Mockery Of Deregulation In Nigeria’s Petroleum Industry


I am a staunch advocate for deregulation of the Nigerian economy. At independence in 1960, Nigeria was a fully deregulated mixed economy. There was economic order and progress.

Before the misguided military takeover of power in 1966, Nigeria’s petroleum industry was free from government destabilizing participation.

The major oil companies; Shell BP, Total, Esso, Agip and Texaco were foreign multinationals. Then, Nigeria had only one 80,000 barrels/day refinery (Port Harcourt 1) owned by Shell BP. Their production, augmented with minor import of petroleum products by other majors fully satisfied domestic consumption.

Shell BP lost its ownership of Port Harcourt 1 refinery, partially due to the indigenization exercise of 1972 and later fully to the Federal Military Government when it was seized to compel Great Britain to grant independence to Rhodesia.

In Nigeria, the assault on deregulation started before military takeover when the Western Regional Government prohibited export of Cocoa, except through the State owned Marketing Board. That policy did not survive for long.

Under General Yakubu Gowon, the military embarked on full scale regulation of the economy. Decrees were promulgated that prohibited the private sector competition against public monopolies in the commanding heights of the economy.

In fairness to the military, they invested heavily in State sponsored enterprises but subsequent administrations could not preserve their legacies. The enterprises became conduit pipes through which the national treasury was looted.

When the failings of State monopolies started to stifle the economy, the need for their privatization and deregulation of the industries that were monopolized became apparent. The reforms started with SAP in 1986.

All along, Nigeria had been lucky for the consistent deregulation of the agricultural sector. When the communist government of defunct Soviet Union collectivized agriculture, the sector failed and several citizens of the evil empire perished from hunger. The positive revolutionary transformation of Nigeria’s telecoms industry is a vivid illustration of what deregulation can achieve.

President Goodluck Jonathan’s mischievous deregulation of the electric power industry is not a good example to behold and yardstick for judgment. It is a classical case of mockery of the tenets of deregulation. Out of the three sections; Generation, Transmission and Distribution, he maintained government’s strange hold over Transmission which is the connecting factor. In addition to retaining this element of inefficiency,

President Jonathan also devilishly set the agenda for failure by privatizing the other sections to his cronies who lacked the technological competence and financial capacity to revive the failed industry.

The essence of deregulating an industry is to foster competition and allow Market Forces to determine quantity and price. These are the factors that drive cost effectiveness and efficiency of service delivery. Role of government in a deregulated environment is only to regulate participants and not to be a participant itself.

The job done by a game’s Referee. Therefore, when the Hon Minister of State for Petroleum, Gov Timipre Silver claimed at a recent Press conference that Nigeria’s Petroleum industry has been deregulated, he was only being mischievously deceptive.

There is no competition in the supply of Petrol as only NNPC, owned by Federal government imports the product. The quantity and price are also not determined by Market Forces. PPRA, a department in government fixes the price at which Marketers source from NNPC. One wonders when supply monopoly and price control became synonymous with deregulation.

Concerning the Hon Minister’s justification for the vexatious increase in fuel price as means to ending fuel subsidy, didn’t APC claim that there was nothing like subsidy? They accused President Jonathan of embezzling the N1 trillion purportedly spent yearly on fuel subsidy.

There is no doubt that fuel subsidy, an economic evil and nonsensical wasteful consumption subsidy, if it truly exist, is overdue for replacement by production subsidy which facilitates creation of wealth and generation of productive employment.

Let it be known that full deregulation of the Petroleum industry, where FGN does not supply or fix price, and privatization of the corruption ridden and ethnically bastardized NNPC, are imperatives that can transform the failed Petroleum industry into the semblance of the successful telecoms industry.

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