For most part of the first quarter of 2016, Nigeria witnessed a serious and near paralyzing oil crisis .It left the country in unprecedented state of anxiety, gloom and hardship. There is no need to talk here about the consequent agony, frustration, huge economic waste , the high inflation, great security risk, deep agony, physical and psychological tears and wears etc associated with the sad phenomenon. It suffices to observe that the general negative impact on the average citizen and economy at large was severe.
Oil crisis is not new in Nigeria.It is one of its sad and ugly recurrent features. What is clear on review and reflection of the oil crisis in the first quarter of 2016 is the urgent need to change policy gear. Policies are meant for men and not otherwise and they should be changed where they are not working fine. In this essay to mark my 65th birthday, we shall explore the nature of oil crisis, its cause and proffer solution. Here we call for change of gear by putting an end to a regime of price control and importation of refined products.
Our observation is that the country’s oil policy especially of importation and distribution has failed woefully. Price control and poor management of distribution drove refined products underground and made them very scarce . This was largely the cause of the crisis as exemplified by scarcity of refined products, extremely long queues and chaotic situations witnessed at the filling stations these past months. The sector appears too regimented and thus in urgent need of liberalization.
CHANGE OF GEAR
There are many reasons to change gear today -not the least being the recurrent nature of the crisis at hand. It is neither new nor rare and it is sustained and reinforced by current regime of oil importation and price control. We must therefore not only care enough to ask why such crisis has remained a constant feature of our life, also we must do the needful to check it. We are faced with a most shameful and confounding situation: Why should oil rich Nigeria be faced with scarcity of oil products at home all the time? And why do continue with a unhelpful policy or remain on the wrong road?
Many reasons have been advanced for the oil crisis in Nigeria, but short-sighted vision, greed, poor management, corruption, weak security and surveillance system, wrong philosophy and and approach to production and distribution appear the obvious ones. For me the top- most reason is the importation of refined products with its associated price control, corruption and waste of resources , opportunities and time.There has been little or no sustained efforts to do refining of crude oil at home for domestic consumption.
The crisis presents us the opportunity to face our reality and to find ways to improve it. Part of that reality is the dismal failure of the current policy thrust . The continued importation of fuel is wrong and unhelpful and state’s involvement in the distribution of products to marketers is unnecessary. Related here is the effort to extirpate what the mass media report as ‘illegal refineries’ by seizing and destroying their tools instead of steadying them more to boost domestic production . For sure ,given the precarious and poor state of oil refining technology and the gross under -supply of products to the domestic market, oil refiners and their technology deserve protection and not extirpation. More on this later.
It is needless to say to say that fixing the prices of products we do not produce or have enough quantity to go round every corner cannot work to produce the desired result for either the consumer or marketer. It would only prove futile, drive refined products underground for black market to thrive and create seasons of extreme hardship and exploitation. The Nigerian domestic market is large enough to accommodate both the state and private investors in the production and refining of oil for domestic consumption and exportation . This is where efforts should be concentrated on -now and henceforth .
.NO NEED FOR PRICE CONTROL
Government’s resort to fuel importation, distribution and grant of subsidy was often justified by the desire to meet the needs of the poor by taking fuel nearer to them. It looks morally sound but it failed expectation. Price control has neither met the yearning of many consumers to buy products at reasonably cheap price or motivate the marketer to invest in oil refining at home.While importation of refined oil product would not generate as much employment opportunity as would production of same at home, the present approach has not really benefitted the poor ordinary Nigerian living in the rural areas. As I have observed in another article, only the big cities enjoy government’s efforts. For a very long time now those in the rural areas had not received refined petroleum products let alone to buy them at controlled prices. Their source of supply has been the black market.
In practice the policy has been heavily urban-bias and has failed woefully to hit target. It should therefore be reviewed for greater positive impact. The lasting solution will be the real liberalization of the oil sector to allow anyone that is fit , able and willing to participate .The state and private sector can intelligently work together to put an end to this recurrent silly problem of our time.
