Opinion: Reflection on Oil Crisis in Nigeria  (Birthday Thoughts and Reflections) by John I Abhuere

 

 

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.

 

Author: News Editor

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