Lagos — Nigerian government's determination to return the country to the path of market-driven economy cannot be faulted. But implementation of the process is currently faced with several policy gaps that threaten to scuttle realization of the desired goals. And only a conscious effort to plug the gaps can guarantee a sustainable reform of the economy.
For a country that for long was subjected to the exploitative forces of state control of the economy, the desire to embrace market forces is understandable. State control of virtually all sectors of the economy bred inefficiency from which this West African nation is still suffering.
This explains why the country's four refineries cannot satisfy local demand for refined products. It explains also why electricity generation virtually collapsed until the coming of the new government about two years ago. And even then, current power supply is still less than half total demand.
But there can be no shortcuts to reforms. Countries that have pursued successful reforms followed consistent sets of policy measures, says Olisa Agbakoba, lawyer and Senior Advocate of Nigeria. These measures, he says, are: creation of an enabling environment through the production of a new policy blueprint, and setting up of a new legal and regulatory framework.
The crisis in Nigeria today, he says, is that the country wants to go through the process without passing through stage two-establishment of a legal and regulatory framework. This is the cause of the crisis in oil sector, as the government and organized labor movement trade tackles over a planned deregulation of the downstream sector of the oil industry.
Government, he says, wants to "jump from regulation to deregulation without going through stage two (legal and regulatory framework)." This "jump" is manifest in many of the sectors currently billed for privatization or deregulation in the country. In the telecommunications sector for instance, government says it wants to privatize the Nigerian Telecommunications Limited, which until recently was the sole provider of telecommunications services in the country.
The snag: there is no legal and regulatory framework for the telecommunications sector yet. A seminar that took off Tuesday in Abuja, the Nigerian inland capital, is expected to provide inputs into a regulatory framework being prepared for this sector. This is why, he says, Nigeria's privatization program is "a colossal failure." Absence of a regulatory framework has led to unco-ordinated implementation of the program.
It is the same for the oil and gas sector, which in part explains the near debacle in government's handling of the contentious issue of deregulation of the downstream sector of oil.
For the oil and gas sector, a legal/regulatory adviser is expected to be appointed between July and August this year, according to a timetable released by the Bureau of Public Enterprises, the secretariat of the National Council on Privatization. Despite this, government has been busy with plans for deregulation of the sector.
A Special Committee set up by the government last year to review the supply and distribution of petroleum products in country had recommended a three-phased deregulation of the downstream sector of the oil industry. But the committee also recommended the establishment of a Petroleum Products Pricing Regulatory Committee, to "superintend" the deregulation process. Although the government recently set up the regulatory committee, it action initially gave the impression it was not interested in setting up this body.
"The problem with the current deregulation exercise is that there is a policy disarticulation," says Agbakoba. According to him, this is why labor "is not necessarily saying it's against deregulation, but against misapplied policy." The Nigerian Labor Congress, which embraces all industrial unions in the country, says it will resist government's plans to increase prices of petroleum products through deregulation.
NLC last Thursday rounded off a series of rallies against deregulation. At its grand rally in Abuja, the congress said it would embark on a nationwide strike action if government went ahead with the plan. It had earlier accused the government of planning to effect the price increase from last Saturday, April 1. Although government later denied this charge, Agbakoba believes this is true. "Without the rallies, government would have increased the prices," he says.
The face-off between government and labor could go on for long, says Agbakoba. "That is the sad thing, and it's the masses that will suffer." Despite labor's threat, government says there is no going back on deregulation. "It's not a matter of if, but when," Ojo Maduekwe, Minister of Transport, said here Monday.
"Not deregulating the oil sector is like an old man who not only refuses to farm, but is also eating the seedlings that his children should feed on," he said. Maduekwe said he needed part of the 200 billion naira (about $1.8 billion) that government says it spends annually on subsidy for local consumption of refined products. "I need part of that money myself to revamp the railway system."
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Government says money saved from deregulation would be invested into such social sectors as health, education and infrastructure, which are currently in dire need of funding. It has also said that removing the subsidy on petroleum products is more imperative because about a quarter of these products are smuggled out of the country into neighboring countries.
But Agbakoba says government should admit the flaw in its plan, and return to the drawing table and articulate its policies. Deregulation, he says, "always transfers" assets from the public sector to the private sector. At present, however, he says there is nothing to transfer. In the oil sector, he says the refineries are not functioning at full capacity (in government's words, they are working at various percentages of installed capacity). The pipeline network is old and needs to be replaced.
"So, if government feels that deregulation will increase the flow of fuel, it's making a mistake," he says.
