According to Investor Glossary, Deregulation is an act by which the government regulation of a particular industry is reduced or eliminated in order to create and foster a more efficient marketplace. Deregulation is usually enacted to weaken government influence and forge greater competition.
The Federal Government recently disclosed that in 2008, N640 billion was spent to subsidise regulated petroleum products, that is petrol and kerosene, for domestic use. Government argued that many years of subsidising the products have resulted in inefficiency, fraud and racketeering. Because of these problems, government has opted for full deregulation of the downstream petroleum sector. Government officials argue that the magnitude of the existing subsidy is unfair and unsustainable.
But labour and some sections of the public are opposed to the proposal which, they fear, will increase pump prices and further impoverish the people. Their objections are not misplaced. They doubt if government has taken the trouble to establish true production/supply costs and fair prices.
An industry expert, Audu Usman said looking at the motive behind the position of government and that labour shows that all of them are interested in making life good for all Nigerians but from a different perspective. According to him labour is saying that We want good life, deregulation will make life bad if not worse and the Federal government is saying don’t worry thing will be fine after deregulation. “The government therefore needs to handle the deregulation brouhaha more smartly. They need to talk more about liberalization because deregulation without liberalization is a recipe for social catastrophe and economic repression. The government must build a good argument. It should focus more on the benefits of liberalization and deregulation and less on the trillions of Naira it is hoping to save. The government must talk honestly about the initial hardship and what it plans to do to tackle it while the industry squares up for competition. The government must equally talk very loudly, resolutely and consistently about what is in it for Nigerians.”
Usman said one of the success stories of deregulation and liberalization beyond our shores is the PETRONAS of Malaysia.” PETRONAS is one of the largest companies in the world not just in Malaysia. Their cash-flow is higher than the revenue or budget of the federal government of Nigeria. It is on the list of FORTUNE 500. The PETRONAS Towers was the tallest building in the world from 1998 to 2004.
It is a profit-making company. It is a global player and not a local miserable champion. Above all, the government makes big money from it from taxes and other avenues. Jobs are created. Technology is acquired and diffused in the Malaysian Society and an expanded business field has been created and the actors and players are many.
They don’t have fuel queues in Malaysia. They don’t lack kerosene or gas for domestic or industrial use. Life has not deteriorated in Malaysia on account of their energy policy. In fact, the petroleum industry in Malaysia is one of the most mature in the world. This is what these people have gotten from deregulation and liberalization.” He said it would be sheer hypocrisy to deny the fact that there will be initial shock and price hike. Nigerians according to will definitely feel the pain during this period of adjustment but what the country stand to gain far out weigh the pains.”
The sanity; the new opportunities; the permanent availability of products; the climb on the ladder of downstream expertise and technology; the new and pregnant investment climate; the jobs; the wider redistribution of wealth away from the hand of a few opportunists; the reduction in the number of government avenues being used by men of government and their private sector lackeys for plunder and personal aggrandizement; the refocusing of government attention away from businesses that are better managed by the private sector towards industry supervision, policy formulation and development of energy strategy; the prospect of seeing Nigeria build the capacity for local refining and becoming self dependent “He argued.
The NLC on the other hand fault government claims that deregulation will bring in competition which will eventually lower fuel pump prices “The idea that deregulation will lead to lower fuel pump prices is ridiculous; the fraud behind the argument can be assessed by what has happened to diesel and kerosene which have been fully deregulated. Kerosene is now so much out of the reach of ordinary Nigerians that many Nigerians have gone back to using fuel wood for their energy needs. This has increased the rate of deforestation and desertification with both contributing to global warming. In spite of the fact that the international price of a barrel of crude is now about one quarter of what it was in June 2008, the high price of diesel remains unchanged. The price of diesel oil has remained high averaging over N120 per litre in 2008. If the price of PMS is deregulated, consumers can only expect to pay more and not less even when the international price of a barrel of crude has reduced. Therefore, the fictional benefits for the consumer will never occur; rather, marketers and government policy makers will be smiling to their foreign bank accounts while ordinary Nigerians will be wallowing in hardship and pain”.
