Having established that there is a clear and present danger that investors might not show up afterall once the subsidy is removed contrary to what the government would have us believe, let us scrutinise another benefit of ‘deregulation’; job creation.
Ah yes, ‘deregulation of the downstream sector’ (or is it upstream sef?) is supposed to usher in mass employment according to the government. Indeed, listening to them, you begin to see visions of an army of Nigerian workers carrying ‘ponpons’ on their heads as they head joyfully to the refinery for the day’s work, perhaps also singing ‘ise l’ogun ise’ …that Yoruba anthem extolling the virtues of hardwork as the surefire antidote to poverty.
Now if this were the case, no sane person would argue against ‘deregulation’. Indeed whatever ‘short term pain’ it might bring ought to be worth it as a sacrifice to the god of unemployment that has set up his main office in Nigeria. At the recent NPAN organised Town Hall on fuel subsidy removal, the Comrade Governor, Adams Oshiomole, said ‘we are exporting employment to European countries and importing unemployment‘ as a result of our reliance on foreign petrol. As you can imagine, this statement received a deafening applause from the audience.
No doubt about it, removal of petrol subsidies will kill some jobs in Nigeria within one week of the policy taking effect so what we need to ask ourselves is, will ‘deregulation’ create more jobs than it will destroy net net? As always, best thing to do is check around to see what’s up.
Yours truly lives in London and as such has a UK bias for many things. Please forgive me as we start our investigation here. You will recall I mentioned earlier that the UK currently has 8 refineries after several smaller refineries have been forced to shut down following declining margins.
The largest refinery in the UK is the Fawley Refinery owned by ExxonMobil. It currently produces 20% of the country’s refining needs at 330,000bpd. According to the company’s latest report, it currently employs around 2,300 people although close to 500 of those are contractors. How about the 270,000bpd Stanlow Refinery now owned by Essar of India? It employs 960 people. Or the 220,000bpd Pembroke Refinery that ws opened in 1964? 1,400 people. There is also the Grangemouth Refinery in Scotland which began operations in 1924 and has a capacity of 210,000bpd – 2,000 jobs. So from the above, 4 refineries with capacity of more than 1m bpd employ about 6,660 people in total. Bear in mind that 1m bpd is far in excess of what Nigeria requires.
Now we know the British can be very stingy and will gladly sell their own mother in exchange for efficiency – Indeed, every one of those refineries is currently in one dispute or the other with the local unions as they look for sneaky ways to cut back staff – so maybe its not fair to compare with them.
To Singapore we go then. The 3rd largest refinery in the world is based there and owned by ExxonMobil. It has a capacity for 605,000bpd which is far more than Nigeria needs. How many people does the company employ? 750 people. I trust you are clicking on these links to verify for yourself?
Again we know the Singaporeans are deadly efficient so let’s try Arab money. The Yanbu Refinery in Saudi Arabia can refine 235,000bpd and is owned by Saudi Aramco. It employs 700 people. Then there’s the 470,000bpd Mina Al Ahmadi Refinery in Kuwait. According to the Kuwaiti National Petroleum Corporation website, it employs 1,550 people.
Quick stop in America at the Baton Rouge refinery in Los Angeles with a capacity for 503,000bpd. According to this US Dept of Labour website, it employs 2,100 people. Or the BP owned Carson Refinery in California which processes 265,000bpd with 1,200 employees.
Perhaps India is a better country to compare us with given their large population and similar levels of poverty. They also happen to have the world’s largest refinery with a capacity of 1.3m bpd. According to the company, it employs 2,500 people. Bear in mind that Nigeria cannot possibly require a refinery of this size and will be a huge undertaking by any standard. There’s also the Essar Refinery in the state of Gujarat in India with a capacity of 300,000bpd. If wikipedia is to be believed (take with a pinch of salt), it employes 1,000 people.
Unfortunately getting employment information for refineries in places like China, Russia and Brazil which would have been useful is harder than imagined. Perhaps there are some refineries out there employing 100,000 people. Please have a look around the internet and see if you can find employment numbers for other refineries and do share them in the comments section.
Since the ‘deregulation’ debate began, a day hardly goes by without someone mentioning the amount of jobs that were created when the telecoms sector was deregulated and how something similar will happen to the downstream sector once this goes ahead. We ought to pause and think about this. The telecoms deregulation created jobs that previously never existed in Nigeria. From the recharge card seller in traffic to the woman sitting by the roadside under an umbrella making calls to MTN distributors to phone sellers and repairers. All of these jobs never existed before that sector was opened up.
But can something even remotely similar be expected from the downstream sector? We already have most of the jobs in that sector before deregulation. There are petrol stations all over the place already and there are plenty of people already selling engine oil and other refined products. There is a diesel cabal fully in place already due to the high usage of generators. There will be no big bang. At the very most we can hope for something incremental.
Let’s say we somehow manage to build 5 refineries with a capacity of even 1m bpd across the country, given the numbers from across the world above, how many jobs do we realistically expect to create? 20,000? 50,000? It is telling that the very ambitious YouWin programme backed by the govt is aiming for 100,000 jobs by backing 1,200 new businesses. Now most people have said even if that lofty goal were to be achieved, it wont make a dent in our unemployment numbers which frankly could be any number of millions of people.
This is where govt policy ought to be well thought through. Does the govt even known how many jobs will be destroyed when ‘deregulation’ happens? Even a rough estimate? The next stage will then be to assess whether it can create more jobs than will be destroyed by the policy. Perhaps someone will say that the SURE programme is also part of the mix and will create hundreds of thousands of jobs. Whatever. We can do better than this. The question should be, is this policy worth going ahead with based on a dispassionate weighing of the costs and benefits? From a job creation perspective, it will be tough to answer in the affirmative to that question.
From the above, it is hard to see how Nigeria is ‘exporting employment and importing unemployment’ by importing refined crude according to Gov Oshiomole. Should we destroy with the hope that something new and better will come up or do we consolidate on what we have and see how we can add to it? The govt loves to mouth job creation but scratch the surface of what they are promising and you are met with hollowness.
Nigeria had absolutely nothing to lose by deregulating the telecoms sector; most people had no telephone lines before GSM anyway.
Can we honestly say that’s the case this time around? I’ll let you tell it.