Deregulation and the politics of public policy By Reuben Abati

This thing called democracy, particularly the Nigerian brand, never ceases to throw up new and intriguing lessons about the relationship between government and the people, and the larger, complex socio-political environment. I had gone to Lagos on an assignment in the last two days of the year 2011, when around midnight I received a phone call from someone close to the corridors of power, informing me that a meeting had just been concluded in Abuja where a decision had been taken to deregulate the downstream petroleum sector, and thus, in effect remove the subsidy on Premium Motor Spirit (Petrol).

I told him I was aware of plans to that effect, since the President had been holding a series of meetings with various stakeholders and constituencies on the same subject, but as at the time I left for Lagos, no final decision had been taken. The fellow insisted he knew what he was talking about and that in the morning, the Petroleum Products Pricing Regulation Agency (PPPRA) would make the announcement. Sometimes in the corridors of power, informal stakeholders could enjoy faster access and be even more powerful than persons with formal responsibilities. There are persons and groups whose livelihoods are so dependent on government and the people in power that even a whisper at the highest level resonates immediately as an echo in their ears. I learnt very early never to underestimate such persons.

As it turned out, Nigerians were greeted with the Happy New Year news of deregulation of the downstream sector on January 1, 2012 and if you’d remember, hell broke loose. It was the end of the Nigerian people’s honeymoon with the Jonathan administration, the beginning of a long nightmare, and an opportunity for the opposition to launch an unending campaign of blackmail, name-calling and abuse against the administration. I received an early morning summon to leave Lagos and return immediately to the Villa.

The Jonathan administration was definitely not the first to seek to deregulate the downstream sector and end a regime of subsidy, as a means of ensuring greater transparency, efficiency and competition. Since 1987, every administration had tried to manage this aspect of the curse of oil. Nigeria is the sixth largest producer of oil in OPEC, and the second largest exporter of the product in Africa, at a time after Libya, at other times, after Angola. But the big problem has always been making the product available to Nigerians at home, in an efficient manner and as they say, at an “appropriate” or “correct” price. The mismanagement of oil resource, which accounts for about 90% of the country’s exports, is at the heart of corruption in Nigeria.

Years of inefficiency and graft had resulted in the collapse of the country’s refineries, from low capacity utilization to eventual collapse, persistent scarcity of the product, large scale smuggling, the rise of an oil industry cabal, violence in the Niger Delta, oil theft, pipeline vandalism, and all the evils of irresponsible leadership. From being a major exporter of crude oil, Nigeria soon became a major importer of finished petroleum products, and as international spot prices were volatile, government provided private importers of refined products, a subsidy that took care of landing costs that could have been passed on to the people. But the subsidy continued to grow out of proportion, becoming a major drain on the country’s finances – from 1.42% of GDP in 1987, it grew to about 3% of GDP in 2011.

Every administration sought to check the resultant crisis through price controls or gradual deregulation. The people’s counter-argument and the source of the angry protests that always followed was that Nigerians should not be made to pay heavily for a God-given resource, and that if the refineries were to function efficiently and government officials would moderate their greed, Nigerians would not need to buy petroleum products at the most expensive rates in OPEC. The Nigerian Labour Congress (NLC), supported by other groups in civil society, led the protests against every attempt at deregulation, compelling virtually every administration since 1987, to review proposed increases in the pump price of fuel in order to pacify the people. Only Diesel (AGO) and Low Pour Fuel Oil (LPFO) were successfully deregulated in 2009. By 2011, the regime of PMS subsidy had become unsustainable. The decision to fully deregulate the downstream sector in 2012 was the boldest policy move by the Jonathan administration but it was also the costliest.

The NLC and the Trade Union Congress (TUC), and their affiliate unions together with civil society groups took to the streets and shut down the country. The main opposition party, the then Action Congress of Nigeria (ACN) went into a propaganda overdrive, throwing every possible mud at the President and the administration. In Ojota, Lagos, the opposition organized anti-Jonathan and anti-government rallies. “Paid” and mobilized youths and musicians, wearing designer T-shirts, voiced expletives, danced, and screamed; in other parts of the country, the protests resulted in violence and the death of many. This was the season of the Arab Spring, and those who launched what became known as the #OcccupyNigeria movement were convinced that this was the best time to demonstrate the superiority of people-power over government policies. Everyday in the Villa, at the time, we agonized over what had become a frightening assault on the administration. President Jonathan was the country’s first Facebook President, the first president to use the social media to run an election campaign, globally he was second only to President Obama in terms of Facebook followership, but in the face of the 2012 fuel subsidy protests, that same online advantage became his nemesis.