The whole ‘no-more-subsidy’ argument of government collapses when we look at the components of the subsidy NLC argued. They said Nigeria is daily ripped off and government ought to be ashamed because it is unable to protect the interests of its people. “The main elements of subsidy arise from (i) production costs (ii) demurrage and landing costs. Although the demand for PMS is about 31 million litres per day, the combined production of the three refineries even if they were producing at 100% of installed capacity would be around 18 million litres. However, owing to government’s own ineptitude, these refineries now produce about 6 million litres leaving a huge demand gap of some 25 million litres”.
To meet this demand gap, NLC posited that government contracted companies in Spain, which is not an oil producing country, to refine petroleum products for the Nigerian market. Given the fact that Spain is not an oil producing country, the costs of refining there are higher than what obtains in countries that have a domesticated technology for refining oil because they produce crude oil they submitted. These higher costs are passed on to Nigerians as ‘subsidy’. Is this the fault of the Nigerian people? NLC queried.
The Managing Director/CEO, Eterna Oil & Gas Company Plc, Mallam Ibrahim Boyi says the inability of the country to operate functional refineries to meet local demands has exposed both marketers and consumers to the dynamics of
International prices, as the bulk of products consumed were imported from the international market.
According to him, there was no need for Nigerians to pretend that all was well with the continuous regulation of the sector, especially as related to the prices of products because aside Lagos and its environs, consumers in all other parts of the country are buying at prices far above government regulated prices.
The regulated market, he said, also meant continuous government subsidy on equalization funds; funds designed to ensure that products are sold at uniform prices in all nooks and crannies of the country, but which at no point in time, has never met its designed objective.
“Deregulation will it take away a lot of inefficiency; it takes away a lot of wastages. It frees funds for government to do other development projects. And believe me, at the end of the day, the customer will still be better for it because products will be available, its supply line uninterrupted and facilities and services will improve,” he said.
According to Investor Glossary, Deregulation is an act by which the government regulation of a particular industry is reduced or eliminated in order to create and foster a more efficient marketplace. Deregulation is usually enacted to weaken government influence and forge greater competition.
The Federal Government recently disclosed that in 2008, N640 billion was spent to subsidise regulated petroleum products, that is petrol and kerosene, for domestic use. Government argued that many years of subsidising the products have resulted in inefficiency, fraud and racketeering. Because of these problems, government has opted for full deregulation of the downstream petroleum sector. Government officials argue that the magnitude of the existing subsidy is unfair and unsustainable.
But labour and some sections of the public are opposed to the proposal which, they fear, will increase pump prices and further impoverish the people. Their objections are not misplaced. They doubt if government has taken the trouble to establish true production/supply costs and fair prices.
An industry expert, Audu Usman said looking at the motive behind the position of government and that labour shows that all of them are interested in making life good for all Nigerians but from a different perspective. According to him labour is saying that We want good life, deregulation will make life bad if not worse and the Federal government is saying don’t worry thing will be fine after deregulation. “The government therefore needs to handle the deregulation brouhaha more smartly. They need to talk more about liberalization because deregulation without liberalization is a recipe for social catastrophe and economic repression. The government must build a good argument. It should focus more on the benefits of liberalization and deregulation and less on the trillions of Naira it is hoping to save. The government must talk honestly about the initial hardship and what it plans to do to tackle it while the industry squares up for competition. The government must equally talk very loudly, resolutely and consistently about what is in it for Nigerians.”
Usman said one of the success stories of deregulation and liberalization beyond our shores is the PETRONAS of Malaysia.” PETRONAS is one of the largest companies in the world not just in Malaysia. Their cash-flow is higher than the revenue or budget of the federal government of Nigeria. It is on the list of FORTUNE 500. The PETRONAS Towers was the tallest building in the world from 1998 to 2004.