As a strong believer in active state participation in the development process of a nation – state-much more so developing/ non- industrialized countries such as Nigeria, I used the word liberalization advisedly. It does not mean that the state should take its hands off oil business. It simply means the removal of all strictures that hinder the effective participation of anyone – private investor or state agent that is able and willing to participate. Here, the state should concentrate attention on domestic refining of products and running well its mega- stations to serve as gauge and stabilizer of the domestic oil market and check monopolistic tendencies within. We need to promote healthy competition , innovation and opportunity for consumers to make choice.
The Nigerian market is large enough to accommodate both the public and private investors and there are things which the private sector can do much better than the state and vice versa. The distribution of products belongs here. In any case it serves no useful end for one monopoly to be kicked against only to be replaced by another. Monopoly is bad in any hand – private or public. It stifles creativity , innovation,and competition.
There is also no need for price control or even fuel subsidy. Price control serves no useful purpose and it was largely responsible for driving products underground. The presence of officials to enforce compliance at filling stations creates high tension and long queues and scarcity of products. The interest of the poor and rural dwellers has not been served well by price control or fuel subsidy. It is simply an obstacle- a big clog in the wheel of progress.In any case one does not dispense what is not available to one or control what one does not produce or grant subsidy where one cannot afford it. The first major step is to solve the problem of gross under-supply of products by intensifying local production.
Let’s face our reality and deal with it. Price control does not motivate investors in the sector. Even in the best of times, petrol has never been sold to all corners of the country at the control prices .Having put a seal on the forex, by Jove the marketers should sell according to the dictates of the market. According to many of the marketers , they often go through hell before they get allocation and hence they cannot sell at the controlled prices? It is not profitable to do so.
Their story may be true or false or exaggerated or not but it points to a situation of scarcity which was at the roots of the latest rounds of oil -crisis in Nigeria.Incidentally the NNPC is already doing what should be done by setting up the mega- filling stations as opposed to the independent marketers’s. The state should supply and manage these mega filling stations and allow the private investors to do their own thing – source for funds to produce or import as the case may be and distribute freely to recoup their investment. With healthy competition especially between the NNPC Mega stations and others, prices would sooner than later find their real level to the happiness of all- the consumers, the marketers and the nation- state at large.
There are other reasons to be concerned now with existing policy. One of them is the high pyramid of human suffering and attendant security implications associated with it. I live close to a Gas refilling station and I can attest to the agony and frustration of the consumers on those endless long queues and chaotic scenes at the Filling stations. I drove to different parts of Abuja city and saw some virtually closed roads. TV reports confirmed the ugly experience in other major cities.One could only imagine the man -hour lost to productive activities in the country and the huge security risk if some ungodly elements decided to strike at the crowd. We should not wait for another round of such nightmare to happen our country again.
The crisis reaffirmed the resilience of the Nigerian spirit in the face of adversity. Nigerians have limitless capacity for patience , to absorb pains in hope and wait for a ration of a product that they knew not when it would come. Patiently, they waited on the extremely long queues several kilometers away from over crowded filling stations in endless hope of some succor. This commendable quality should be better deployed to more productive end than spending many hours to buy some fuel that could be done under ten minutes all things being equal.
There is the greater danger: the best of men could fall to temptation. Nigerians might look cool staying on queues but never take the patience of people in crowd- like situation such as we had at our Filling stations for granted. It could snap. In fact the standard practice is not to allow angry and frustrated people to form crowds. Such crowds often lack control and direction and so could be disastrous. Thus like a coward, I shivered severally. Something unforeseen could provoke ungodly action. The terrorists for instance could decide to attack in order to make great impact. It far better not to create opportunity for such potentially delicate, difficult and dangerous situation.
