INTERVIEW: Oil workers will resist fuel subsidy removal – PENGASSAN President

The national president of the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Francis Johnson, tells PREMIUM TIMES how workers view the proposed deregulation of the petroleum sector by the federal government.

PT: Deregulation of the petroleum industry means different things to different people – government, investors, marketers, etc. What does it mean to oil workers?

Johnson: Deregulation is a universal economic concept that promotes free market enterprise. When the regulator relaxes regulation and permits market forces to determine the means of production and distribution of an economic product, deregulation is achieved.

While deregulation is desirable, it must be approached with caution and highest sense of good conscience. For us in the oil and gas industry, deregulation would have been a non-issue if the critical issues of legal, regulatory and fiscal reforms as posited in the Petroleum Industry Bill, PIB, were addressed.

Today, we are talking about deregulation of the downstream sector of the petroleum industry as a single item, whereas what is required is a complete overhaul of both operational and policy frameworks in the industry.

The laws currently in operation cannot support the demands of the sector, because it is in dire need of reformation.

The 1968 Petroleum Act is what the industry is currently surviving on. How can the country rely on an obsolete body of regulations and still demand efficiency from an industry that has been stretched beyond its elastic limit? Why would Nigerians be talking of deregulation at all if we had a functional products pipeline operating at a user-fee basis?

If the nation had taken the intervention of PENGASSAN seriously enough in 2001 after the submission of the whitepaper report on Supply and Distribution of Petroleum Products headed by the then Secretary to the Government of the Federation, Chief Ufot Ekaette, the country would not have the problems it is facing today.

The union, at the time, had called for a systematic review of all aspects of the supply and distribution of products, including regular turnaround maintenance, TAM, of the refineries.

Today, we are talking of shutting down the refineries for a year to carry out a comprehensive TAM. This is the action needed 15 years ago, while fuel importation lasts. By now, the country would have achieved full sufficiency of local fuel production and thin out the subsidy margin.

PT: Some people say deregulation is the answer to the perennial fuel scarcity. Does PENGASSAN share this view?

Johnson: Some say it is “the answer”. Well we say it is an answer. Deregulation is not an end in itself, but a means to an end. If we understand to that level, then part of the problem is solved.

Our stance has always been to put in place necessary structures that will enable and sustain the policy. When the sector has achieved full deregulation, there will even be a greater challenge than scarcity, namely consumer protection.

Post-deregulation, the first aspect of the policy that will be most felt is price liberalisation. That is the greater concern for us as a pressure group. It is not enough to deregulate.

What have we put in place to prevent collusion and predatory tendencies of operators? We do not have strong protection or cover for consumers’ in Nigeria.

See what we experience daily with service providers, in aviation, telecommunications, etc. We seem to be engrossed in the quest to deregulate the sector, but no one is paying attention to the public utilities, like the pipelines, jetties, depots and even refineries.

We seem to forget that the very reason for scarcity is the neglect and lack of maintenance culture, with which public infrastructures were left unattended to for so long. So, deregulation yes, but it’s just an aspect of addressing the myriads of problems confronting the sector.

PT: Successive governments have over the years thought of deregulation, particularly in the downstream sector of the industry. But, there has always been resistance from Labour, which PENGASSAN is part of. Do you think the country is ripe for the policy?

Johnson: Same as what I said earlier. The unions are not against the policy in anyway, rather deliberate steps should be taken to address weightier issues of employment, sectoral development, corruption, inefficiency and profitability for the Nigerian state.

In fact, the labour movement in Nigeria has been in the forefront of restructuring of the downstream sector for a long time.

Sometime ago, between 2000 and 2003, the unions participated in the various interventionist committees set up by government to address the problems in the industry.

At a point, we proposed phased deregulation of the downstream sector to enable the federal government fix the ailing refineries, grant licenses to private refiners, stimulate investment drive, improve human capital capacity, institute legal and regulatory framework and a whole lot of institutional policy to engender sectoral development.

If the proposals were taken seriously, we definitely would not be where we are today 15 years after. So, we are not ready for full deregulation yet until those concerns are addressed, otherwise we shall be riding in the air.

PT: Deregulation works better in a free market moderated by competition. With regulated fuel price of N87 per litre, how would the policy work with subsidy in place?

Deregulation and subsidy are two different regimes. No system ever works that way. It is either we deregulate or we subsidize. It can only be one of the two, and not both.

Subsidy is an intervention aimed at moderating volatility of prices at the pump. It became necessary to subsidize premium motor spirit, PMS and household kerosene, HHK, because these products were closest to Nigerians in terms of use.

However, there was a moratorium for the subsidy regime when the Petroleum Support Fund, PSF, commenced in 2006. It was dependent on other variables including periodic TAM on the refineries to boost local production up to the point of complete sufficiency.

But, that has not been done. So, at what point can we now say we are ready for deregulation?

Then, we must be very careful with this overt capitalist approach of market forces determining everything in free enterprise, especially in a developing economy such as ours.

The regulatory agencies are not fully independent and inadequately funded, yet we desire to free the market to operators to feed on consumers? No! The union will not subscribe to that conspiracy against the Nigerian people.

PT: The combined products supply from the country’s refineries cannot meet domestic demand. How would deregulation work under a product import regime?

Johnson: The major challenge in the refineries is feedstock. Crude supply to the refineries must not only be systematic, but statutory.

The daily fuel consumption is between 30 and 32 million litres per day, with provision for strategic reserve. If capacity is boosted to refine 80% of the domestic demand, and work towards bringing on stream private refineries to complement the balance, why should we still bother about importation? Now, why I said earlier that we need to put up structures that will sustain the policy of deregulation?

