Will liberalization of the oil sector end fuel scarcity?

For almost 40 years, crude oil has been a major source of foreign exchange for the Nigerian economy. The sale of crude oil has significantly increased government revenue. But additional revenue from crude oil has not meaningfully increased productive activity of the average worker, trader and farmer of the Nigerian enterprise. Low productivity remains a major feature of the Nigerian economy. Regrettably, the economy remains inert as the productive sector is not responding to economic treatment administered through monetary and fiscal policies.

As far as I can remember, perennial fuel scarcity in Nigeria has been in existence for more than three decades. With the refineries down, Nigeria had to start importing Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO) popularly known as diesel. This requires huge capital in foreign exchange (forex). For a very long time, the truth about pricing of petroleum products is not known to the public. But the federal government claims it has always subsidized imported petroleum products.

Fuel scarcity is here again! Unfortunately, when the nation had surplus forex, there was still fuel scarcity. Currently, forex reserves is low, and as I write, the Central Bank of Nigeria (CBN) has been accused by major oil marketers of not providing forex to enable them import fuel for use in Nigeria. For almost one month in the first quarter of 2016, there have been long queues in gas stations all over the country.

Mr President who is the Minister of Petroleum and his Minister of State, Ibe Kachikwu, are under intense pressure to provide fuel for the citizens. As Ibe Kachikwu is apologizing for a phraseology jocularly made to press men that he is not a “magician”, he is equally strategizing by looking at appropriate logistics measures that would ensure there is no more scarcity of petroleum products. In fact, Ibe Kachikwu has pronounced that by 7 April 2016, fuel scarcity will end.

Even if there is fuel today, I doubt if scarcity of the product will not surface again before the end of the second quarter of 2016. This is because Nigeria’s oil sector has several layers of challenges: First, available forex is not sufficient to accommodate all importers of PMS; second, NNPC is burdened with 100 percent importation but has inadequate storage capacity with only about 3 out of 22 oil tank farms operational; third, corruption and inefficiencies in the supply and distribution chain; fourth, incessant vandalism of pipelines and poor performance of refineries amongst others. In order to provide a lasting solution to the perennial fuel scarcity, experts say that the oil sector should be liberalized. This is the crux of my treatise in this column today.

Liberalization of the oil sector will enable the federal government regulate policies in order to check the excesses of capitalism in the oil sector with a view to providing a “safety net” against poverty and misery in the land. This is possible if the PMB administration is ready to do the needful.

Will liberalization of the oil sector stop perennial fuel scarcity in the country? Why is the federal government reluctant in liberalizing the oil sector in Nigeria? It is because the federal government lacks the political will to do so. Why? The federal government benefits immensely from the kwashiorkor structure within the sector for almost six decades. Even the Goodluck Jonathan’s regime wanted to liberalize the oil sector but lacked the political will to do so.

With due respect, NNPC as an agent of government, has not performed its functions with elegance for almost a decade. That is why NNPC was caught in the web of corruption and fraud because its management get orders from “oga at the top” always. Why? It is because the federal government has command of the oil sector? He who commands the oil sector, commands everything in Nigeria.

It is the oil sector that gives breath to all activities of the federal government. The supremacy of the federal government in Abuja has direct correlation with proceeds from the oil sector. That is why government at the centre is very “juicy.” With all of this, do Nigerians think that the federal government will now be willing to only regulate, while others go away with Dollars? No way!

If the federal government of PMB agrees to liberalize the oil sector, then due diligence has to be done within the sector. If due diligence is not done in the sector through transparency and accountability, I bet it will be an effort in futility. It may even end up worse than the privatization of the Power Holding Corporation of Nigeria (PHCN). This is my view because the way some private companies conducted their affairs during the fuel subsidy regime of the immediate past government was indecent and very messy. If privatization of PHCN remains the way it is today and the proposed liberalization of the oil sector is not diligently handled, then Nigerians should be prepared for a very tough time ahead.

What the government needs to do is to lobby the National Assembly to pass the amended Petroleum Industry and Governance Bill before it is forwarded for assent by Mr President. But I hope due diligence was done while amending the Bill. Politicians should detach themselves from sentiments and parochial considerations in passing the Bill. The NASS should pass other bills that would improve the business climate in Nigeria.

The federal government needs to display an appreciable level of transparency and create a level playing ground for investors to operate. I know that the oil sector has high entry barrier but the federal government should discourage outright monopoly and oligopoly in private refining of crude oil. Others investors are interested. I read that nine companies have applied to bid for license to operate private refineries. This is good news! The federal government and the NASS need to work together to provide rules of engagement within the oil sector.

Perhaps it is when the oil sector is liberalized that Nigerians can be assured in the long term that there will be no fuel scarcity again in gas stations across the nation. Until then, fuel scarcity will be a way of life in Nigeria.

 

MA Johnson