Lagos — The Nigerian authorities may clash yet again with workers over a planned deregulation of the oil industry, seen now by ordinary Nigerians as just another name for price increases on petroleum products, mainly kerosene, diesel and petrol or premium motor spirit.
The Government says deregulation is the solution to the current fuel scarcity in Nigeria. It says it is needed to achieve structural changes in the industry, to enhance efficiency, and is not principally intended to raise prices. This has failed to impress the countrys organised labour movement, which has vowed to resist the plan.
Government wants to end the monopoly of the Nigerian National Petroleum Corporation, in the marketing of petroleum products. Deregulation, government officials say, will create competition by allowing the entry of other participants to the downstream sector. NNPC through its subsidiary, the Pipeline Products and Marketing Company, is solely responsible for marketing refined products. All Nigerias four refineries are also subsidiaries of the NNPC.
When the refineries fail to produce enough products for the domestic market, it is also the NNPC, through the PPMC, that imports products to fill the gap. In recent times, production from the local refineries has become so low and unpredictable that the nation now relies largely on imports. Long years of neglect and mismangement have weakened the productive capacity of the refineries.
Nigerias domestic consumption of these products until recently was put at the equivalent of 300,000 barrels of crude per day. Yet the refineries, with a total capacity to refine 445,000 barrels per day, have been unable to meet the domestic requirements. And even when they are fully operational, says NNPC, Nigeria will still import petrol, because the four refineries can produce only 18 million litres per day, while national demand is 25 million litres per day.
This situation, says the government, leaves the supply system vulnerable to mistakes by the monopolist. One such 'mistake', President Olusegun Obasanjo revealed Monday, occurred last October/November when, he said, NNPC applied "arbitrariness" in selecting companies to import fuel on its behalf.
Speaking on Media Chat, a combined Radio/TV live programme, President Obasanjo said NNPC officials were "looking at peoples faces" when deciding who should win the importatation contracts. He said the approach by the corporations officials was at variance with the system introduced by his administration at its inception in May 1999. He said the switch to arbitrariness from the acceptable procedure led to the shortage of petroleum products, now in five weeks old.
But government has said also that deregulation will imply the removal of the subsidy on domestic consumption of petroleum products. Jerry Gana, Minister of Information and National Orientation previously put this amount at 120 billion naira (about $1.2 billion) per annum; last Monday, Obasanjo put it at 200 billion naira. The amount, whatever its exact figure, is significant, and should be put into other more important areas of need, the government argues.
Obasanjo said government would invest savings from the withdrawal of the subsidy in such areas as agriculture, health and education. Besides, said the Nigerian leader, withdrawal of subsidy on the products will help discourage smuggling of these products across Nigerias borders.
Although the government says deregulation is not necessarily about price increases, it does acknowledge that the current price of petroleum products is too low and therefore discourages potential investors from investing in the downstream sector. Obasanjo said Monday that "the price at which the product is being sold is not cost plus profit. It is an artificial, suppressed and subsidised price."
Vehicle fuel, for instance, sells in Nigeria for 22 naira (about $0.22) per litre, but Obasanjo said without an increase in its price, Nigerians should not expect any investments flowing in to build new refineries.
"Nobody in his right senses would set up a refinery in Nigeria and sell at such a subsidised rate," Obasanjo said.
He said deregulation would lead to cost recovery by operators in the industry, when they sell at "cost plus profit," unlike now, when the government, through the NNPC, is subsidising consumption.
The Government's arguments have failed to impress the Nigerian Labour Congress, the countrys umbrella labour organisation. NLC says government created the current scarcity. The plan, it says, is for government to present price increase as solution to the recurring shortage.
"I believe that this is deliberate and it is working for the governments position, that its either you allow us to deregulate or you continue to suffer, "Adams Oshiomhole, NLC President, said Tuesday at a forum organised by the National Assembly on the oil industry.
In June last year, NLC embarked on a nationwide strike action in protest over governments 50 percent hike in the prices of these products. Government justified the increase by the need to eliminate the subsidy and prevent smuggling of the products across the border. NLC called off its strike after government had reduced the increase to 10 percent. Government also set up a committee to review the supply and distribution of petroleum products in Nigeria.
The Congress says it will do the same again, should the government raise these prices. It has debunked governments claim on subsidy, saying it does not exist. "You cannot withdraw what does not exist," Oshiomhole said in Abuja. "Our sources within the oil industry told us that the actual average cost of producing Nigerian crude is $4., while it is sold to NNPC (for refining for local consumption) at $9.50. If you translate the difference, it amounts to 600 naira, which the government is already making on each litre. So the issue of subsidy does not arise," he said.
NLC says government should first tackle Nigerias decrepit infrastructure. It wants the government to improve on telecommunications and power supply, before subjecting the oil sector to the powers of competition. These demands were echoed Wednesday, at a meeting between some independent petroleum marketers, and officials of the Department of Petroleum Resources, which regulates the industry.
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The independent marketers (indigenous entrepreneurs, unlike the major marketers who are mainly multinational companies) said they supported deregulation, provided government first improved on telecom and power generation.. "Deregulation is good, but government should make sure the telephone is working, and is cheap, so people can afford it," a spokesman for the marketers said at the meeting.
On power supply, the groups spokesman said: "NEPA (National Electric Power Authority; some call it Never Expect Power Always) should be working 24 hours, so that people will not have to be buying diesel." Both demands are no mean challenges in a country where there are about 450,000 fixed telephone lines for a population of 120 million.
The power sector is as gloomy. Obasanjo admitted Monday that the "rot in NEPA is pervasive," far more than he had imagined when he took over nearly two years ago. This explains why despite his target to generate 4,000 megawatts of power by end of this year, total power supply now hovers around 2,500 MW.
It means that more individuals and companies will still buy diesel and petrol to power their generators.
But for now, many of them have to spend up to six hours at petrol stations before they are able to buy the products.
