Public Sector Performance in the Nigerian Downstream Oil Sector: A Critical Reflection

Abstract

Despite successive attempts to effectively manage Nigeria’s downstream oil sector by strengthening the country’s institutional capacity, the Nigerian public institutions remain ineffective, inefficient, wasteful, incapacitated, inept, unprofessional and uninspired to drive the reform in the downstream oil sector. Public institutions have failed to successively oversee management of the downstream oil sector. This paper draws on the new public management theory and unstructured interviews to assess the role of public institutions in the distribution and marketing segments of the oil sector. It concludes that poor public sector performance is responsible for the crisis in the oil industry that led to subsidy cuts and efforts to deregulate the downstream oil sector.

Keywords

Development downstream oil sector institutional capacity Nigeria subsidy new public management theory deregulation

Introduction

The Nigerian downstream oil sector has been characterized by crises ranging from ineffectiveness, to fuel scarcity, corruption and maladministration. Despite the oil boom of the 1970s, the state’s dependence on oil resources, and efforts to increase the capacity of public institutions operating in this sector, the country has not managed to achieve sound management of the distributive and marketing segment of the oil industry, which constitutes the downstream oil sector. This sector deals with the management and sales of petroleum products; and includes four refineries with output of 445,000 billion barrels per day (bbl/d), eight oil companies and 750 independent oil marketers involved in the oil business (Kupolokun, 2004). Failure of this sector to effectively manage the sector led to what the government believed to be the inevitable removal of fuel subsidies and deregulation of the downstream petroleum sector (Kupolokun, 2004). The result has been deepening impoverishment, leading to labour conflict, strike action and mass discontent, which threaten political stability and aggravate massive disillusionment. The weakness of the public institutions in the oil industry has been identified as the major cause of the crisis, while the complexities of Nigeria’s federal arrangements have aggravated the institutional failure. The urgency to proffer a probable solution to the rot in the Nigerian bureaucratic arrangement necessitated the application of new public management (NPM) theory as the sure path to the revival of the country public institutions for optimal performance. It therefore becomes imperative to also revisit the Nigerian federal arrangements.

The federal government controls everything and everything consists of the state. It dominates the other tiers, has established many public institutions and dispenses resources at its will and caprices. These flawed relations have had a negative influence on the management of and crises associated with the Nigerian oil industry in general, and the downstream oil sector in particular (personal communication, 1 July 2013). To put this into perspective, the number of state institutions and structures in the oil sector outstrips the total number of state institutions in countries like South Africa (personal communication, 1 July 2013).

The reality of over-bloated, excessive and redundant institutions in the sector has created an overlap of functions and responsibilities. This is not only counter-productive, wasteful, costly and confusing but it explains the inefficiency and under-performance of the sector in terms of ensuring the effective distribution and marketing of petroleum products in the country. This paper utilizes the NPM theory to demonstrate the imperative need for a management-oriented civil service. For instance, the 2013 budget earmarked N34.5 billion for one of the agencies in the oil sector, the Directorate of Petroleum Resources (DPR) (Budget Office of the Federation, 2013), but their performance did not match up with such a huge budget.

While the government has created numerous institutions and agencies in an effort to achieve institutional efficiency, these agencies have failed to successfully perform their monitoring, regulatory and oversight functions. Instead, they continue to drain the public purse and provide employment through the networks of nepotism. The Director of the Nigerian National Petroleum Corporation (NNPC), Reginald Stanley complained about the excessive number of institutions in this sector, especially the lack of clarity between the regulatory roles of the DPR and other agencies like the Petroleum Product Pricing Regulatory Agency (PPPRA) (Niyi, 2013). Therefore, this paper assesses the roles of major public institutions in the oil sector by specifically focusing on the President and Ministry of Petroleum Resources, NNPC, DPR, and PPPRA.

Theoretical framework

The study utilizes NPM theory as a more appropriate lens to understand and expose the institutional rot in the Nigerian oil sector. NPM theory explains most of the structural, administrative and supervisory changes that are required in the Nigerian public service, otherwise known as the civil service or bureaucracy (Quadri, 2008). NPM theorists advocate for dramatic improvement in the government approach to management and service delivery, with an emphasis on efficiency, and the infusion of technology, economic measures and effectiveness. The main assumption of NPM is that “changes in the economic, social, political, technological and administrative environments prompt radical changes in public administration and management systems” (Larbi, 1999: 2). NPM is characterized by performance measurement and auditing, competition, separation of politics from administration, strategic planning and management, among others (Gruening, 2001: 2).

