Oil Sector: Time for labour to review its stance on deregulation

By EDITOR on March 9, 2021

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NLC President, Ayuba Wabba

News Commentary

Helpless Nigerians presently managing to make a living are being subjected to yet another stress of standing in long-winding queues of vehicles to buy petrol at fuel stations across the country a practice that many thought was history. Those without the strength for the hassles at the fuel stations are forced to cough out scarce money to buy the precious commodity in jerry cans at exorbitant prices from road-side hawkers. We are back to square one!

Industry watchers had since concluded that the deregulation of the downstream oil sector that puts petrol sale at market-driven price, which kicked off in March last year, had effectively sanitized and solidified the petroleum products supply system, insulating the system from intermittent supply shocks.

Having been used to casually driving into fuel stations and filling up their tanks without worrying about queues for the past four years, Nigerians across ranks, regions and religion woke up in rude shock to see long-winding queues resurface at filling stations in Abuja and other major cities of the country, no thanks to the confusion brought about by the push back by the organized labour against the downstream sector deregulation process.

Desperate motorists besiege Fuel stations

Since the deregulation commenced, organized labour, represented by Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) have been strident in their opposition. Their argument, as had always been over the past two decades, is that deregulation with its concomitant rise in the pump price of petroleum products, depending on the prevailing market forces, would lead to further hardship for Nigerian workers as the ensuing inflation would erode the value of workers’ earnings and push them deeper into the jaws of poverty.

The Federal Government has robustly engaged the labour leaders to get them to see the other side of the deregulation policy. The argument, on the Federal Government’s side, is that the system of paying subsidy on petrol is not economically sustainable and that whatever pain the deregulation would bring on Nigerians would be temporary as the competition that would be engendered by the deregulation would eventually force down the price of petrol.

Another point the Federal Government has emphasized is that contrary to labour’s position that the deregulation was anti-poor, the subsidy system which the deregulation seeks to abrogate is more in favour of the rich who consume more of the subsidized petrol with their Sport Utility Vehicles (SUVs) and multiple number of cars.

The Minister of State for Petroleum Resources, Chief Timipre Sylva and the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, have echoed this argument over this period in the course of the Federal Government’s engagement with labour.

Minister of State for Petroleum Resources, Timipre Sylva

 

 

 

 

 

 

 

Mele Kolo Kyari, GMD NNPC.

 

 

 

 

 

 

 

 

 

But how did Nigeria get to this dig-dong affair over subsidy? In simple terms, the conundrum stems from the general belief that as citizens of an oil producing country, Nigerians ought to have petroleum products at the lowest possible price, if not for free. This thinking was actually fuelled and supported by the government but failed to factor into the equations that there is a cost attached to the production, refining, and transportation of the oil to end users.

Selling petrol at the lowest possible price to citizens meant that there was no market-driven process for recovering those costs. Government was thus saddled with the responsibility of defraying those costs through payment of subsidies to marketers. The subsidy bill, over the years, grew to become a heavy burden on government coffers forcing many Nigerians to cry foul.

The Federal Government has evolved various policies to tackle the problem one of which, according to an oil industry source, was the sales of crude oil to the NNPC for local refining and domestic consumption at a subsidized rate. According to the source, in those days when crude oil was selling at the international market for between $10 and $12 per barrel, it was sold to NNPC at $8.

‘’That way, NNPC was able to take care of the subsidy. But with a change of policy in 2004 when government insisted that NNPC should pay international price for domestic crude, the subsidy challenge resurfaced in a way that has almost become intractable’’, the source said.

Notwithstanding, keen analysts have praised the Federal Government for keeping faith with its promise to allow market forces to dictate and determine the pump price of petrol since the deregulation journey commenced last year. This has seen the pump price of petrol fall from N145 per litre to N129, swinging to the current N162 in direct proportion to the rise and fall in the price of crude oil in the international market.

Although the market efficiency and competition expected to be created with the resumption of products importation by private sector marketers were yet to kick in as a result of access to foreign exchange, the government ensured that marketers did not fleece members of the public through arbitrary increase in pump price.

In the normal run of a deregulated environment, the rise of the price of crude oil to $60+ per barrel would ordinarily have led to a rise in the pump price of petrol in the local market. The anticipation of that rise amid labour’s insistence on halting the deregulation process is what has created the confusion that has led to the resurgence of fuel queues across some cities in Nigeria.

While NNPC has continued to assure marketers and Nigerians that there would be no increase in the ex-depot price of petrol this month, the market is just gradually responding to that assurance as some marketers are still engaged in products hoarding in anticipation of a pump price adjustment knowing that there is no provision for subsidy in the 2021 Appropriation Act. On the other hand, motorists are engaged in panic buying knowing that the current price of N162 per litre is not sustainable in the light of market realities.

Consequently, Nigerians have been thrown into deep hardship as transport fares have more than doubled while motorists spend endless hours on queues waiting to buy petrol thereby raising serious moral question for labour leaders who are opposed to deregulation leading many to wonder whose fight labour is actually fighting.

The questions on the lips of the ordinary man in the street today are: Are these labour leaders truly defending the Nigerian worker who is currently reeling under the hardship of artificial scarcity? Is the current hardship preferable to whatever hardship the labour leaders believe would be imposed on workers under a deregulated environment? Are Nigerians happy with labour over the current avoidable hardship they are going through as a result of its hard stance over deregulation?

A cross-section of Nigerians think that with the fuel queues getting longer by the day Nigerians’ groans growing by the minute, it is time for labour to review its hard stance on deregulation for reason to prevail. Now more than ever, our labour leaders need to feel the pulse of the workers for whom they claim to see how they are actually inflicting more hardship on the masses than the Federal Government’s deregulation policy would.

Analysts believe that labour is alone in the anti-deregulation stand-off judging by the rapidity at which their rank in the fight against deregulation is gradually depleting. For example, former NLC president and ex-governor of Edo State, Comrade Adams Oshiomhole, saw the light and converted into a deregulation apostle. Today, he is on the good side of history.

Also, some members of the Civil Societies who were staunch supporters of labour in its opposition to deregulation have begun to backtrack. Just last weekend, some leaders of the civil society community under the aegis of Coalition of Nigerian Civil Society for Petroleum and Energy Security broke the ranks with labour and called on Nigerians not to allow labour to plunge the nation into the unnecessary crisis and hardship often associated with acute fuel scarcity.

The convener of the group, Mr. Timothy Ademola, called on the labour leaders who are spearheading the resistance to the deregulation to note that the policy has already stabilized petroleum products supply across the country to the satisfaction of many Nigerians.

Nevertheless, industry stakeholders still believe it is not too late for labour to backtrack in the interest of the collective well being of Nigerians who are presently in daily search of petrol otherwise labour risks losing its support as the recent trends appear to have shown.

Rather than allow itself to continue riding against the tide of public opinion its opposition to deregulation, an urgent review of its stance is now more compelling than ever. With the pains Nigerians are currently experiencing on account of its opposition to deregulation, there is need for labour to retrace its steps as it is unwise to continue to prescribe a drug whose side effects is even worse than the sickness.         

 

Source SOUNDBITE NEWS

Posted on March, 9 2021

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