Abstract
This chapter presents a critical analysis of the realities and motivations for the pseudo-deregulation of the downstream oil sector, and evaluates its cost-benefits. It explores the influence of globalization and democratization on oil sector reform, and assesses the effect of the partial-deregulation and its attendant fuel price increases on democratization. It examines government strategies in the implementation of deregulation policy, and explores its implications Nigeria’s political economy. This section also reconciles the intent of the policy with the effects of implementation in view of the implications for the sustainable socio-economic and political development of Nigeria. I claim that the intent and implementation of the pseudo-deregulation policy by government was greatly flawed and based on false assumptions. However, the reality in the sector and reluctance of the Nigerian government to embark on public management makes deregulation a matter of necessity and not of choice.
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Notes
- 1.
Having reserves that will last for 46 years is only meaningful if oil proceeds are substantially and effectively used to develop Nigeria.
- 2.
The downstream sector comprises the distributive and marketing aspect of the petroleum industry. It is not just a distributive and marketing network, but encompasses oil infrastructure and the structure of fuel in the sector. Everything outside crude oil exploration falls under the downstream sector.
- 3.
Subsidy in simple term is the difference in the naira value of the cost of petroleum products, at the point of distribution to consumers, and the government approved price.
- 4.
This is a “complex mixture of relatively volatile hydrocarbons with or without small quantities of additives, blended to form a fuel suitable for use in spark-ignition engines. Motor gasoline, as defined in ASTM Specification D 4814 or Federal Specification VV-G-1690C, is characterized as having a boiling range of 122–158 degrees Fahrenheit at the 10 percent recovery point to 365–374 degrees Fahrenheit at the 90 percent recovery point. Motor Gasoline includes conventional gasoline; all types of oxygenated gasoline, including gasohol; and reformulated gasoline, but excludes aviation gasoline. Note: Volumetric data on blending components, such as oxygenates, are not counted in data on finished motor gasoline until the blending components are blended into the gasoline” (http://www.indexmundi.com/energy.aspx?country=ng&product=gasoline&graph=consumption).
- 5.
The Federal government increased the pump price of a litre of PMS from N65 to N141. The NLC reacted and embarked on a nationwide strike and mobilized Nigerians, along-side the Civil Society in paralyzing governance completely. After days of negotiation, the price was reduced to N97; NLC accepted but a cross section of Nigerians and some civil society organizations accused NLC of betrayer.
- 6.
The government vehemently argued that the security of Nigeria, as well as its corporate existence, depends on the implementation of deregulation policy.
- 7.
These are sets of individuals who have displayed a moderate stance against deregulation and who, although believing in its implementation, are opposed to the manner in which the entire process is being implemented by the government. They would rather prefer a gradual process that includes a sustained subsidy payment until all the conditions necessary for full deregulation were put in place and strong institutions were created to manage the deregulation processes, backed by a legal framework to prevent policy reversal. They were more interested in the availability of fuel at all times, and fall within the upper-middle class. Many of these moderates are businessmen, senior public officials and highly-skilled professionals.
- 8.
The politics and realities behind low productivity of the refineries are discussed later in this chapter.
- 9.
General Sani Abacha had forced the Interim President, Ernest Shonekan to resign in a bloodless coup. General Abacha had therefore become the President; see http://www.nytimes.com/1993/11/18/world/nigerian-military-leader-ousts-interim-president.html
- 10.
These committees have no formal power but play advisory roles in the economic programmes of the President.
- 11.
One of the aims of the policy shift in the oil sector is to divide the responsibilities of the NNPC under different institutions.
- 12.
The 4600 MW of electricity generated in Nigeria is extremely inadequate. This explains the intermittent supply of electricity and complete power outages in some areas (Ekiti State and Ondo State) for weeks. Inadequate power supply also increases the use of PMS as a source of generation for private electric generators. In the same period, South Africa on the other hand, with an average population of 55 million people generated 34,000 megawatts of electricity; see http://www.eskom.co.za/AboutElectricity/ElectricityTechnologies/Pages/Generating_Electricity.aspx
- 13.
Nigeria maintains the lowest prices of PMS in West Africa in 2012 (IISD 2012). As at July 2016, Nigeria ($1.94 per gallon), Egypt ($2.46 per gallon), and South Africa ($3.19 per gallon) represented the lowest prices of fuel on the continent at large.
- 14.
There is a link between the high number of unemployed youth in the country and the spates of armed insurrection against the state. See Akinola and Uzodike (2014).
- 15.
- 16.
This point was reinforced by the Commercial Integration and Business Value Manager of Shell, Mr. Taaj Shobayo, who complained about the failure of local of banks in the country to fund large oil and gas businesses. This information is available online at http://www.vanguardngr.com/2013/05/nigerian-banks-unable-to-fund-large-oil-gas-deals-shell/
- 17.
See Ogunbodede et al. (2010, p. 120) for more information. The study reports that about eleven million litres of fuel had allegedly been looted in a day in the South-east depots. This figure could have been exaggerated by officials of the depot, who would have diverted the sales of this shortfall into their private pockets.
- 18.
Human right activists such as Gani Fawehinmi, Femi Falana and some civil society organizations strongly believe in this line of argument.
- 19.
Femi Falana, one of the conveners of the civil-society led “occupy Nigeria”, a member of the most honourable rank of the Nigerian Bar, and Senior Advocate of Nigeria (SAN) served as the President of the African Bar Association.
- 20.
The National Assembly released data showing how payment was made to specific companies. See House of Representatives (2012). Also see Social Action (2012) and the websites of PPPRA (http://www.pppra.gov.ng/).
- 21.
SUPA is an organization of Nigerian professionals across all disciplines, committed to professional excellence, ethical integrity, social cooperation, justice, selfless service and the progress of Nigeria, see http://www.supanigeria.org/
- 22.
TAM refers to the periodic maintenance or repairs necessary to keep the refineries working at full capacity.
- 23.
Fuel importation negatively affects Nigeria in many ways. The exporting country makes huge profits from selling refined products to Nigeria. Building more refineries or expanding the four Nigerian refineries would have provided employment opportunities and made fuel available at low prices. Fuel importation also expands the networks of corruption in the subsidy administration.
- 24.
A respondent revealed that one of the oil companies is strongly backed by a powerful minister under the current leadership.
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Akinola, A.O. (2018). The Deregulation Debate. In: Globalization, Democracy and Oil Sector Reform in Nigeria. African Histories and Modernities. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-70184-4_8
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