Igunbor: The petroleum subsidy blackmail (1) RECENTLY, Petrobras, the Brazilian State-owned oil company announced a net profit of $13.7 billion for the first half of this year 2011. The company is currently valued at N291 billion, and is competing favourably with other well established and efficiently run international oil companies, ranking next to companies like Exxon Mobil Corporation, PetroChina Company Ltd, Royal Dutch Shell Plc and Chevron Corporation in market value. The announcement of the impressive performance of Petrobras was coming about the same time that the Nigerian Senate ad-hoc committee on privatisation was hearing tales of woe and sleaze concerning our public enterprises. During the ad-hoc committee hearings, we were, among other things, told incredible stories of how and why 23 companies spread across various sectors of the economy, including three major oil marketing companies (namely Conoil, Oando and African Petroleum), banks, giant cement companies, hotels, etc were sold for N57 billion ($38 million ). It is worthy of note that the three major oil marketing companies involved in that exercise were originally, foreign multinational companies which were nationalised by the Federal Government during the indigenisation era. Those of us who still care to task the memory will remember that what is today known as Oando is composed of Unipetrol (originally ESSO Petroleum company) and Agip Oil company, Conoil (formerly National Oil) was originally Shell Oil marketing company, while African Petroleum (AP) was originally British Petroleum (BP). Up till today, ESSO, Agip, Shell and BP are still major players in oil marketing across the globe. What the Bureau of Public Enterprises (BPE) privatised were actually nationalised multinational oil companies, and not just ordinary average players in the industry. It is the considered opinion of this write-up that of those 23 companies privatised by BPE under the leadership of Mr. Nasir El-Rufai, the three oil companies alone should have fetched the Federal Government more than $38 million, not to talk of the other 20 companies. But that is history now. We were also told that a certain Federal Government-owned company (ALSCON?) valued at $3.2 billion was sold for $150 million. On this transactions alone our very patriotic public officials caused us a loss of $3.070 billion. Again, the world got to know that Nigeria spent over $100 billion to establish a number of enterprises which at privatisation yielded a paltry $1.6 billion. Allegations and counter allegations were also made about bribes, undue interference and improper involvement of the Presidency, etc, but such things are not new to us. In the past, we had been treated to all sorts of things at similar ad-hoc committees and probe panels – things ranging from strange comic to embarrassing absurdities, and everything in between. Quite seriously, this is a sad indictment of our public officials and raises serious questions as to their competence, commitment, honesty and sincerity of purpose. In our chequered history, we have had almost as many dysfunctional policies as we have had even more dysfunctional public officials poorly implementing such policies, for reasons other than public interest. That  largely explains why we impudently import just about anything from just about anywhere in the world, even when we possess the potential and capacity to produce them, even for export. That is why in the year 2010 alone Nigeria spent over N1.3 trillion on the importation of four food items into the country – N635 billion for wheat, N356 billion for rice, N217 billion for sugar and N97 billion for fish. That is also why the country spends $10 billion (N1.5 trillion) annually on the importation of petroleum products despite being one of the world’s leading crude oil exporting countries. That is also why we import petroleum products from Cote d’Ivoire and Senegal. Again, that is why Nigeria will soon start importing petroleum products from nearby land-locked, poverty-stricken Niger Republic before the end of the year, right under the nose of our own oil giant NNPC with all its crude oil and refineries. That the politico-economic leadership of this country has failed woefully and thus proved to be unable to run our affairs is clearly evident in the revelation at the Senate ad-hoc committee, the “import-mania”, highlighted above, as well as the general paralysis of productive ideas and actions demonstrated so far by the leadership in virtually all aspects of our national life, especially in recent times. There are many reasons for the establishment of public enterprises, but the underlying philosophy on which all such reasons are grounded is the utilitarian philosophy which seeks to achieve the greatest good for the greatest number of people. It is therefore all about public interest. But given the peculiar circumstances of our experience with public enterprises in Nigeria, how much of public interest is really served? Can  we honestly say that they have provided the greatest good for the greatest number of Nigerians? We are confronted with the hard choice between keeping state enterprises and privatising them.  On the one hand, they have been known to often constitute drain pipes on public funds while the purpose for which they were set up is hardly realised. Our governments have usually ended up funding corruption and inefficiency for the benefit of a very few. Viewed against this background, it makes good sense to privatise them. On the other hand, our experience with privatisation has been such that the process is always so highly deficient in transparency that the result is usually nothing more than the legitimised criminal grabbing of our sovereign assets by a few privileged people in power. It has always been the case of a few individuals and their family/friends unjustly appropriating for themselves national assets and monuments which were built on what some have sentimentally described as “the sweat and blood of all.” Such public enterprises have been sold at give-away prices, sometimes even below their scrap values. The services provided under the new ownership are hardly better, and more importantly, unaffordable to the ordinary Nigerian. The new private owners have also been known to engage in asset stripping, profiteering, etc at the expense of the people’s pain. The sale of these state-owned enterprises by government officials and what happens thereafter in the hands of the new private owners can safely be described as acts of willful vandalism. These considerations have burdened the hearts of most Nigerians who are passionately opposed to the privatisation of our public enterprises, including and especially our oil refineries. A serious search for a viable alternative model has therefore become imperative at this point because it is of critical importance that we strike a balance between the protection/preservation of public assets on one hand, and the curbing of seemingly unending inefficiency and drain to public funds on the other. Under our present model, head or tail, we the people lose. It is against this background that the recent persistent calls by state governors for the removal of petroleum products subsidies had not only caused heightened apprehension among the informed citizenry, but also made millions of Nigerians jittery. Now that the Finance Minister, Dr. Ngozi Okonjo-Iweala has recently confirmed the intention of the Federal Government to that effect, this is the most appropriate time to find a lasting solution to what has become a ready blackmail weapon in the hands of successive governments in this country. For about two decades now Nigeria has continued to witness recurring incidence of scarcity of petroleum products which is traceable to the depressing state of our oil refineries. Government has continued to award contracts worth hundreds of million of dollars for the rehabilitation or turn around maintenance (TAM) of the refineries almost on yearly basis without any positive result. The country has had to depend on imported petroleum products to meet its needs, thereby not only incurring huge bills in foreign exchange and creating employment for citizens of other countries in foreign economies, but also expending staggering amounts of money each year subsidising the products for the domestic market. Records indicate that Nigeria not only spends about $10 billion (N1.5 trillion) annually on importation of petroleum products, but also spent a whooping amount of money in excess of N2.3 trillion subsidising them for domestic consumption between 2006 and 2010; N261.1 billion in 2006, N278.8 billion in 2007, N630.5 billion in 2008, N421.5 billion in 2009 and N621.5 billion in 2010. In spite of the huge financial resources government commits to making products available, scarcity has persisted. Like the successive ones before it, the present administration believes that the only panacea to the seemingly intractable problem is deregulation of the downstream oil sector, which simply means hike in petroleum product prices, removal of subsidies and eventual privatization or sale of the nation’s oil refineries. Government’s argument has always been that petroleum products are too cheap in Nigeria and therefore cannot attract requisite investment in the sector. To them, only market forces should be allowed to determine the prices of products so that it would be profitable enough to attract both local and foreign investors to the sector. By extension the sector would be run efficiently, smuggling of subsidised petroleum products out of Nigeria into neighbouring countries would be curbed, products would be readily available and we can even begin to export refined petroleum products. •To be concluded. • Igunbor lives in Edmonton-London, UK.