Under a products import regime, government will only put in place a mechanism that monitors the price parity to prevent oligopolistic tendencies of operators.

PT: There are strong arguments for and against deregulation of the downstream petroleum industry. What’s the way forward?

Johnson: Straight away, the way forward is for government to show the will in eliminating inefficiencies and corruption in the sector by strengthening the regulatory agencies by establishing their independence for greater efficiency. This is where the much anticipated passage of the Petroleum Industry Bill (PIB) is important. Like I said before, the Unions are not averse to deregulation as a policy, but it must be approached taking cognizance of Nigeria’s socio-economic realities.

PT: For deregulation to thrive, all regulatory issues and laws capable of frustrating its effectiveness must be removed. Don’t you think the absence of the PIB could pose a major problem? What do you think the government should do?

Johnson: Absolutely! The Petroleum Industry Bill (PIB) remains the panacea for the myriads of problems in the industry. We have heard government say it will implement provisions of the bill piecemeal in order of needs and priority.

We don’t know how that will play out. Our expectation is for the Executive arm to re-present the Bill to the National Assembly and take advantage of the majority of membership for accelerated passage. Graciously the Senate President has promised to work assiduously at passing the Bill.

PT: Crude oil theft and pipeline vandalism are two issues capable of frustrating the deregulation policy. What do you think these problems could be resolved?

Johnson: We empathise with NNPC Management on the negative impact and colossal loss to the nation caused by the menace of crude oil theft and pipeline vandalism, which have become a major dent on the national and business integrity.

These criminal incidences are major causes of incessant shut-in production, force majeure, massive divestment, environmental degradation, and unbearable cost of maintenance and repairs.

Apart from causing unimaginable economic/revenue losses to the Federation Account, pipeline vandalism and crude oil theft continue to deter confidence in industry’s operators and players.

Refineries’ operational and functional effectiveness are truncated by pipeline sabotage. There should be a review of pipeline installation techniques and the maintenance policy, regular surveillance by core experts to evaluate pipeline integrity and proffer necessary solutions, well-coordinated security network, strict enforcement of Pipeline Right of Way, and review of enabling legal instruments for sanctioning violators/defaulters.

Troubled pipeline spots should be clear of all obstructions to ensure effective monitoring. We demand creation of a specialized security agency for monitoring and securing pipelines. Such specialized agency’s offices should be strategically located in troubled areas.

PT: How do you think oil workers’ interest would be adequately protected under deregulation?

Johnson: That is why Labour associations exist. The Labour movement in Nigeria will support anything that will advance the development of the country just as we shall resist attempts to mortgage our common wealth and hand them over to shylocks under the guise of a free market enterprise.

The oil and gas industry in Nigeria is endowed with some of the finest professionals and operatives the world can boast of.

Our engineers, geophysics, chemists, humanists, environmentalists’ are the finest you can find anywhere around the globe. So, who is afraid of deregulation?

Our laws are clear on job protection and wealth creation along the value chain, so we are not losing sleep over the effective implementation of deregulation.


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  • Abdullah Musa

    This government is not suitable for Union blackmail.
    The leader is not here to loot, or own oil block.
    You either agree to cooperate for better Nigeria, or be exposed as economic saboteurs and be effectively dealt with.
    By working in the industry, does it make you owners of the oil and it’s infrastructure?
    What an uninformed decision.

  • Du Covenant

    Ye Ye Saboteurs……, so government should continue feeding the greedy animals called oil marketers who have planted you in the industry?. When have you ever come out on the side of government and the masses for the waste of scarce resources called subsidy and for the suffering fellow citizens even after the subsidy is paid?. Lets see if you will old us at ransome again with the current administration in place. We have more than twice your number roaming our streets without gainful employment……just thinking aloud!.

  • Rommel

    Time has come to us to begin to take a closer look at these trade unions to know whose interest the represent,it is without doubt that most sectors of Nigeria is deeply corrupt so these cannot be an exception and since no one probes them,it is possible that they have become a criminal racket colluding with people who rip off Nigeria,what roles did they play in the Jonathan/Okonjo Iweala fuel subsidy scam?

  • Jimi

    YES. Just like the last time. In the end the union leaders accepted GEJ’s millions in bribes and the poor were back to where they started from. My friend just keep quiet. The subsidy has been removed. Period!

    • Du Covenant

      That was then, this time around NO bribes and Nigeria must be free from saboteurs!.

  • SAM .A

    If you resist it , then the people should rise up occupy all your offices and chase you all parasites out of Nigeria ,you are the people who have been benefitting in Kerosine , diesel and petrol subsidies . Ole , Barawo , Onyeozi.

  • Ajantala

    ONLY in Nigeria Unions go on strike for something completely outside their Association by-laws. Strikes have become a TOOL for sabotage and blackmail.

  • MI

    Don’t waste your time……well meaning Nigerians have decided to make sacrifices to truly move the country forward especially with the current set of leadership. The union should be a partner rather than clog in the wheel of progress. So much had happened in the oil industry the past two to three decades. Importers of petrol have been lazy in sourcing for competitive product in the international market since the govt will pay the difference anyway. Crude prices has gone drastically low for any subsidy to be sustained. The other advantage is that we all are now stakeholders, and must, therefore, complement efforts by govt to ensure refineries work, protect as much the pipelines for our common benefit.

  • Isaac

    What Oil workers is this man talking about. If he has been paid to utter ignorant statements; he would better swallow it. Subsidy is already removed. Period.