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Questions What is Deregulation? Why does the Government want to deregulate? What is the difference between the past and now? In a free market environment that is envisaged, don't you think the marketers would charge higher prices as there won't be any control from anybody or organization? So subsidy has been removed from oil prices? Isn't it our birthright as a petroleum producing nation to enjoy petroleum products subsidy? With all the numerous law enforcement agents in the country, why couldn't the government muster the political will to put an end to smuggling at the borders? After deregulation, chances are that prices of petroleum products would skyrocket. How much would be the cost of Petrol, Diesel and even Kerosene? Will deregulation not further impoverish the majority of Nigerians? Some pressure groups have said repeatedly that Government should grant private individuals the license to own and operate refineries. Why couldn’t Government just do that instead of still relying on importation? Wouldn't you agree that the country should postpone deregulation until some future time when there will be some improvement in the life of our people? Of what further benefit is deregulation? What are the fundamental differences between deregulation of the downstream sector and other sectors that have deregulated? How can we be sure that the government will extend the gains of deregulation to the people? As a citizen of Nigeria, what should one do to ensure that Government successfully deregulates the downstream sector of our oil industry? Answers   What is Deregulation? Deregulation is opening up of the downstream sector of the Petroleum Industry to competition among all players in the industry. It means allowing every player the opportunity to refine or import petroleum products for use in the country in-so-far-as the products so refined or imported meet quality specifications. It involves removal of entry barrier into the supply and distribution of petroleum products. Under the policy of Deregulation, no qualified and competent person should be prevented from participating just as none should be prevented from going under by any offer of official assistance in whatever form, it is free entry, free exit.     Why does the Government want to deregulate? The Federal Government wants to deregulate the downstream sector, of Nigerian oil industry in order to: ensure that petroleum products are made available to the consumers in an uninterrupted manner; eradicate waste and corruption which are consequences of tightly regulated economy; ensure that the supply and distribution of petroleum products are orderly and consumer-friendly; channel money realized from the exercise to development projects that will be beneficial to the majority of the people. What is the difference between the past and now? In the past, government tried either 'appropriate pricing' or 'price adjustment'. Those were mere palliatives and not the solution to the comatose process of supply and distribution of petroleum products in the country. Now that the government has opened up the sector to competition, scarcity will be a thing of the past. The present arrangement will allow for competitive pricing which will break the monopoly being enjoyed by NNPC. Deregulation is indeed a more comprehensive policy for social justice and re-engineering.     In a free market environment that is envisaged, don't you think the marketers would charge higher prices as there won't be any control from anybody or organization? The Petroleum Products Pricing Regulatory Agency (PPPRA) was established to superintend the deregulation process and ensure that participants in the downstream sector operate within acceptable limits. With competition, there will be no monopoly. Competition brings out the best in terms of creative response to issues and services provided by stakeholders. The telecommunication industry in Nigeria has changed for good with the advent of Global System of Mobile (GSM) communication. Within two years, Nigeria's teledensity had tripled. Can you imagine the improved services private airlines have brought to the airline business in Nigeria, the kind of creativity and improved pleasurable hours private broadcasting organizations have brought to the business of broadcasting in Nigeria? Such is the power of competition. Now that the downstream sector has been opened up to competition, soon shortage of products would be history and the hidden potentials of product derivatives and job creation would begin to manifest.     So subsidy has been removed from oil prices? Subsidy means 'the loss of revenue that should otherwise have accrued to the Federation Account if the crude oil allocated for domestic refining and fuel consumption were to be sold at International prices. With deregulation, the federal government commenced the sale of crude oil to NNPC at the international price as against the former practice of concessionary prices. Through deregulation, the government will now capture its entire take from the sale of crude oil to be channeled into productive development projects. However, recent spikes in crude and products prices have necessitated government’s intervention so as to protect the citizens from the immediate impact of international market prices. Over time, it is hoped that the market will calm down and the modulator mechanism being introduced will enthrone greater participation and a more vibrant downstream sector.     Isn't it our birthright as a petroleum-producing nation to enjoy petroleum products subsidy? Subsidy poses a problem to the socio-economic development of the country. As stated above, the subsidy on crude being enjoyed by Nigerians was several billions of naira annually. That amount of money should rather be channeled to developmental projects for the benefit of all. Besides, subsidy even negates fairness and equity. This is so because the subsidy as currently practised in the country favours the elite class much more than the poor. After all, an average elite uses more litres of fuel than an average poor man. In some other countries, subsidy is applied in areas such as agriculture, health, education, etc. In these areas, subsidy is beneficial to the majority. It is better to subsidise production than consumption. If the subsidy is for consumption, it should be properly targeted such as the new feeding programme for school pupils.     