Young people, excited by the idea of an “Ojota Spring” deployed online hashtags to tear down the administration. Government officials also took to the media to explain the deregulation policy to the people. Ministers were dispatched to their various political constituencies to explain, communicate and convince, thus: defending the government became a test of loyalty. In my case, before going to work in the public sector, I had written an article in 2009, in which I opposed deregulation and predicted that the government was so wrong it would soon mislead Nigerians to such a day when we, the people, would soon start trekking or riding bicycles, no thanks to official voodoo economics and incompetence. Access to more detailed information about the extent of the corruption in the oil and gas sector later made me to review my initial objections to the policy of deregulation. Nigeria would be doomed if it continued to rob the poor to enrich the rich and thus through subsidy payments sustain a tradition of theft and wealth without work.

That article was dredged up nonetheless and circulated widely and I got called all kinds of names, including being called a “turn-coat”. It was a trying time for the Jonathan administration: myths over-shadowed reason. The government was accused of acting hastily and failing to consult widely.  But that was not true. Weeks before a decision was taken, President Goodluck Jonathan personally met with state governors, labour leaders, media chiefs, youth groups, civic and cultural organizations, leaders of thought, traditional rulers, oil marketers and importers,,. Behind closed doors, labour leaders and leaders of the ACN did not oppose the deregulation policy. I recall the union leaders only asking for palliatives and the ACN submitting a detailed policy implementation paper.

The second myth was that the government acted on impulse because it was “clueless”. Again, not true. The House of Representatives had probed the subsidy regime reporting massive fraud in the downstream sector. The Ministry of Finance and later the Presidency subsequently set up the Aig-Imoukhuede Technical and Verification Committees, which made worse revelations about how the payment of subsidy had become a huge scam. The Ministry of Finance on the basis of available damning evidence suspended further subsidy payments and insisted on proper verification of claims, an integrity check that was resisted by the major oil marketers and their agents. Minister Ngozi Okonjo-Iweala’s mother was later kidnapped in the midst of all that.

Deregulation of the downstream sector was inevitable then as it is now, because the fuel subsidy regime had become a cesspool of officially backed corruption. The country could no longer afford to pay rent to an oil sector cabal feeding fat on the inefficiency in the sector, putting in their pockets resources that could be used to develop infrastructure and serve the people. This was the principled position. But following the January 2012 deregulation, those who had urged the Federal Government on, including State governors who always wanted more money, and marketers who spoke about how deregulation had worked with diesel and telecomm, abandoned the government to its fate. Opposition leaders who had submitted a blueprint for implementation, publicly led the protests. The betrayal was astonishing. The short and long term effects were devastating.

Let us now fast forward to 2016: The present administration has again, like the Jonathan administration, announced a removal of subsidy.  The pump price of petrol is now officially N145 per litre. The objectives and the arguments are the same as in the past. But the context is different. Those who fuelled and funded the protests of 2012 are either quiet or openly supportive or apologetic as they now defend the principled position they once abandoned. The labour unions are factionalized, there is no co-ordinated protest, the media, the people and the civil society are indifferent, the government is not under any pressure to convince anyone: same policy, same issues, but different politics!

My prediction that one day, we will all ride bicycles or trek to work has now come to pass. But if that is the sacrifice Nigerians have to make to end the outright brigandage in the downstream sector, so be it, please. Putting the subsidy thieves to shame, ending a subsidy regime that encouraged round-tripping, rent collection, smuggling, instant gratification, theft, insincerity, blackmail, and cabalism may well become President Buhari’s most important legacy. This could have been done since 2012, but the politicians, desperately seeking power and office, failed to put Nigeria first, and looking back, it seems all the young men and women who died in that season did so in vain. Politicians must learn not to play politics with people’s lives for reasons of selfish convenience. President Buhari must stand firm but let him also take steps to ensure that local refining is restored and let him keep an eye on those saboteurs who always manage to find a way around every public policy. And to all the 2012 hypocrites now turned today’s yes-men: una do well o.