The proposed deregulation of petrol price

FOR the better part of 20 years, the economics of the petroleum pump price has held Nigerians in a riveting contest. Military governments and elected governments have struggled to rationalise the socio-economics of petroleum pump price for the Nigerian people. On at least eight occasions in the past decade, the dynamics of the increased pump price has been the touch-stone for popular nationwide strike action by Nigeria's organised Labour unions contending with Federal Government on behalf of the masses.

Government has now decided to fully deregulate the price of petrol, (PMK), having already allowed the price of diesel and kerosene to find its open market price. According to the spokespersons, this would be the culmination of the deregulation of the downstream oil sector. The kernel of the issue remains fairly unchanged, namely that Government in its benevolence has subsidised the pump price for petroleum products and is no longer in a position to do so. In 2008, this country spent N650 billion on petroleum products subsidy. It would therefore allow the effective market-determined price to flow through to consumers and the expectant rational behaviour of the Nigerian consumer to come to play in the orthodox matrix of market demand and supply.

Deregulation as a doctrine is well acknowledged in a number of instances in our country today and Nigerians are at home with the vagaries created by deregulating a number of basic living sectors - epileptic electricity supplies, incontinent water supply, the progress of telecommunication, monetisation of public sector emoluments etc. In other words, the shedding of a benevolence toga by the Governments of Nigeria is up and running.

However, we assert that to let the pump price of PMK float independent of Government's influence or more certainly, public finance subsidies, is a most intractable option. First, this Government is neither prepared to complete the pre-deregulation assurances nor are Nigerians on the strength of extant track record, confident that there is a bulwark for the challenges of deregulating the most pervasive factor in socio-economic determinants of Nigeria. There are a number of examples to buttress the lack of serious capacity to do things right.

Why is Nigeria almost completely dependent on the importation of refined petroleum products for the entire economy when we have both human and material resources, and have had the time, to remedy the existing plants? Nigeria is the sixth largest exporter of crude oil and is the only member of OPEC in this ugly situation.

In 1999, the pump price of petrol was N17 and the incoming civilian government made a series of pledges about the refineries and distribution. Today, this is not the case and at a nominal price of N65 per litre of petrol in only a few cities, Nigerians are in the dark about the investments in refineries and are anxiously aware that the gigantic conspiracies in the import of products will not go away with deregulation. Where is that regulator with credibility and muscle to protect Nigerians and guard against anti-trust behaviours?

As a key component of creating an efficient deregulated market, Nigerians expect that the actual and contrived bottlenecks at our ports which are a huge source of demurrage charges and fraudulent practices would be dismantled in a brisk manner. This is not the case.

Another example of shoddiness is in the manner of informing Nigerians. It has begun in a cloak and dagger framework: bad cop, good cop. One, not quite recognisable, was ferrying the bad news, while another, in a role properly due to another functionary, cancels the first announcement of November 1 as commencement date. The so-called senior official of the NNPC has been countermanded by the Minister of Labour. It is instructive that it is the Minister of Labour, and not Ministers of Information or Petroleum who denied Government's decision on a commencement date.

Perhaps this is so as it is very likely he will be required to engage Labour Unions who have declared their readiness to keep dates at the barricades. It is however another atrocious example of a dysfunctional communication practice within this Federal Government that it could not synchronise a critical policy decision and its implementation details on a decision, which we are persuaded, will save Nigeria N650 billion annually, but is also well known to be an unfortunate tinderbox to the social fabric of the country.

Further, another matter that beggars belief in the imminent deregulation includes the fact that Government intends to continue with the concept of equalisation of prices across Nigeria. It cannot be proper to contradict this policy so blatantly. As deregulation has no half-way house, pump prices will be dictated by costs of importation or preferably local refining plus added cost of pipeline or truck deliveries to locations. By that fact, uniform prices cannot be the norm. We therefore counsel that this is an opportunity to erase fully any concept that would lead to suspicious subsidy, outright leakage of public funds and mischievous collaboration against the people of Nigeria.

The final obvious example of unpreparedness is the timing and economic environment. In a milieu of severe stress and shock in the finance sector infecting the entire credit and banking chain, it is difficult to locate the salvation point for the stupendous hike in transport fares, consumer costs and production prices that the deregulation of petrol will generate. The public dilemma is quite clear: that distance from supply point cannot be subsidised by tax payers, and also that efficiency and competition will not germinate overnight to check inordinate supplier-greed.

We accept the inevitability of the end of subsidy howsoever defined on petroleum products. But perhaps, far more germane is the stoppage of payments to freeloaders, rent seekers and unintended beneficiaries from the public purse. It behoves this Government to take another look at the Petroleum Trust Fund model and other examples across OPEC countries to convince Nigerians that the trade off for the so-called subsidy is applied in robust and transparent initiatives that convey to Nigerians respect and improved infrastructure, create jobs and implement conscientious governance. This matter may indeed turn out to be actually a test for the purpose of Government - to convince the people and stand measured by pledges.

The indications of the policy thrust for deregulating PMK and its anticipated performance grids are lamentably opaque, and far from these. The first task should be a revival of the country's refineries