With all the numerous law enforcement agents in the country, why couldn't the government muster the political will to put an end to smuggling a1 the borders? Nations of the world can only minimize the activities of smugglers. Even in the United States of America, smuggling exists as long as there are financial benefits for the perpetrators. If the nation deploys an overwhelming number of security agents to the borders as suggested, it would not substantially solve the problem. On the contrary, it will only add to the chain of participants. This is the reality. Smuggling will probably continue even after the nation has deregulated its downstream sector. The important thing, however, is that with deregulation in place, smuggling will cease to be injurious to our economy. The amount realizable from the sale of every litre of product would be enough to cover the cost of crude and refining, plus some level of profit margin. In essence, the incentive for smuggling will then be limited to the tax element captured by our neighbours. Under this scenario, it is the neighbouring countries that will worry more about smuggling activities.     After deregulation, chances are that prices of petroleum products would skyrocket. How much would be the cost of Petrol, Diesel and even kerosene? The prices of these products will certainly not be as obtained now. However, the new prices will not be so high as to dig a big hole in the pockets of our compatriots. Remember that the new prices of products will be determined not by government fiat, but by the forces of supply and demand, and by competition. Competition, you know, has a way of forcing down prices. It also has a way of ensuring that companies have a tight rein on production cost such that wastes that could be passed on to consumers in form of high prices are eliminated.     Will deregulation not further impoverish the majority of Nigerians? Frankly, it is the present arrangement that is dynamic in responding to situations. In the past, it was only in Abuja, Lagos and Port Harcourt that products were bought at official prices sometimes. If we agree that a greater majority of Nigerians live outside these few cities, this means that it is only a minority of our people that are the beneficiaries of the highly subsidised products. Deregulation is therefore a policy that will swing the pendulum to the advantage of the majority of our people wherever the may be. It will ensure equity.     Some pressure groups have said repeatedly that Government should grant private individuals the license to own and operate refineries. Why is Government not building more refineries? The Federal Government had always realised the importance of private initiatives in the refining of crude oil in the country. This was the case in the beginning before government took over the function. Already, 18 companies have been given licenses to establish and operate private refineries, indicating government's commitment to ensure adequate refining capacity. However, the nation in the interim has to rely on importation because it will take some time before the processes of establishing these refineries are concluded. Building a standard refinery will take not less than two years before it starts to operate fully. Much more important however, is the fact that no private refinery can operate successfully under a regulated market. It is only now that Nigerians can expect to have new refineries and a revamping of the existing ones under the privatization arrangement. In the past 2 years, efforts at getting some of the companies to build refineries are yielding fruits with the commencement of Orient Petroleum Resources and the Zenon Petroleum and Gas Limited in Lagos.     Wouldn't you agree that the country should postpone deregulation until some future time when there will be some improvement in the life of our people? To postpone deregulation, even for one day, is dangerous for the products supply and distribution in the country. If we fail to deregulate now, the whole downstream sector of the Nigerian oil industry would collapse and the consequences would be too grave for our fragile national economy and for all of us. Indeed, deregulation is an economic inevitability. Today, the three tiers of government are well funded as a result of improved earnings from crude oil. It is our collective responsibility to challenge and demand commensurate performance in the provision of basic amenities: improved education and health; aggressive agrarian projects and excellent and functional transportation modes nationwide.     To what concrete project does is the government want to commit money to be realised from deregulation? It is the intention of Government to channel money to be realised from deregulated downstream sector into the provision of infrastructure like potable water, construction of schools and colleges. Government also intends to spend the money it to boost agriculture and invigorate the power sector and undertake comprehensive road maintenance nationwide. There will also be focus on economic empowerment of the people and providing social safety net for the poor.     Of what further benefits is deregulation? Deregulation will generate employment opportunities to the teeming youth graduates in the country. To start with, private refinery owners and other providers of services that will spring up consequent upon deregulation will employ more hands to operate. Besides, industries that have suffered from low capacity utilization and low productivity will come alive as there would be enough fuel to power their engines.     What are the fundamental differences between deregulation of the downstream sector and other sectors that have deregulated? Basically, the underlying principles behind deregulation and liberalisation are the same; removal of official restrictions and bottlenecks that discourage participation and investment, and the consequent opening up of the sector with the aim of engendering maximum competition. This applies in all cases so there is no fundamental difference based on sectors. Therefore, the feat achieved in the Communication, Aviation and Broadcasting sectors of our economy can be replicated in the downstream sector if the policy is followed to its logical conclusion.     How can we be sure that the government will extend the gains of deregulation to the people? This is a democratic government. There are constitutional checks and balances like the National and State Assemblies that will ensure that government fulfills its promises. Also Civil Societies are at liberty to pressurise Government to ensure it fulfils its promises to the people.     As a citizen of Nigeria, what should one do to ensure the success of the deregulation of the downstream sector of our oil industry? To make the efforts of Government at deregulating the he downstream sector a success, you are enjoined to among other things; Ask more questions, understand more and always remember that all of us will be winners when the deregulation process is successfully completed. Provide whatever enlightenment you may have on the subject to your colleagues and neighbours. Figure out how you can become a direct participant in the process. It is your right to participate. Believe in Nigeria and the ability of its people to turn things around for the better.