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Countdown to a National Strike

– Towards Averting It

By

Mobolaji E. Aluko

alukome@comcast.net

Friday, November 05, 2004

INTRODUCTION

Another national strike is looming – this time to start on November 16 – and that is bad news.

But first things first….

It is in order to begin this essay with some definitions of terms. Commercialization is the running of a public enterprise (that is government-owned or controlled) along strict financially profitable lines, akin to what strictly private enterprises normally do to survive. Deregulation is the legal enablement of private enterprise to participate in an industry otherwise previously reserved only to public enterprises (i.e. previous government monopoly), while privatization is the unloading (following financial compensation) of previously public enterprises into private hands.  Next comes competition, which requires the presence of several enterprises within the same industry offering similar services such that the race for consumers (in a non-cartel, non-oligopolistic environment) will generally lead to lower prices and better quality of service. Finally comes regulation (invariably a public enterprise function), for left alone, competing private enterprises in a deregulated economy would  seek to maximize profits, and consumers will  then be left at their mercy.

Commercially-run public enterprises are not an oxymoron, only that it requires some social accounting engineering to balance the books such that it can be declared “profitable” in the accounting sense.  {The inclusion of “Goodwill” in accounting is a good example of such innovation.]  Privatization presumes prior deregulation (could be simultaneous), while competition requires a number of  different players in such a deregulated environment.   Finally, regulation requires an environment where the regulators are fair to operators but fairer to consumers.  They must also be as competent as those they regulate – if not more competent – lest the latter run rings around them.

Commercialization, deregulation, privatization, competition and regulation – these are the key mantras of the economic reform policy of the present Administration, and in fact they are all commendable.  The only problem is that the mode and rate of their application is industry-specific and country-specific. 

It is that tension – of those who tell the administration about the need to be wise about applications of otherwise commendable notions, and the unwillingness of the administration to listen, being too convinced about the creation of a deregulated regime with unceasing privatization – that fuels actions like the upcoming strike.  

For example, there is one constant untruth being bandied by government and its apologists:  that the deregulation of fuel industry will give rise to  the same  effects as the deregulation in the telecommunications industry (as far as Nigeria was concerned, the phone industry), particularly in terms of access, availability, affordability and sustainability. 

Absolutely not! 

There are substantial differences between the two.  For example, never in the history of the country has the previously government-monopolized telecommunications industry  (represented by NITEL) EVER been in a situation where its services were widely accessible, available or even affordable.  On the other hand, for quite a long time in the country’s history, the government-monopolized fuel industry (represented by NNPC) had accessible, available and affordable fuel – until certain uncertain “funny things” started to happen.  The other difference is that while for the general masses,  telecommunications is very convenient, there were some competing modes of communication -  shouting to each other, posting of letter, traveling (by land, sea or air), or refraining from communicating altogether.  With fuels, the masses CANNOT refrain from them, for it goes into cooking of their food, transportation of man, materials (food and other goods), etc.  The only other alternative is the use of wood – and that is not only massively inefficient and destructive of our environment,  but it is completely INAPPLICABLE in many situations where energy is needed.   The final major difference is that while availability of telecommunications can be staged and cost of provision can be staged and provisioned within a short time, primary availability of oil and gas fuels is only in a geographical location (Niger-Delta), and the cost of refining fuel is quite high, and the time for setting up a refinery is quite long (up to two years.)

THE UPCOMING STRIKE

It is in light of the above that the confusing roles of the NNPC (Nigerian National Petroleum Company) and PPPRA (Petroleum Products Pricing Regulatory Authority) as participants and regulators in the oil and fuel business  in Nigeria have contributed to the incessant strikes in Nigeria.  The inability of NNPC (both regulatory and participatory in the oil and gas business) to properly run the refineries, making us to import anywhere from 40 – 60% of our needed refined products, despite enough crude production within Nigeria; the inexorable determination of the government to privatize (rather than commercialize) our refineries in an already deregulated economy, despite no readily willing private takers;  the scary rise in world crude prices; and the apparent willingness of the PPPRA to go along with fuel price increases have all been disconcerting, leading to these strikes.   

So I have been scrambling my brain to see what can be done to avert the upcoming strike of November 16, which has two consequences:

(1)    if it succeeds, it will have further devastating consequences on an already faltering economy;

(2)    if it fails, it will have devastating consequences on our economy, because the administration will claim a moral victory, leading to a demoralization of a necessary citizens’ opposition to undesirable government policy.

It is a Hobbesian choice,  between a rock and a hard place,  between the devil and the deep blue sea, between Scylla and Charybdis.  And reasonable people can sit down to negotiate – and the government has a bigger role here.

