Nigerians, NNPC and market reality

Nigerians have been dealing with a debilitating rise in the prices of food items and Covid19’s stifling impact on an already struggling economy that has also been adversely affected by the insecurity and instability that has become fairly common in Buhari’s Nigeria. In the midst of this, the Nigerian National Petroleum Company has announced through its subsidiary, the Petroleum Products Marketing Company (PPMC) that there will be an increase in the rise of petrol with the ex-depot price rising from N147.67 per liter to N155.17 which effectively takes the pump price from N168 to N170.

The NNPC has said that the increase was necessitated by market realities. The problem is that these market realities do not ever change the government’s behavior towards itself. The existence of the NNPC goes against market realities.

The NNPC is an organization that pays out roughly N357 billion as wages, salaries, and other benefits to its workers while failing utterly to do its core job. Its three refineries reported a combined operating loss of N154 billion in 2018.

The Warri refinery had a N44bn loss and the Port Harcourt refinery recorded a N45 billion loss for the year in question. The Kaduna refinery outdid everyone else though. It spent N24 billion but generated zero revenue and had operating losses of N64 billion in 2018.

Zero revenue. The vegetable-oil sellers in any neighborhood were more profitable than the Kaduna refinery.

These refineries were built to have the capacity to put out 445,000 barrels per day, but the NNPC has failed woefully at local production and has rewarded itself for its failures by becoming the major importer of petrol into the country in a market distorted by poor government policy.

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Now, this NNPC is using the excuse of market reality to raise prices. This same NNPC costs Nigeria roughly half a trillion Naira in salaries and losses from refinery losses while failing to do its job. It simply should not exist.

What we should do is let private sector players produce and import these petroleum products under proper regulation. We do not need an NNPC that sometimes costs a poor country like Nigeria half a trillion Naira while being protected from the death that would have been its just due if market forces were allowed to have their way with it.

The NCC handles telecom sector regulations. Can you imagine if the NCC was responsible for the production, importation, and sales of airtime, internet access, or smartphones?

Can you imagine the NCC being responsible for the site of base-stations?

Nigeria would definitely benefit from having products like electricity and fuel appropriately priced so the markets they are in can become balanced.

But there is no point in having Nigerians pay the cost of facing market reality while they are cheated from getting the benefits by government agencies that deliver very little but soak up so much resource and distort the market.

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