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Deregulation Of The Nigerian Downstream Oil Sector; Keeping Faith With A Global Trend
By Okafor Loretta

The sticky issue of oil is no longer a new phenomenon in the global political lexicon. Though oil has been in existence for ages, buried beneath the earth as debris, it had enjoyed a steady metamorphose into what we all refer to as crude oil. Oil is also a popular item because of the inevitability of its usage, which as a double-entendre has become a major bane contributing to the “rat race”, which has reduced the entire humanity into a village. The implication here is that no nation is an island, as what happens in one part of the world ultimately affects the other parts.

This has offered the world crude oil production, pattern, supply, distribution and consumption to be uniform, experiencing the same hiccups which send shivers running down the spines of countries that have International crude oil relations. Oil accounts for more than 75% of the world’s total source of revenue, hence at the instance of its pendulum tilting either right or left, nations of the world are forced to scurry for safety. Even the world acclaimed Super Powers are kept on their toes, with OPEC states monitoring supply and proffering solutions on how to checkmate the excesses of some recalcitrant nations from flooding the market with products. Nigeria, as a part of global politics has had her reforms including liberalization and deregulation in the petroleum oil and gas sector driven by the oil phenomena. The reason for this is not farfetched; oil remains the most internationally traded commodities with increased private sector participation. Besides, the oil sector has for years been characterized by improved technology and participation that developed economics have also embarked on the reforms in their various nations to enhance both local and international participation. At the same time, create an enabling environment for private investor participation as it suits them.

However, deregulation policy has globally been embraced by several countries, in order to lessening public sector dominance and for developing a liberalized market while ensuring adequate supply of products. For this policy to be successful in these other countries they had planned and mapped out an effective policy response which transcended into full deregulation. Such is the story in Peru, Argentina, Pakistan, Chilean, Philippines, Thailand, Mexico, Canada, Venezuela, Japan and USA, all of which have systematically dismantled their State-owned oil companies, for a significant turning point in the success story of their oil industry reform efforts.

The economic reforms of the government become rather imperative since they are geared towards reviving the ailing sectors. The precedence of some sectors that have been fully deregulated and their achievements are so tremendous that Nigerians had forgotten the scares of the initial experiences.

Six years ago, government deregulated the telecom sector by allowing the private investors to run the sector thus de-emphasizing government control. The initial prices of sim cards from MTN and other service providers were within the ranges of N25 000-N10, 000 but today, the success story is that sim cards are virtually free by all the service providers, the scratch cards have been reduced to N100 denominations, making it affordable for every strata of the population. Other marketing gimmicks like per second billings were also introduced to motivate would be subscribers. The good news of the telecom industries is ubiquitous, for these past six years, it is not government funding that is oiling the sector but private capital. Interestingly, government is feeding fat from revenues these sectors are generating. However, one thing is clear, consumers have a wide range of options to choose from, thus promoting healthy rivals among operations, with each trying to outwit the other in their marketing strategies. The financial sector; media and most recently the Insurance sector are also experiencing the “cyclone sweeping” across the sectors. Why then must the oil sector be different?

From the countries so far enumerated, Nigeria is not alone in this global trend of attempting to develop its downstream sector through liberalization and deregulation and increased private sector participation. Deregulation of the downstream petroleum sector, as conceived in 2003, involved not just the removal of government control on petroleum products prices, but also the removal of restrictions on the establishment and operations including refining, jetties and depots, while allowing private sector players to be engaged in the importation and exportation of petroleum products and allowing market forces to prevail. Nigeria, ever before this reform had weighed its pros and cons and there is no place in the world where reforms are embraced without agitations. If statistics of nations already adopted deregulation is taken, it will be shocking to know that its take-off met with lots of road blocks. Today, it had paid off, and they are reaping the benefit of their perseverance. For deregulation to be made or marred will depend solely on the generality of Nigerians.

If Nigeria should borrow a leaf from these nations and allow the downstream sector to be fully deregulated, we are sure to have a success story to tell. Otherwise, Nigeria becomes an onlooker in the polity of oil producing nations. As the recent events unfold, deregulation becomes inevitable. There is no point running away from grasping reality, effort should instead be made to face the challenges stoically than postponing the evil day that will eventually come. Definitely, somebody has to bear the “sledge hammer” for posterity to forgive this generation. It is of paramount importance that petroleum tax be implemented because it is a must food to be eaten one day. In these countries where deregulation has been institutionalized, their Tax proceeds are used to fund their social welfare programmes. It would recalled that Nigeria rejected the 1% tax built into the cost of oil simply because they cannot trust their leaders to judiciously and justifiably use the money as it should, but for how long will it last? In so far as the elites, the organized Labour and stakeholders in the country are attuned to what deregulation is, they should deem it fit to help educate and enlighten the populace on the need to embrace deregulation policy. The-playing-to-the-gallery posture by the elites is uncalled for. They understand the intrigues in the global oil setting and the truth of deregulation, rather than the premature assessment and outright condemnation of a “baby” that is only four years old. If the sector is fully deregulated, then will Nigeria reap the gains of decontrol of the prices of products by government and the transformational changes obtainable in other sectors be witnessed in the downstream sector. Oil is pervasive in nature and affects every sphere of our lives, therefore should be handled with utmost caution. In as much as am sounding like a protagonist of the reforms, I will not hesitate to register my dismay on the shabby attitude of the appropriate authority that ought to have embarked on an aggressive enlightenment programmes to educate the masses on the gains and challenges to anticipate of deregulation and try selling their mandate to the populace. The regulatory authority, PPPRA, should go beyond being only seen as a price-fixing government organ. Its impact must be better appreciated and felt by all Nigerian. PPPRA should also collaborate and cooperate with other regulatory bodies across the globe in its quest to adopting an acceptable benchmark as well as try to enforce compliance when need be. Otherwise, the impoverished and vulnerable masses will continue to suffer under the yokes of the marketers who short-dispense products and sanctioning them accordingly.

The Agency should see to it that whenever prices come down or go up in the international oil market, it should also reflect locally. By this, Nigerians would always be willing to adjust anytime there is price increase. That notwithstanding, every hand should be on deck especially the stakeholders in the downstream petroleum sector and government for the success of the policy. Therefore, for global trends in the oil industries not to elude Nigeria, there is need for all and sundry to uphold the philosophy of the deregulation movement, since nations interact at the international oil market. Or, the TITANIC of 1912 will repeat itself. What do I mean? That Nigeria be allowed to toe the way of the trailblazers, knowing that all nations of the world are inescapably sailing on the same vessel perhaps to a common destination so that we can all reach the home port of prosperity. If not, we suffer the fate of the TITANIC, which struck an iceberg and sank in the North Atlantic in 1912, having on board 1513 passengers drowned. Thus, the need for Nigeria to join other nations of the world since we all have a common destiny, which is the crude.




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