 

THE PRICE OF FUEL – WHAT GOES INTO IT, PPPRA?

From all information, the price of fuel has increase about  twelve to fifteen time  s since 1973,  with seven of  since this administration began in 1999, and possibly three more unsuccessful attempts.  [  See Table 1.]

Who then is to blame if the people do not see the ceiling to this price increase; when they see themselves captive to international oil prices;  when they have enough of the oil in their own “backyards” – or real oil yard as the Niger-Delta is?

The price of kerosene – the ordinary peoples’ fuel – is particularly high, resulting from its more excruciating scarcity [See Appendix I.]   In fact,  while complaining about the latest PMS price rise to N55 per liter [{$1.60 per gallon] , the irrepressible FCT Minister Nasir El-Rufai commented that we have the PPPRA is to be thanked for the price not going up to N150 [$2.92 per gallon]!  Why would the people not as some point say “We better take a firm stand now or never?”

So that has now caused me to ask pointedly, as an issue of negotiation:  what  are the specific charges AT THIS TIME that  go into the determination of a liter of fuel of domestic production and international imports– such that it comes to N40, or N50, or even N150?  Why don’t we just start with that information, so that all understand?

I have laid out all the possible charges that have been bandied over the years into Table 2.  Maybe we can just get the NNPC (Funso Kupolokun),  PPPRA (Rasheed Gbadamosi), or the major marketers (Agip, Elf, Nolchem,  Total, Oando,  Mobil, Texaco, AP), or some independent marketers  (some 500 of them or so) to fill the table out, so that we can see what to add and subtract and understand the present funk that we are in.  Maybe if we all level with each other – and remove suspicions – we can begin to give-and-take here and there.

I rest my case for now.

BIBLIOGRAPHY

http://www.nigeriafirst.org/article_664.shtml

Petroleum Pricing Agency officially established
18 June, 2003

http://www.nigeriafirst.org/article_675.shtml

Government liberalises petroleum pricing
19 June, 2003

http://www.nigeriafirst.org/article_713.shtml

Petroleum Pricing Agency board inaugurated
20 June, 2003

http://www.kwenu.com/publications/aluko/fuel_hike2003.htm

Oil price hike:  why we are where we are

APPENDIX I

Guardian

November 4, 2004

Kerosene dealers seek Obasanjo's intervention on higher price

KEROSENE dealers Association has urged President Olusegun Obasanjo to implement the recommendations of the Palliative Committee headed by Senator Ibrahim Mantu to reverse the price of Kerosene or offer subsidy.

 

The dealers under the auspices of Surface Tankers Kerosene Dealers (SUTAKED), a branch of National Union of Petroleum and Natural Gas Workers (NUPENG), in a statement in Lagos said since deregulation is aimed at alleviating the suffering of the people, removal of subsidy on kerosene, which is the major source of fire for downtrodden Nigerians, would amount to continue to impoverish them.

Prices of petroleum products including kerosene rose by over 25 per cent in September, raising fresh doubt whether the poor are been considered in fixing the prices of the products. For instance, kerosene price rose from between N52-54 per litre to N63-65 and about N70 per litre outside Lagos.

The implication, according to the chairman of the union, Mr. Rotimi Benjamin would cause many rural dwellers to look for cheap products including illegal activities, such as pipeline vandalisation, deforestation as well as illegal bunkering.

Benjamin said the major oil companies did not help matter, as many of them have shunned kerosene importation, leaving many Nigerians at the mercy of the independent depot owners. "Even out of about 27 of them, only two have kerosene in stock," he said.

He lamented that though the dealers provided employment to over two million Nigerians, they may be forced to reduce their staff strength to cope with the increase in the price of the product as well as to stay in the business.

"If we are saying that democracy is for the people when will they feel its impact. Go to any of the NNPC depot, you can't get kerosene to buy. The excuse has been that kerosene has been deregulated. Must we strangulate our people because of deregulation."

 

Benjamin said most of the dealers have travelled to Port -Harcourt refinery in search of the product, only to be told that a litre is N59. " So when you add transportation cost of between N150,000- N170,000 on 30,000 litres and other service charges, we will be dispensing at N75 per litre. This is killing", he said.

________________________________________________________________

Table 1:  History of Fuel Price Increases in Nigeria

Sources:

http://www.nigeriafirst.org/article_703.shtml

History of Petrol Price Increases
01 July, 2003

http://allafrica.com/stories/200410110685.html

Fuel Price Hike:  Is this Democracy Dividend?

This Day [October 11, 2004]
TABLE 2

Please Tell us,  PPPRA: What Goes into the Cost of  One Liter of Petrol?

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