF). A marketer in Sokoto who buys products from government approved depots in Lagos is paid a bridging cost or claim. This is done only because the government wants to regulate the price of the products. These bridging costs are not paid to marketer immediately but take months and the marketers have to bear the burden until the government decides to pay. If such a marketer is operating a bank facility, he begins to run into problems. But if the industry is deregulated, all the marketer in Sokoto needs to do is to include his transportation cost as part of the expenses and set his profit margin for the customer. Apart from getting his profit instantly, he is making the product available to the consumer which is the most important element in the quest to tackle petroleum scarcity.
There are so many problems in the industry that this piece cannot cover. Most Nigerians do not know that the marketers are the most affected whenever petroleum products are scarce. In the collective interest of the nation, we must make this patriotic sacrifice by calling on the government to deregulate the industry so that the products can be available to Nigerians and all the hullabaloo and blame trading will cease. The effects may be hard on us at first but as completion sets in, the prices will be dictated by market forces such as is obtainable in the international prices of crude oil. The earlier we wake up to make this patriotic sacrifice, the better for us all.
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