Opinion: N65… N141… N97… N250: Can we deregulate this sector already?

by ‘Yemi Adamolekun


While the removal of the subsidy was the trigger, most Nigerians were clear that our concerns were around the cost of government; the waste in government and corruption which were the crux of the lame excuses given to justify the removal.

A year ago Nigerians received a nasty New Year’s gift via a press release from the Petroleum Products Pricing Regulatory Agency (PPPRA) that subsidies on premium motor spirit (PMS) would cease after January 1st.

Nigerian citizens as well as most government officials, including the CBN Governor and the Coordinating Minister of the Economy and Minister of Finance were caught by surprise. Though there had been some discussion about removing the subsidy with the 2012 Budget (April), there were still ongoing consultations with various stakeholder groups and the first of a series of town hall meetings had just held a few weeks before. Furthermore, the Minister of Finance had tentatively agreed to a town hall meeting scheduled for January 22nd, hosted by Enough is Enough Nigeria, to engage young people on the issue.

Nigerians reacted swiftly with the first wave of protests starting on Monday, January 2nd and these continued across the country under the banner of #OccupyNigeria. Labour’s general strike started on Monday, January 9th and through Friday, January 13th, Nigerians came out en masse in Kano (including women for the first time in history); Abuja, Akure, Lagos, Ibadan, Ife and Kaduna to name a few.Sadly, lives were lost during the protests and no guilty government agent is yet to be prosecuted. Labour hastily called off the general strike on Sunday, January 15th and the Federal Government used military forces to forestall any other citizen-led action.

While the removal of the subsidy was the trigger, most Nigerians were clear that our concerns were around the cost of government; the waste in government and corruption which were the crux of the lame excuses given to justify the removal. Why should the government not do anything about cleaning up its act yet continue to inflict suffering on Nigerians at various levels?In a country that provides no social services and the average citizen provides all basic utilities – water, electricity, and security; the government cannot continue to rob us on all sides!

In her two appearances before the Senate Joint Committees on Appropriation, Finance and Petroleum Resources (Downstream) for the public hearing on “The Operations of the Fuel Subsidy Scheme in Nigeria, the Minister of Petroleum represented the Federal Government’s position as follows:

The fuel subsidy structure is inefficient, costing us N600bn (~$3.75bn) in 2010 and N1.3 trillion (~$8.125bn) from January – October 2011. The Federal Government cannot continue to pay as it’s unsustainable. By removing the subsidy, the savings will be used to provide critical infrastructure and services. Currently, only a small percentage of Nigerians (the marketers, middle & upper-class Nigerians) benefit. When removed, more Nigerians will benefit. 

In the aftermath of the January protests, 4 committees were set up by the Minister of Petroleum Resources; Mr President set up a technical committee; the Senate and the House of Representatives conducted their own investigations. While each report has been shrouded in controversy, the undisputed fact is that the regime is corrupt and inefficient with guilty parties in the public and private sectors. The total bill for 2011 is now N2.09 trillion (~$13.4 billion) and 2012 will be approximately N1.05 trillion (~$6.8 billion).

We protested last year against government waste and corruption, yet in a lot of ways, things have only gotten worse: a) there’s now fuel scarcity and most Nigerians don’t buy PMS at N97/l. Most NNPC retail stations don’t even sell; b) large sums of money continue to turn up missing; c) no one is yet to be prosecuted for the many cases of fraud unraveled by the probes; 4) the 2013 Budget shows no lessons learnt from the issues raised in 2012 – duplications across agencies and line items that can’t be supported; and 5) impunity at all levels of government to name a few. On the flip side, Nigerians became more aware and it showed that when pushed to the wall, Nigerians will react.

In the sector itself, there are lots of unresolved issues:

  • No one knows the exact amount NNPC makes or the exact amount of fuel consumed per day in Nigeria so figures remain estimates.
  • Why does NNPC still get 445,000 barrels of crude a day that it can’t refine?
  • A lot of money is being spent to push a Petroleum Industry Bill (PIB) that both local and foreign operators agree is detrimental to the sector.
  • Our refineries continue to operate at ~22% capacity while billions are earmarked for upgrades and turn around maintenance. In 2011, the Minister of Petroleum Resources said contracts had been signed with the original builders to revamp the refinieries. One year later, no work has been done on any of them and upgrades are yet again in the 2013 Budget.

The Federal Government has played fast and lose with terms. In certain contexts, it talks about ‘deregulation’; in others, ‘fuel subsidy removal’. The simple truth is if the sector is deregulated, the price of PMS will stabilize amidst competing forces. We were clear about this last year, but that was not the time to have a discussion about a deregulation plan. Our demand was clear – return to N65 and then present a deregulation plan that would, by default, include the removal of subsidy. Removal of subsidy is only one element of the deregulation process and certainly not the first step.

One year later, there is no such plan to deregulate the sector. When we got serious about fixing power, a road map was created that provided a step-by-step process to privatize the power sector. While the road map hasn’t been implemented flawlessly, we continue to stumble through with improvements in certain areas.

Late last year, a Niger-Delta elder statesman said the oil producing states have received over N7 trillion (~$45 billion) in 13 years with nothing to show for it. In our 50 years since independence, it’s estimated that $400 billion of oil revenue has been stolen or misspent. If we are really serious about accelerating growth in other areas of the economy and taking advantage of our youth bulge, it would do us well to get serious about deregulating this sector so states stop coming cap in hand every month to Abuja for their share of the ‘national cake’. It’ll force states to get more creative about creating wealth and reorient public servants about the true meaning of ‘service’ that is not dependent on endless access to cash.

Fuel scarcity and increased fuel prices – we hope the Federal Government does not take the easy route and push Nigerians to the wall yet again. Deregulate this sector already!

Yemi Adamolekun is Executive Director for Enough Is Enough Nigeria, a coalition of youth groups focused on good governance and public accountability.
Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija

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