Monday, May 23, 2016

Buhari And Oil Sector Liberalisation: What Kachikwu Has Not Told Us?

By Ifeanyi Izeze
Whether they called it “subsidy removal,” at first and later “price modulation” and now “downstream liberalisation,” one fact stands out that the announcement by the federal government on the fuel issue represented a form of deregulation of the petroleum products procurement and distribution sub-sector of the nation’s downstream. Most Nigerians as it stands today are seriously praying and hoping that President Muhammadu Buhari and his team will arrive and quickly too at a reasonable strategy to take the nation through the next couple of years and position us for the long term as well. This is our hope and according to the Holy Bible (Romans 5:5), “Hope does not make us ashamed”- we cannot be ashamed of having hope on the abilities of our crop of ‘ogas on top.’ And our prayer is that our president fulfils the hope of his calling by being fruitful in every good work.
It is an understatement to say that there is a lot of confusion that need to be cleared and in plain language too by the government in the announced liberalisation of the petroleum products procurement and distribution sub-sector.

Truly Nigeria is “fantastically wonderful,” if not how do you explain the existing foreign exchange (forex) discrepancies between the Central Bank rate and those of the autonomous or rather black markets? As at today black market foreign exchange rates are well over two times the official rate. The first question is: who supplies forex to the black market operators? Is it possible that someone can smuggle huge amount of dollars into Nigeria without beign detected? It is obvious that those in authority- in government, CBN and the NNPC are the ones releasing forex to their cronies/fronts that operate the black markets. Is this in its self not corruption/fraud at its highest order?

This government that has shown a strong political will to fight corruption should address this foreign exchange discrepancy that is at best sabotaging the genuine efforts to re-jig and strengthen our economy. You expect marketers to source forex at the secondary/ black market and at the same time cap the price they are expected to sell their commodity, is that going to work?

Though it is better to believe it was an oversight, remarkably, the president and the petroleum minister have been mute on the fate of one of the worst epicentres of corruption in the fuel subsidy and price modulation fraud in this country. The Petroleum Equalisation Fund (PEF), a conscription that is as fraudulent as the entire subsidy racket is being completely left out of the present argument by both the government and those against the recently announced deregulation of the downstream.

It is “fantastically corrupt” to be mute on the issue of equalisation as enshrined in the Act that established The Petroleum Equalisation Fund. This Fund was supposed to make sure every Nigerian, no matter where you live, pay the same price for at least petrol and kerosene. And money has been channelled through it all these years to majorly offset haulage costs to different parts of the country. Unfortunately, the haulage cartel is as corrupt, mindless, and selfish as the fake fuel importers themselves. But for whatever reasons, their fraud and activities had been deliberately played down by both government and anti-subsidy campaigners.

Has the obnoxious payment of the “Bridging Cost”, also been scrapped by the federal government as part of the recently announced deregulation/subsidy removal and cost saving initiative?

We all remember a recent campaign by those pretending to defend the interests of Nigerians in some parts of the country that if the Equalisation Fund is scrapped, Nigerians in those areas would be made to pay four-five times higher prices than price regimes in areas closer to the depot facilities because of the distance it takes to transport the petroleum products from coastal depot facilities into the hinterland. In a regime of no subsidy, does the government still expect petrol to sell at the same price in Maiduguri, Makurdi and Lagos or Brass?

To everybody, the argument actually made sense but Nigerians were unaware they were being manipulated by the haulage cartel whose only interest is themselves. Even in the coastal areas that host refineries and/or depot facilities, does fuel sell at the same price everywhere? Not at all! But because we like to play politics with everything, sectional, regional and even ethnic colourations were introduced to deceive the innocent Nigerians for the selfish interests of a very few businessmen.

If this government is still retaining that fund, it means then that they are subsidizing fuel in certain sections of the country while leaving out others to the mercy of the oil marketers. The Petroleum Minister needs to clarify this issue without ambiguity.

Now, whether anybody wants to hear this or not, our refineries are still comatose. The combined performance outings for the three and a half plants we have in this country are nowhere near 30 percent utilisation of installed capacities not minding all the deceit by the NNPC and its people in government. Even the ordinary boiling of crude oil to separate petrol (PMS) and/or diesel, none of the refineries- Warri, Kaduna, Port Harcourt I and II is doing that effectively to anything near 40 percent capacity as installed. Meanwhile, this is just a very tiny fraction of what the refineries were set up to do in the first instance.

It has been severally said that years of mismanagement and corruption not only in our oil sector but in all facets of our economy as a nation has produced a Nigeria that does not (as at now) have the capacity to refine crude oil into petrol and other products for her domestic needs.

Just last week, we were told that the federal government would set a deadline for the country to be self-sufficient in refined petroleum products and become a net exporter of same. Good as it sounded, the Government need to be very clear on what they mean and also be honest sincere enough to set realistic and achievable deadline. The government has not told us the magic it’s going to do to achieve that in the short term and even in the long term as we glaringly know that our petroleum minister “is not a magician.” We need to be “carried along.”

All kinds of talks have been dangling around on the decision to privatise/sell the existing refineries; establish co-location plants near the existing sites to process crude; private involvement in crude oil refining through the modular concept; and so on. In all these contemplations, my advice is that the government must critically consider the issue of availability of crude oil feedstock supplies to the proposed ventures. Of what use is a refinery whether full plant or modular sited somewhere but cannot receive crude oil to process? So whatever has been the cause of disruptions and vandalisations of lines from the sources of the crude to where they are expected to be processed should be addressed without politics because ‘I no gree na im dey tear shirt o!’ There is a way you ask somebody to go to hell that he actually decides to go there and see what will happen. A word don do for the wise o!
*Ifeanyi Izeze lives in Abuja and can be reached on: iizeze@yahoo.com; 234-8033043009)



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