Why Nigerians Cannot Pay International Prices for Oil

It has been disconcerting watching the melodrama that has been going on in the energy industry of Nigeria for the past weeks. First, the ever bad mannered capitalistic head of NNPC came out saying that his organization is about to go bankrupt because he is subsidizing the cost of providing Nigerians petrol at the gas pump. As if Nigerians would really be sad at the thought of a bankrupt NNPC which is by far one of the most corrupt and inefficient government corporation in Nigeria and indeed the world, he went ahead to suggest that price Nigerians pay at the pump should be upped to satisfy his desire to break even – excuse me!

To really show Nigerians that he is the one that control the price of petroleum after all, and that we have no right to enjoy the tremendous windfall from international crude oil price increase, Kupolakun pulled enough strings to make the moneybag controlled PPRA to hold a bogus meeting and start considering price increase. To add insult to injury, the PPRA, which has already been known for lacking any milk of kindness for the ever-suffering populace, came out with a bogus memorandum after the meting duly rejected the proposals of the moneybags like Oando and Zenon oil.

The truth about the matter is that the PPRA is controlled by moneybags that do not feel the real impact of petrol increases on the common citizen, as well as government functionaries that have stolen and are stealing enough to ensure they can open a fixed deposit that would finance their petrol purchase on exit from this ridiculous administration!

The real problem of Nigeria’s energy industry today is a lack of imagination on the part of the administration on one hand and the corruption and inefficiency of the NNPC itself. By NNPC, I mean the workers, engineers, moneybags and the likes of Kupolakun that control the organization. Not only has the NNPC failed to properly manage the existing refineries, they are yet to come up with ways to build new ones. For God sake, we can add additional capacity to existing refineries; in fact, it makes more sense to do so than to build new ones (talking as an expert in the oil industry).

Most importantly, the issue of subsidy needs to be ironed out with this administration once and for all. Anyone that says removing subsidy is part of the reform program is simply mad! Fuel subsidy has been the only benefit Nigerians get from having crude oil in their country and to remove it now is simply wicked. Most liberal economies subsidize various areas of their citizen’s life- in Europe; healthcare and social security is heavily subsidized, while in America their farmers are so subsidized some of them plant to destroy! In China, South America and other Far Eastern countries except Japan, who are major importers of petroleum products, all of them subsidize fuel consumption of their citizens. That is the only way they can guarantee cheaper goods for export to the West or competing favorably in the international scene while allowing their people some let up from the crazy crude oil prices.

Effectively, this makes Japan, United States and Europe (all developed economies) the only places on earth that pay international price of crude at the pump; moreover, why not? They are the ones that have the speculators that benefit from fear and capitalistic greed, so they can afford to pay these obscene prices for psychology! What concerns the pure old woman in the Nigerian village about the psychology of the market that has put kerosene (to prepare food to eat) beyond her reach in price? Simply put, it is none of her business! If truly market economics is at play, Nigeria has to be part of the market. Unfortunately, we are not! The market does not behave well or bad because of our action or inaction (perhaps, the only thing they react to in Nigeria is bad news of unrest that would disrupt their appetite for our unrefined crude) – we are basically a small player in a world filled with terror and fear! Moreover, the countries that pay these prices at the pump subsidize their citizens in other ways and have 24-100 times the per capita income of Nigeria! We would stupid to compete in the market they control!

Leaving petrol prices in Nigeria to the whims and caprices of international spot market rate is leaving Nigerians vulnerable to the speculators on Wall Street and Main Street. In fact, it is leaving us open to Osama Bin Laden and his fellow terrorists (and the every day madness going on in the Middle East) since every new video the mullah-in-chief produces usually spark up an increase in crude oil prices in the international commodity exchange. In actual fact, Nigerian government is exposing her citizens to undue security risk and making them vulnerable to terror by preaching the mundane gospel of liberalization of downstream sector.

To fully realize the potential of our country in the energy sector, there is need for wholesale reforms of the industry. One cannot guarantee proactively and efficiently the welfare of ones citizens by practicing brazen free market economics. There must be some stopgaps and genuine reforms to guarantee competition, eliminate monopolies like NNPC and truly deregulate. If government wants to deregulate the downstream, then the upstream have to be deregulated! There is no piece meal. Not that I am preaching upstream deregulation, all I am calling for is consistency! Moreover, if the government wants to regulate the upstream part of the oil sector lightly using Production Sharing Contracts and Joint venture Agreements, then the same should be said of the downstream. The obscene profits being declared by oil companies in Nigeria and around the world at the expense of our citizens in untenable and should be brought to an abrupt end.

In the last round of deregulation (or Soludoism), I wrote an article suggesting ways of cushioning the effect of international crude oil prices on our local markets, while guaranteeing the availability of the product, prevent inter-border smuggling and encourage the entry of local entrepreneurs to the business of refining and gasoline retailing. That article can be found on: . It is simple, the NNPC need to be commercialized and broken up into manageable parts, DPR need to take on regulatory function more seriously, local incentives for competition have to be introduced, the foreign majors have to be induced to refine in country and the market must be well managed to ensure efficiency and price stabilization! Besides, benchmarks that creates price band within which oil would be traded to local refiners for local consumption need to be determined in the budget and something similar to what the senate recently proposed should be included to ensure marketers could recover their cost from budgeted subsidies not from the common man!

There is no way around a sensible energy policy, what this admini

stration is proposing, especially the likes of Kupolakun, Gbadamosi and Daukoru, is pure madness! Where are the presidents men by the way? Is this what we get for 35 billion dollars in foreign exchange? Moreover, for the so-called 18 billion dollars in excess revenue fund, what happened to that? Mr. President, is that what we get for debt relief? Mr. President, can you see poverty around you? May be Nigerians should start reconsidering this PDP government all over again – it appears to be a party for the highest bidder – reminds me of American Republicanism. In my opinion, 200 billion naira which equals little over 1.5 billion dollars as yearly subsidy for petroleum is not too much to draw down from the 18 billon dollars excess revenue fund that the ignoble governors and senators would spend in pepper soup joint anyway!

Last Line:

“The welfare of the people in particular has always been the alibi of tyrants, and it provides the further advantage of giving the servants of tyranny a good conscience“