It is a profit-making company. It is a global player and not a local miserable champion. Above all, the government makes big money from it from taxes and other avenues. Jobs are created. Technology is acquired and diffused in the Malaysian Society and an expanded business field has been created and the actors and players are many.
They don’t have fuel queues in Malaysia. They don’t lack kerosene or gas for domestic or industrial use. Life has not deteriorated in Malaysia on account of their energy policy. In fact, the petroleum industry in Malaysia is one of the most mature in the world. This is what these people have gotten from deregulation and liberalization.” He said it would be sheer hypocrisy to deny the fact that there will be initial shock and price hike. Nigerians according to will definitely feel the pain during this period of adjustment but what the country stand to gain far out weigh the pains.”
The sanity; the new opportunities; the permanent availability of products; the climb on the ladder of downstream expertise and technology; the new and pregnant investment climate; the jobs; the wider redistribution of wealth away from the hand of a few opportunists; the reduction in the number of government avenues being used by men of government and their private sector lackeys for plunder and personal aggrandizement; the refocusing of government attention away from businesses that are better managed by the private sector towards industry supervision, policy formulation and development of energy strategy; the prospect of seeing Nigeria build the capacity for local refining and becoming self dependent “He argued.
The NLC on the other hand fault government claims that deregulation will bring in competition which will eventually lower fuel pump prices “The idea that deregulation will lead to lower fuel pump prices is ridiculous; the fraud behind the argument can be assessed by what has happened to diesel and kerosene which have been fully deregulated. Kerosene is now so much out of the reach of ordinary Nigerians that many Nigerians have gone back to using fuel wood for their energy needs. This has increased the rate of deforestation and desertification with both contributing to global warming. In spite of the fact that the international price of a barrel of crude is now about one quarter of what it was in June 2008, the high price of diesel remains unchanged. The price of diesel oil has remained high averaging over N120 per litre in 2008. If the price of PMS is deregulated, consumers can only expect to pay more and not less even when the international price of a barrel of crude has reduced. Therefore, the fictional benefits for the consumer will never occur; rather, marketers and government policy makers will be smiling to their foreign bank accounts while ordinary Nigerians will be wallowing in hardship and pain”.
The whole ‘no-more-subsidy’ argument of government collapses when we look at the components of the subsidy NLC argued. They said Nigeria is daily ripped off and government ought to be ashamed because it is unable to protect the interests of its people. “The main elements of subsidy arise from (i) production costs (ii) demurrage and landing costs. Although the demand for PMS is about 31 million litres per day, the combined production of the three refineries even if they were producing at 100% of installed capacity would be around 18 million litres. However, owing to government’s own ineptitude, these refineries now produce about 6 million litres leaving a huge demand gap of some 25 million litres”.
To meet this demand gap, NLC posited that government contracted companies in Spain, which is not an oil producing country, to refine petroleum products for the Nigerian market. Given the fact that Spain is not an oil producing country, the costs of refining there are higher than what obtains in countries that have a domesticated technology for refining oil because they produce crude oil they submitted. These higher costs are passed on to Nigerians as ‘subsidy’. Is this the fault of the Nigerian people? NLC queried.
The Managing Director/CEO, Eterna Oil & Gas Company Plc, Mallam Ibrahim Boyi says the inability of the country to operate functional refineries to meet local demands has exposed both marketers and consumers to the dynamics of
International prices, as the bulk of products consumed were imported from the international market.
According to him, there was no need for Nigerians to pretend that all was well with the continuous regulation of the sector, especially as related to the prices of products because aside Lagos and its environs, consumers in all other parts of the country are buying at prices far above government regulated prices.
The regulated market, he said, also meant continuous government subsidy on equalization funds; funds designed to ensure that products are sold at uniform prices in all nooks and crannies of the country, but which at no point in time, has never met its designed objective.
“Deregulation will it take away a lot of inefficiency; it takes away a lot of wastages. It frees funds for government to do other development projects. And believe me, at the end of the day, the customer will still be better for it because products will be available, its supply line uninterrupted and facilities and services will improve,” he said.
