Why Nigerians Cannot Pay International Prices for Oil

by Michael Oluwagbemi II

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

Albert Camus (French Novelist, Essayist and Playwright, 1957 Nobel Prize for Literature, 1913-1960)

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oluwaseun May 16, 2009 - 2:38 pm

an article telling nigerians the truth state of their economy

Anonymous March 15, 2006 - 11:32 am

Well, Busanga i must commend you for being frank and passionate on this topic. However, for there to be meaniful change in this sector, the likes of your expertise is needed to restructure this sector and ensure that the citizens of the great country enjoy the benefits of God's major gift to them.

Tope Bailey



Anonymous March 6, 2006 - 12:38 pm

meets th3e standard of the present situation.

Lagbaja September 9, 2005 - 2:18 pm

The writer above represents a sizeable minority of well off Nigerians that just mouth nonsensities on the state of Nigerian economy. What is the use of all the macro economic indicators he is annoucing to my old grand mother in Esa Oke..it makes absolute no sense. Going by the provisions of the constitution the primary duties of government is for the security of life/properties and welfare of the people – On this two counts Obasanjo adminsitration has failed: The people are worse off toay than when he came going by the development indicators released by IMF yesterday we came from 48 years life expectancy in 1999 to 43 years last year- that is a disgrace! Additionally the spate of armed robbery and day light crimes in the country has climbed..even OBJ himself is not safe..this administration is a total disgrace..the fuel price is just one dimension to a clueless economic policy that has IMF at the center instead of the people..who are you for ..the people or IMF..me I choose the people of the Great Federal republic of Nigeria. Thanks Busanga

prince kennedy Iyoha September 9, 2005 - 3:11 am

As if Nigerians would really be sad at the thought of a bankrupt NNPC.

I am convinced that the common Nigerian your article is trying to protect will find it very difficult to have bread for their children once a day and to pay school fee for their children if your prediction of the above mentioned corporation materialised.

NNPC which is by far one of the most corrupt and inefficient government corporation in Nigeria and indeed the world

I also dont agree with you the above mentioned corporation has suffered blocked from the numerous sanctions against Nigeria from the international communities particularly the west during the time of the military juntas some years back.This has affected the funcions of the machinaries that had to be replaced for the corporation the began its activities again. The above has affected negatively the functioning of the corporation. The suppose hike in the pump price of oil and its effects on the Nigeria economy. The response of the Nigeria labour movement to regulate the decision or insist on the actual pump price of oil will probable not be of interest to the overall economy of the nation. Nigeria is not an island hence she trade with other nations of the world. The pump price of oil in the international market will have effects in its economy.

You should understand that the Nigeria economy depends on the industrial countries that sale technology to Nigeria. And for this economy to sustain the people of Nigeria most be ready to fly high without thinking of how far it is from the bottom. The increase and free flow of money in the economy will help stebalize it.

The hike in the pump price is not just a Nigeria affair but global and i think it's necessary that we Nigerians play a role in the stabilization of our economy.

Operators of private business in Nigeria are likely to take advantage of this situation but i am of the opinion that the windfall of this increase will help the government create more job opportunities for the millions of unemployed Nigerians.

I will like to know why more than half of the Nigerian population don't contribute to the economy in a way of regular tax payment dont the government have an infrastructure capable of collecting tax from the vast majority of Nigerians in my observation its only the civil service and some foreign company employees including the banks that really contribute in a way of pay as you earn program.

The market women farmers road transport workers small scale businessmen like the spare parts sellers owners of canteens bear palours…Etc. and a very large sector of the Nigerian public don't contribute in anyway to the Nigeria economy.Yet it is this sector of the public that always critisize the government of irresponsibility.

For the government to respond to the needs of his citizens the people most help the government meet their needs in form of contributing (i.e.) by paying tax and all other level stipulated in the constitution. Hence revise is the case the government is left with no option but apply the only instrument in his power to force its citizens like the hike in the pumping price as a last resorts to force the people meet their obligations to the nation.

The finance minister is a person with international reputation and respect. she has worked for the World Bank and has adapted a moral valour difficult to find among the present day political class in Nigeria. Therefore we have confidence that the money accrued from the hike in the pumping price will be effectively used for the interest of the people. Gone are the days when civil servants politicians and people with authority in Nigerian siphon money into their private accounts. The European Union and all other international organisations are putting in place an infrastructure to combat this corrupt practice

i think obj's administration has also done its homework in this regards.

I think we need to change our moral value and the way we look at things in Nigeria and lean to respond to our obligations to the nation if we want our Nigeria to rise above waters some day.

Anonymous August 30, 2005 - 4:34 pm

so much for debt relief! OBJ Okare!

Anonymous August 30, 2005 - 6:31 am

Adressing the real issue with fairnness and providing solutions to the arry of problems


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