Nigeria Petroleum sector - For a number of reasons, I was reluctant to be part of the recent public discussion on the deregulation of the downstream petroleum sector. Foremost among these reasons, was that after having worked so hard and getting eventually getting presidential approval to go ahead with the reforms, the process was stalled right from the highest possible quarters. Apart from the sweat and emotional investment, I was angry because a process that was going to benefit the economy and the nation at large seemed to have been sacrificed (or postponed) at the altar of political expediency. I however realize that despite my personal reservations, it is extremely important to get the facts and credible information out to the public.

Perhaps because fuel prices affect just about everyone, there has been a lot of emotional commentary on the matter. Sadly though, most of the commentary do not reflect the facts and have actually been quite dangerous and misleading in their conclusions and recommendations. Expectedly, it has also been another opportunity for some of the attention seeking types to get their name in print, using dramatic headlines to attempt to mask their ignorance and lack of proper research of the issues. I believe that a major weakness that we've faced as a people has been the inability to engage in honest and comprehensive analysis of important issues, thus reducing the likelihood of emerging with solutions that advance public good and increase welfare.

As a key player in what has been the most comprehensive review of the downstream sector (and having no current ties or commitments to the government or the oil industry), I am probably uniquely positioned and obligated to provide facts and information that would give some objectivity to the emotionally charged debate. This is however not an attempt to help the government sell its agenda or absolve it from mess that we currently experience in the downstream sector. On the contrary, I will begin by highlighting some troubling signals that have emerged from the current handlers of the process (who interestingly were somewhat culpable in the mismanagement of the sector).

- An obvious red flag is the recent pronouncement by a cabinet member that a committee will be set up to 'monitor' the use of funds saved from deregulation. For starters, this statement shows a complete ignorance of the fiscal process and how subsidies are funded. Beyond that however is that this will at best be another expenditure incurring talk-shop, or worse still will join the Petroleum Equalization and Petroleum Support Funds as non-value adding money guzzlers (to put it in the mildest possible terms).

- The recent statement that subsidy removal will be done in phases over four years is not just a troubling signal, but a clear attempt to sabotage and shipwreck the entire process. I'll get to the details later, but due to the market distortion it causes, a complete removal of all subsidies on the importation and consumption of petroleum products (and the structures that sustain it) must be the first step in any meaningful downstream sector reform. Anything else will be a futile attempt to deal with the symptoms, without addressing the root cause of the problems.

As previously mentioned, I do not intend to absolve the government from blame or responsibility for the failings of the petroleum sector. I also do not intend to gloss over the poverty and suffering that millions of Nigerians experience on a daily basis. What I hope to achieve, is to get the facts and information out to the public sphere, in the hope that a more informed public will ensure that whatever decisions and actions are taken by the government, is taken in the best interest of the Nigerian economy and the people, and that the corruption and inefficiencies that bedevil the downstream sector are eliminated.

Olateju, a former consultant with the Ministry of Finance, resides in the U.S.

Jide Olateju

Daily Trust/22/11/2011