BY AUGUSTINE OMILO
THE Friday, October 30 announcement of the approval of 15 per cent ad-valorem import duty on petrol and diesel imports into Nigeria by President Bola Ahmed Tinubu has continued to form the fulcrum of political-cum-economic debate in the country in for some days and many more ahead. As usual, political opponents and economy analysts, as expected, are taking their stand on the issue just as staunch believers in the President’s approach to governance are equally showing this as one the causes for the support they have for the federal government policies.
Those that believe in the theories of economics are applauding the move. Indeed, this is one policy that has waited for too long before its embrace by the government. It offers sucour to local refineries (infant industries) which have long been subjected to unfair competitions from companies abroad, thereby contributing to the unstable pricing of petroleum products in the country.
Given the fact that about 50 per cent of the nation’s foreign exchange earnings are expended on the importation of these products, the policy will boost the country’s foreign reserve. And by extension, local refineries stand to become better positioned to offer better contributions to the economy – repositioning Nigeria’s downstream oil sector for long-term growth and stability. Additionally, the strategy will lead to increased local job creation, investment and energy security. This means that if global crisis occurs in the sector, producing refined petroleum products locally can ensure continued access to fuel, thereby guaranteeing self-sufficiency and better chances for export,
With the policy, the five privately owned refineries, including Dangote Refinery, OPAC Refinery, Waltersmith Refinery, Aradel Refinery, and Edo Refinery that are already functioning in the country will be strengthened for fairer competition among themselves on one hand and collectively against companies abroad on the other. As the local refineries continue to enjoy this and the earlier policy of Naira-for-crude, they no longer have enough reasons for not bringing the prices of petrol and others down to more affordable levels for citizens.
However, protecting infant industries is not without its challenges and uncertainties. To begin with, if the ambition to protect infant industries, especially in complex sectors such as oil is not well-managed, it can lead to other devastating economic state of dinosaur. One of these is the risk of inefficiency and over dependence on government support.
Without competitive pressure, there are tendencies for Nigeria’s protected industries to drift into lacking the required challenges that can attract incentives to innovate and reduce costs, thereby leading to the production of goods and services that are more expensive and of lower quality than those available on the international market. This, in turn, can lead to the misallocation of resources, where government support props up industries that are not viable in the long run.
Moreover, protectionist measures can provoke retaliatory measures from other hitherto countries with bilateral trade agreements with countries executing policies aimed at protecting their industries. The implication of this is the escalation of trade wars that can potentially cause harm to the global economy in general terms.
To avoid the negative fall-outs of the country’s attempt at protecting the Dangote Refineries and others, it is imperative for the federal governments to thread with caution and utmost diplomatic sagaciousness. In this direction, it behooves the government to clearly set the criteria for continued support for her indigenous oil firms within a reasonable timeframe.
Those entrusted with the responsibilities for overseeing this policy implementation must imbibe the virtues of transparency and accountability in the provisions of appropriate support for desiring companies.
Good as this policy appears, government must do all she can to avoid the possibilities of attracting dumping – an economic situation where imported goods, especially through smuggling are sold to consumers at prices lower than they are sold in exporting countries.
Meanwhile, this import restriction should be as temporary as possible in order to usher in a new era of industries with self-sustainability. The country should leverage on the experience of countries like Germany and Japan in the post-World War II era as a template to illustrate the importance of a well-designed economic growth inspired by the protection of infant industries in the oil sector.
With careful management, this discouraging import policy can become a viable strategy for economic diversification and growth in a developing country like Nigeria.
Beyond the views on the merits and demerits of this addition to the many policies of the President Tinubu-led government so far and its use as a bait to attract investments, Nigerian leaders at various levels must, as a matter of priority, continue the fight against insecurity in the nation, without which, policies will continue to fail.
For example, the re-listing of the nation as a Country of Particular Concern, CPC by the American government and the accompanying threat of invasion must not be treated with kid’s glove. President Trump’s message must be thoroughly understood with a view to providing appropriate response from government. The American government does not need explanations on the ‘balanced’ killings of Muslims and Christians as being put forward by some highly placed leaders.
The concern is on the people who are perpetrating the evil and the laws that permit blasphemy against non-adherents of the Islamic faith. It is worthy of note that the onerous task of presenting the Nigerian side of the security issues raised by America has been handled personally by President Bola Ahmed Tinubu before the US vice President, J. D Vance.