I was worried too because ‘I am involved’. My personal involvement, conviction and nasty experience during the crisis left me heavily worried and agitated. Firstly I am a self appointed advocate of political change and and development direction of the country and and supporter of current change agenda. While I know that the problem was not as complex as it had been allowed to become over time it was like watching the collapse of a pet- dream.Secondly, the pains of fuel scarcity was deep and the inflationary impact was simply beyond reason and pardon. Thirdly like many others, I suffered both financial and psychological stress. I bought ten liters of petrol for three thousand Naira- that is N300 per liter several times and I know the deep cut it left on my pocket.
Before the crisis, it costs about N6000 only to fill my car tank but during the crisis the same amount could not even cover half of the same tank. Sadly, I shook my head . The implication was too grievous to imagine especially in terms of personal hardship and general inflation. The thought alone was quite frustrating. The emerging state monopoly over pricing was proving suffocating and would not promote production, competition and innovation. The gear had to change for the better.
The state is doing what it should not be doing – distributing oil products, fixing prices etc. So what is needed is to liberalize the sector in such a way as to allow both the state and anyone who has the ability and willingness to produce or import petroleum products to do so. We should do away with price control. And this fact has been evident even before the dawn of this government but we failed to do the needful.
Consequently the state has continued to bite more than it could chew . Accordingly, the Mass Media had been filled with heart-touching reports of man- made agonies at Gas Filling stations. They remind us of the persistent wrong policy, managerial incompetence and mis- governance which had dominated the country over time. How do we explain to the world that oil rich Nigeria has no petroleum products for sale at home and the little that is available Was even imported. This national shame must be addressed by doing the needed liberalization of the sector.
Of course the magical or mystical date of 7th April 2016 as promised by the Minister for collective relief could not work . But this was not because of the incompetence of the Minister but the non availability of success factors. Apart from the fact that he was truly not a magician, what was ground did not favor success through a magical pronouncement. Even if there was remarkable success it would not translate to lasting solution or end of the problem As long as importation and price control are accepted as the key, the problem will continue . At best it will abate awhile for some respite and return to haunt us. We are not yet doing the right thing for lasting solution.And as long as solution is based on the importation of fuel and price control, it won’t work any better than before.
MORE HOME PRODUCTION, NOT IMPORTATION AND DISTRIBUTION PLEASE
There seems to me a misunderstanding of the problem and misdirection of efforts and energies.There also appears to be the absence of creative thinking to identify cause, effect and the best way out. According to media reports, instead of production and deregulation of prices,the efforts are on importation and state distribution of refined products on controlled prices. To this effect a ministerial committee was set up to ensure nation-wide distribution of petroleum products and to enforce compliance including selling refined products at controlled prices.
In the view of Hon Minister of State for petroleum,Dr Ibe Kachickwu, the crisis was a ‘product of unavailability of foreign exchange -forex, lack of capacity, activities of pipe line vandals, as well as the reduction in subsidy payment (The Sun 8-4- 2016). In short, we seem to have concentrated effort on importation and distribution. However the real the problem at hand is scarcity of fuel in oil- rich country Nigeria- acute shortage of refined products due to gross inability to refine products at home. There has been gross under- production and under-supply of refined products warranting heavy importation . But what is needed is home production of refined products and not mass importation
Meanwhile there have been administrative and technical problems galore crying for attention but which appeared to have defiled efforts? For instance, local oil refining technology has been poor and there is no visible efforts to improve it. The local refineries operate at a level far below installed capacity and understandably, there has been sharp economic down-turn leading to forex squeeze at the moment. While mass production of refined products was needed, we have continued to rely on importation.To worsen things, there is no efficient public transportation system to facilitate normal social and economic movement without the use of personal cars.
