The Last Chance To Deregulate
The discussion on the deregulation of the downstream sector of the Nigerian petroleum Industry has been on for decades without any visible decision in sight. The sorest point around the issue is the debate for the removal or sustenance of subsidies for refined products.
You would want to think that Nigeria being the largest producer of oil in Africa and the 5th largest exporter of the product in the world would have a clear stand on the way forward for such a crucial industry, but alas the country is neither here nor there on the issues of deregulation.
In one breath the government says it has deregulated the market partially, yet same government does not want to rule out the continued payment of subsidies. This to me is a sign of indecision on a critical issue such as this.
Since deregulation was a major point of discussion during the last election campaigns, I would have thought the Buhari led APC government would have taken time out to debate the issues surrounding deregulation deeply within its ranks and take a decision once and for all.
The inability of previous governments to be decisive on this issue is part of the reason why growth in the sector in Nigeria is stunted. We cannot afford another round of policy uncertainties. The Buhari government has to come out clear, if his government will fully deregulate the downstream sector of the oil industry or not.
Nigeria in the last five years has consistently spent over 1 trillion naira that is about $5b USD annually on petrol subsidies, same country that spent less than 20 billion naira on roads in the year 2015, but spent over 1 trillion naira on petrol subsidies in same year is unacceptable.
The major reasons given by those who resist the deregulation of the downstream sector of the oil industry is that subsidy on petrol will be removed and pump price of petrol will go up. Whilst that may be true initially, the side of the story they however don't talk about is the benefits of deregulating.
The deregulation of the downstream sector will open up the sector to private investors who hitherto developed cold feet to investing in the sector due to heavy government interference. Those who have had refining licenses approved several years ago will now go ahead to build the refineries, this will tackle the incessant scarcity of petrol due to importation. Petrochemical industries will spring up alongside local refining; these will create jobs and jobs and jobs unlike what we have now where jobs are being exported to countries where we refine our petroleum products.
We will save the economy the unnecessary pressure put on the Naira due to the heavy demand for FOREX to fund the importation of petroleum products rather we will be exporting refined petroleum products thereby earning foreign currencies to shore up our reserves.
The bone of contention for those against deregulation is the fuel subsidy regime that the government runs. This group has argued that the masses hardly benefit anything from the government hence their insistence on the government keeping the subsidy.
Whilst I am not against subsidies in general, I however have a problem with a blanket subsidy that cannot be measured or directed at a particular target group. Different revelations have emerged of massive fraud in the fuel subsidy process, trillions of naira are alleged to have been fraudulently stolen from the government purse in the name of fuel subsidy payments. It is heart wrenching to discover that the country is being bleed on the side despite its already anemic financial status.
For a country that is deficient in almost all critical infrastructures, paying over a trillion naira annually on petrol subsidies does not make sense. Such monies if spent on critical sectors such as health, education, policing, roads, railways etc. will impart the lives of the citizenry more than whatever impart the Petrol subsidy is having on their lives at the moment.
Let's imagine for a moment, that we spent the over one trillion naira which is about $5b dollars we were handing out to subsidy contractors annually in the last 5 years on our health sector, I can bet we would by now probably have a better health sector than any country in Africa and probably be competing with some European countries in quality healthcare.
If we consistently spent $5 billion on our health care in the last five years as we have done on petrol subsidies, we would have created more than 500,000 quality jobs: from those building the new hospitals, to those who will work as medical staff, administrative staff, support staff, contractors, suppliers and others. We would have saved lives; we would have reduced the demand for foreign currency to go on medical tourism, thereby reducing the pressure on the Naira.
What of our ailing education sector , Poor road networks that continue to kill thousands of citizens yearly , just imagine for a second that each of these sectors got a trillion naira each to spend in a calendar year , can we imagine the transformation that would happened in this sectors.
We simply cannot continue to shy away from the realities that stare us in the face. We not only need to deregulate we need to do it fast. Nigeria has wasted too much time on this road of indecision. We now have to take the bull by the horn. Though deregulation may not be that one single silver bullet that solves all of our problems, one sure thing is that it will grow the oil industry like we have never experienced since the discovery of oil.
It is time we do the next big thing after the great telecoms revolution that came with the liberalization of the sector in the early 2000s. I can predict that the boom economy will experience with the deregulation of the downstream oil sector will make the telecoms experience a child's play.
Written by Sunday Attah, a public affairs commentator and President of Baba Do Something (BDS).