Nigeria and the Challenges of Economic Reforms (Part 4)
(This is the final post on the above subject. You may wish to read the earlier posts to fully understand the discussion)
Furthermore, the reform in the downstream sector of the oil industry which began with the removal of subsidies on refined petroleum products has to be total. NNPCL still owns four moribund refineries that have become drain pipes on government with their unending Turn Around Maintenance (TAM). Many analysts believe that funds that have been expended on these refineries for TAM with nothing to show for it would have built several modular refineries that would serve the nation adequately. One of the objectives of the reform is to reduce or remove the involvement of government in the downstream sector of the oil industry and limit it to regulation. Government should not be involved in the direct sale of refined petroleum products. In spite of the claims that NNPCL is now a business concern, it is still wholly owned by the government and so are the four refineries. Therefore, these refineries should be sold to core or technical investors who can create something better from them. The downstream sector of the oil industry ought to have many players in both refining and distribution so that Nigerians can obtain products at very competitive prices and these producers can also sell outside the country.
Finally, it is commendable that in the last one year, government has aligned its fiscal and monetary policies. A lot still needs to be done; faithfully executing these reforms will further enhance such alignment. Some people have argued that several years of devaluation of the local currency has not resulted in export boom for Nigeria. Very true! Devaluation alone will not lead to export boom; It has to be a set of coordinated policies. Even at that, the President and his team don’t have to go on a long and protracted siesta believing the job has been done. There are series of policy initiatives that have to be introduced to take advantage of the favorable economic climate that has been created with the reforms. Unless the reforms are total, they will be inchoate like the ones implemented by Ibrahim Babangida between 1986 and 1993, and will, therefore not deliver tangible benefits to Nigerians.