But as student of development knows, these causal factors and problems are not new – they have been there all along and the way followed to overcome them has been wrong. The recurring nature of the petroleum crisis in Nigeria is embarrassing and abnormal. Way back in 2003 I had reason to observe the abnormal situation in which the marketer rather than the customer was the king of the business world in Nigeria. The problem then was acute scarcity.Today thirteen years after, it is still the same old story:acute shortage, persistent importation of refined products , price control etc. Nothing much has changed. Like then, one still needs to seek the favor of the oil marketer to buy petrol today. He is the ever glorious king that must be coveted or lobbied by the consumer today
This is quite unhealthy for competition, innovation and promotion of choice by consumers for the growth and development of the country. Since the real problem at hand is acute shortage of products for domestic consumption, there has to be substantial production before distribution. In any case one cannot effectively control what one does not produce. The failed attempt to control House rent in Lagos state in the 1970s in the face of scarcity offers useful lesson here.
I travelled from Abuja to Benin and inquired from the Far East for what obtains there to draw some useful conclusion on the oil crisis in Nigeria today. My observation convinces me that the state’s effort to control price of refined products is a curse and the major cause of the trauma and pains at the filling stations. There is acute scarcity across the country alright but I can report too that many gas stations on the way had fuel which they sold to consumers without regard to government’s price control. Transaction was smooth and fast. There was no stress, no crowd or waste of time at filling stations. It was unlike Abuja where attempt to control the supply and fix the price of what one does not produce made products scarcer and life highly tortuous.
The essential point here to note is that available gas was sold at economic price defined by station owners to recoup their investment and the consumer paid without much hassle. The buyer has to make economic choice between time saved by buying at a higher price than control price without stress and time wasted especially from staying on the long queue with its many headaches.This to me is the answer to the current crisis- liberalization of the sector,creation of opportunity for more choice as a result of healthy competition and the intensification of security over the borders and pipe lines to check smuggling, stealing and promotion of effective consequence management.
EMPOWERING AND MAINSTREAMING SO CALLED ILLEGAL REFINERIES
In the heat of the crippling crisis came the news report of the destruction of several illegal refineries in the Niger delta region by law enforcers. It sets me wondering and wandering.Why are they called illegal ? Is it because they are not registered, or they use primitive tools and low grade technology? Have we tested their refined products for grade of quality ? Then tales from the Nigerian civil war Biafra came to mind- especially Biafra’s firing rocket and oil refining prowess.
An important aspect of our reality today is the phenomenon of illegal refineries in the country. Like the problem of scarcity of fuel that has lingered on, attempts to crush them out of existence had repeatedly failed. This has been so because of the existence of constant demand for their service.They fill a gap in the sector. But as long as there is such a gap, so long would the challenge remain. I think we need to change our official attitude here.Rather than destroying their shops and equipment , we must find ways to accommodate them. They -especially their technology need our protection and not destruction .
This is so because of the present lack of appropriate technology at home and consequent heavy reliance on importation to meet domestic demands. There is the need to break whatever jinx or obstacle around. While not justifying criminality, it seems contradictory to be destroying the little form of technology at our disposal .On the one hand we search for technology for oil refinery at home and on the other we harass those behind home efforts . Meanwhile we are crying of fuel scarcity and the absence of appropriate technology .Let it always be remembered here that the industrial revolution in England started humbly.
It is no longer wise or profitable to continue to dislodge the so called illegal Refiners and to treat them like common criminals. I think something better can be done for then and with them. They should be educated in patriotism, encouraged and empowered to develop whatever technology at their disposal and to apply it to boost domestic production for the good of the nation.
They should no longer be frustrated but assisted to do clean business in the national interest.For instance they could be encouraged to register their business with the appropriate authorities such as the Corporate Affairs Commission (CAC) , organize some of them into Cooperatives and allocate crude oil to them for refining and tax their profit afterward . They should be main-streamed into the national economy and protected in the mould of infant industry for growth and development of the country.as part of our reality today.
(This article was written to commemorate my 65-year birthday)
Abhuere, FNIM, Oven of Ebelle, is the director of Centre for Child Care and Youth Development, Abuja.