Obeying The Rules In An Imperfect Market, By Nasiru Suwaid
The period was such an in opportune moment in the Nigerian history, when citizens have become so frustrated with the scarcity of petroleum products, that you could proclaim the virtue of being a magician and promise to wand a rod and solutions would momentarily appear to resolve a debilitating national problem. Many a cynic would still believe, it is possible, to solve a matter instantly, which had taken years of proactive effort to engineer, in destroying the key petroleum refining infrastructure and national refinery plants for personal gain.
The time was a day after the liberalization of the upstream sector of the petroleum industry, when an editorial struggle must have ensued in many a media house newsroom, though, I could not claim to be a witness or even, affirm that I was privy to what happened, yet, what was the situation there, could not have been different from what I had suspected or even imagined, as the factual truth.
Actually, the nomenclature issue and the disagreement in contention, was what to call what the Nigerian government did, with the price of Petroleum Motor Spirit (PMS), especially as, it has already stated in an official proclamation, that petroleum products must not be sold above a pegged price of N145 naira.
The question to ask here, is was whether what occurred is a liberalization of the sector, but, the players in the petroleum industry had called for a deregulation and how can a deregulation be feasible with a government control in pricing, besides, as the name has highlighted, how can you deregulate, yet at the same regulate.
In fact, it is in this kind of atmospheric narrative of confusion, many wondered and even presumed, the Nigerian petroleum industry is not to be subjected to any governmental regulation, not even in terms of product quality control, ensuring availability and protection of consumer right, which is a fundamental social responsibility of government’s, that every free market environment endorses, recognizes and requires.
Indeed, the conversational narrative as at that time, which was to point out the availability of diesel, aviation fuel and kerosene in the market, as the triumph of deregulation efforts of past policy regimes, in galvanizing the refined product’s marketers to saturate the market with petroleum byproducts.
It is noteworthy, many an industry player, had openly wondered and even complained, why the Petroleum Products Pricing Regulation Agency (PPPRA), should continue to exist in Nigeria, since a deregulated market, presupposes an environment where a government should not care about product’s distribution, availability, quality and cost, as it is the interplay of market forces, which would resolve this necessary obligations in the interest of the consumer.
The general idea in the narrative is that the force of consumer power of choice to choose, to discriminate in terms of product pricing, quality of product available and ability to make preference is enough incentive, to galvanize an intrinsic effort in correcting player behavior in the market. Ideally, that should have been the existing scenario in the refined petroleum products markets and supply end terminal in the country, especially as, the Petroleum Motor Spirit (PMS) has for long been deregulated.
Unfortunately, because, the deregulation had occurred in a distorted market environment, where the nation does not produce what is being marketed, what is occurring in the case of exorbitant pricing of diesel and kerosene, and the scarcity in the availability of aviation fuel is a serious source of concern. Because of its capacity to cause inflation, affect capacity for industrial production, negatively influence quality of life of the citizens and generally, cause a multiplier effect in the economy.
It is worth noting, that the importers of the three earlier deregulated products of diesel, aviation fuel and kerosene, they are also the marketers of Petroleum Motor Spirit (PMS), yet, while the former products had been facing the challenges of exorbitant pricing and lack of availability, the latter had become much stable in pricing and availability, surprisingly, they are traded in the same market. Could it be because the latter PMS product has exhibited signs of consumer resistance?
Obviously, what is happening is purely the ill effect or lack of capacity of market rules to correct individual operator behavior, principally, because, we are operating a distorted market arrangement, as the supply side dynamics of product importation is being carefully controlled, as to ensure it does not tally with products demand, thus, creating a clever profiteering mechanism for importer marketers.
Demand and supply coalescing to create a pricing equilibrium, cannot operate smoothly in a market that does not maintain production supply, it is a recipe for exploitative activities and counterproductive engineering of scarcity amidst plenty.
And this two other things:
WHEN A HIGHER INFLATIONARY TREND IS NOT A RISE IN PRICES
It was in the beginning of this week, the National Bureau of Statistics (NBS) released the Consumer Price Index (CPI) for the month of June, 2016, which rose by 0.9% percentage point to stand at 16.5% percentage point, from 15.6% percentage point of the previous month of May, 2016, year on year (YOY).
Basically, it is the rise in the prices of energy, which had pushed up higher, the statistical inflationary rate, which are the rise in the prices of electricity, diesel, kerosene and other energy fuels. But, the prices of foodstuffs did not rise, while that of electricity is meeting resistance in the courts as well as consumer apathy in payment, because, it is becoming an unbearable financial burden, in a economy facing contracting slowdown.
It is incumbent upon the regulatory agencies in the petroleum industry, which have been in the forefront of urging the President Muhammadu Buhari (PMB) administration to deregulate the sector, to start doing their jobs of effective and diligent regulation.
Key agencies like the Petroleum Products Pricing Regulation Agency (PPPRA) and the Department of Petroleum Resources (DPR), must check the distortionary activities in the refined petroleum byproducts market, as, it’s negative inflationary effect, could drag and sustain the whole of the Nigerian economy into perilous stagflation.
DIRE ECONOMIC PICTURE AS A DAMPENER
While I do not wish to be seen, engaging in the advocacy of media censorship or even, encouraging the press to adopt self censorship in media reportage, I still feel that some of the headlines about the Nigerian economy is way over the top, as it does not portray the actual picture of the economy, which although it is characterized by negative economic growth, it has not reached the crisis state, it is being projected.
Because, it has not reached that stage of a national bankruptcy, where there is no funds to spend and no institution is willing to lend to it, also, the country had not reached the place, it could not sell bonds to raise capital, neither is it that it could it not control the rate of inflation, nor could it not defend the value of its national currency.
I am sorry but, Nigerian economy has not reached that dire strait, yet, almost every day, what you see in the newspapers is akin to economic Armageddon, as if in a few days time, the country’s economy would collapse. These headlines, lightly as they might seem to many an editor, it could still waver the confidence of any investor, willing to put his or her money into the economy.
Mind you, it is when an investment is made, the need to advertise becomes imperative and creates an enabling environment for monetary inflow, that inspires a financial recovery and galvanizes economic prosperity.
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