Revealed: Why FG Moved Deregulation Take-off Date

Written by Duncan Monday, 19 October 2009

Fresh facts emerged at the weekend on the real reason why the November 1 take-off date of Federal Government’s policy on deregulation of the downstream sector of the petroleum industry was postponed.
Powerful forces in the Nigerian National Petroleum Corporation (NNPC) who are said to be benefiting from the fuel importation regime over the years are said to have moved against the November date.

They allegedly made representation  to the Minister of Petroleum Resources, Dr. Rilwanu Lukman, that the proposed take-off time frame was “impracticable”.

THISDAY investigations revealed that the postponement was masterminded by the officials as well as bureaucrats who derive personal benefits from the current system of awarding contracts for fuel importation and the payment of bridging costs to marketers in the form of “equalisation”.

Top NNPC officials were also said to have argued that if deregulation took off in November – and with it an increase in fuel prices in conformity with the prices of crude oil in the international market – it would affect Eid-el-Kabir festival and Christmas coming up in late November and late December respectively.

They impressed it on the minister that the timing was wrong as most Nigerians would be negatively affected by the expected multiplier effect of the policy. They argued that the religious festivals would also be affected by the likely product scarcity because NNPC did not have the capacity to meet demand as it currently stands.

The Federal Government had in February endorsed the full deregulation of the downstream sector following the recommendations presented to President Umaru Musa Yar’Adua by the Presidential Steering Committee on the Global Economic Crisis.

Government said it had been subsidising inefficiencies, fraud and racketeering in the whole production chain, resulting in its spending an estimated N1.63 trillion on subsidies.

The government also said it would re-examine the role of Petroleum Products Pricing Regulatory Agency (PPPRA), even as it admitted that there was a need for regulatory institution.

THISDAY learnt that part of the reason for the implementation of the deregulation policy was because government wanted to address the issue of price mechanism to ensure it was not transferred to a “cartel” who could collude to rip off Nigerians. 

However, after months of speculation on the actual take-off date, NNPC last week confirmed the November 1, 2009 date.

NNPC Group Executive Director (Investments and Commercials), Mr. Aminu Babakusa, who confirmed the November 1 date during an inspection tour of oil facilities in Lagos, said to ensure its successful implementation, government had put various measures in place to ensure availability of products across the country.

Such measures, he said, included partnering private depot owners to lease their facilities for fuel storage and distribution and building of more retail outlets by the NNPC.

“We are very confident that our deregulation, which is taking off on November 1, 2009 will be successful and we are ready for it. Deregulation will ensure there will be no more shortages of supply throughout the country,” Babakusa said.

However, four days after Babakusa assured the public that the NNPC was ready, the Minister of Labour and Productivity, Prince Adetokunbo Kayode, announ-ced government’s decision to start in January 2010, curiously stating that no government official had announced November as take-off date.

THISDAY learnt that the NNPC suddenly claimed it was not ready for November.

Apart from the cartel in the NNPC which has been benefiting from subsidies, it is also believed that the opposition by the organised labour and other civil society coalitions may be responsible for government’s action. 

In April and May the major marketers who accounted for 53 per cent of the country’s fuel needs plunged the country into scarcity of petroleum products when they refused to import products because of government’s failure to reimburse their costs under subsidy.

It was alleged that this development paved the way for forces within NNPC to hijack the whole importation business and pay lip service to deregulation. These powerful forces, sources said, are also frustrating all efforts to get the refineries to work, as they earn so much through importation and inappropriate bridging claims.

An industry stakeholder, who also is a former National Vice-President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), noted that some unscrupulous marketers make bridging claims, whereas they sell off the product at the point of loading.

“Corruption such as inappropriate bridging claim should be checkmated. Some unscrupulous marketers claim to have done bridging, but the truth is that there was no bridging because the products are sold off at the point of loading. They always get their papers stamped and approval for outrageously claims. This is corruption and stealing, yet, government is subsidising this unholy game that does not give any value to the masses of this country,” the ex-labour leader said.

President of Trade Union Congress (TUC), Mr. Peter Esele, had told THISDAY that the government’s decision to suspend the implementation of the policy next month was a vindication of labour’s position that the government was not ready for deregulation.

“We have always told them that they are not ready for deregulation. We have been telling them since the last five years that they should give us alternative to premium motor spirit (PMS) before they embark on deregulation. If the train transportation is revamped, nobody will care what the price of PMS will be because the train will be available as alternative. In paper there is nothing wrong with deregulation but the government is not ready,” he said.