Options For Gradual Deregulation

Recently, the Federal Government announced the removal of the $I million mandatory refundable deposit slammed on investors wishing to establish private refineries in the country. Making this public in Abuja, Minister of State for Petroleum Resources, Odein Ajumogobia, explained that government took the decision, having become convinced that the measure was a gross disincentive to would-be investors in the refining sub-sector of the petroleum industry.
Ajumogobia acknowledged that the current refinery capacity is low, and that the nation requires massive investment both in small and higher capacity refineries to be able to meet domestic sourcing requirements for refined products, and de-empahasise importation.
The Tide commends this bold step to kick-start construction of private refineries through the removal of that stumbling block. Our position is hinged on the fact that the establishment of private refineries would not only create employment for the youths but also stimulate the economy especially through its multiplier effects of encouraging competition, increasing capacity ultilisation and productivity as well as discouraging capital flight.
However, we note with concern, the federal government’s desire to commence full deregulation of the down-stream sector of the petroleum industry. Our concern derives from the fear that government’s recent action is only a precursor to full deregulation.
While we applaud government for the waiver, which we believe, would facilitate the realisation of the dream of emergence of private refineries across the country, The Tide urges the government not to rush the implementation of full deregulation of the sector. We insist that the removal of subsidies on petroleum products should be phased so as to reduce its negative effects on the populace.
We say so because of the fear that complete removal of subsidies on products in one swoop, would cause social and economic dislocations in the country, and thus, threaten the basic foundations of our democracy. That, we know is not the goal of government. And many well-meaning Nigerians also think along these lines.
Meanwhile, following government announcement of the November date for commencement of deregulation, fuel price has already gone up with attendant difficulties to all.
The Tide must place on record the fact that all the problems with Nigeria and Nigerians cannot be addressed completely by the hurried removal of subsidies on petroleum products.
Instead, Nigeria’s economy, and indeed, the greater majority of Nigerians can only witness growth and sustainable development, peace and stability, if the twin forces of mismanagement and corruption are tackled. But as long as these two monsters maintain their high index on the nation’s governance equation, full deregulation can only worsen the poor living condition of people while, a few relish in opulence.
Perhaps, the time is right to make government realize that it does not need to force full deregulation down the throats of already impoverished Nigerians who are still groaning under the weight of the prevailing high prices of essential commodities. Common sense tells discerning minds that if the 14 private refineries so far granted approval to construct and operate refineries, come on stream and competitively operate at their installed capacities, prices of the products would naturally crash. That way, removal of subsidies would not be felt by the masses.
The Tide reckons that it does not make sense for the government to spend more than N1.8 trillion between 2006 and 2009 on products subsidies whent that huge chunk could significantly address the dire infrastructure needs of Nigerians, especially those in the Niger Delta. Even so, The Tide favours gradual deregulations.