New public management pushes the state toward managerialism by incorporating the management perspective into the public sector, which manifests in the adoption of a private enterprises culture by public spheres, as well as the incorporation of transparency, management perspectives and accountability into public businesses, while the state assumes a developmental and prominent role in the economy. Public administration was condemned by the advocates of NPM theory (Ayee, 2005; Larbi, 1999; Quadri, 2008) because it falls short of the requirement of a ‘large state’ and widens responsibilities that align with the operation of a vast public sector (personal communication, 3 January 2015). The Nigerian bureaucracy could not even measure up to the standard of an administrative state, more so, a management state, at the brink of adopting neo-liberal economic policies of privatization, decentralization and deregulation (personal communication, 3 January 2015).The classical model of organization and public service delivery, in a developing country like Nigeria, based on the values of bureaucratic hierarchy, centralism and direct regulation is being replaced by market-oriented civil sector management (Ayee, 2005: 12; Larbi, 1999: 12). The Nigerian state has repeatedly signified its intention to reform the public service towards public management to combat inefficiency, redundancy, ineffectiveness and mismanagement that characterizes the civil service (Quadri, 2008). However, the institutional decay in the sector reveals the extent to which the state has failed to achieve these objectives.

Methodology of study

The study adopts a qualitative research approach from the critical standpoint of knowledge. Qualitative methods are admissible when the phenomena under study are complex, social in nature, and not subjected to quantification (Liebscher, 1998: 669). It is driven by field work research conducted in Nigeria between 2013 and 2015. The techniques of data gathering are semi-structured interviews through face-to-face interactions in Lagos, Ibadan and Abuja. The study use a constructivist approach to epistemology, locating meaning within the setting in which information was collected in Nigeria. Key stakeholders in the oil sector reform project were purposively selected based on their expertise, active participation, and relevance in the fuel subsidy debate. The following categories of individuals were interviewed: academics; former member of the Presidential committee on petroleum pricing; leaders of major labour unions in the oil sector and executive members of the Nigerian Labour Congress; officials of theNNPC and DPR; members of the national legislature; and media practitioners. The respondents were granted anonymity as a condition for the interviews, which align with the University of KwaZulu-Natal ethical considerations.

The Nigerian public service: big institution, little productivity

The Nigerian public service is modelled on Britain, and “comprise the federal civil service, 36 autonomous states’ civil services, the unified local government service, and several federal and state government agencies, including parastatals and corporations” (Ogunrotifa, 2012). The federal and state public services are structured around government departments (also known as ministries), and additional-ministerial departments controlled by ministers at the centre and commissioners at the constituents’ level. The President and governors appoint these political leaders of units respectively, and are responsible for policy matters. The permanent secretary, formerly called the Director-General, remains the administrative head of the ministry, and he/she liaises between the government and the civil service.

There remains a strong link between the public service and socio-economic development. The bureaucracy is a very powerful and important institution in modern society that can either increase or decrease the state’s capacity for effective performance (Quadri, 2008: 43). A country’s development vision can only be realized under the leadership of an effective agent of change, which the civil service represents, as it is saddled with the implementation of development programmes.

As in other post-colonial African countries, the Nigerian civil service was developed not only for policy formulations but also for effective implementation of policies. The Nigerian civil service is responsible for the design, formulation and implementation of state policy, and for discharging government tasks and development projects in an effective and efficient manner. Yahaya believes that:

‘The paradigm shift in the roles of the state also led many countries to introduce civil service reforms as part of the strategy by government to rebuild the public service to operate more as a catalyst and an enabler. Inevitably, the institutional and human capacity that would be required for the operation and performance of the public sector would be qualitatively different from what was the case in the era of massive intervention of government in the economy’ (Yahaya, 2004: 170).

Such changes mandate the bureaucracy to undergo immediate reforms not as a matter of choice, but as a necessity. However, in the case of Nigeria (aside from the popular Adebo Commission of 1970, the Udoji Commission of 1972, the Phillips report of 1985 and the 1994 Review Panel on Civil Service Reforms chaired by Chief Ayida)¹ the government has not embarked on concerted efforts to implement service-driven reform in the public sector (personal communication, 4 July 2014). This is despite the entrenchment of liberalization policies (commercialization, privatization and deregulation) spearheaded by National Economic Empowerment Development Strategies. In recent times, reform in the sector has focused more on remuneration, the determination of the tenure of top officers and retirement age, and not on enhancing institutional capacity (personal communication, 4 July 2014; Soeze, 2009).

As discovered, these commissions were not able to deliver the bureaucracy from inefficiency, tribalism, nepotism, and favouritism. Furthermore, their recommendations could not be implemented due to the absence of a supportive institutional framework and a lack of political will in successive central administrations. There is the absence of democratic practices in the civil service administration and the state’s reform agenda failed to address this issue. This is understandable as all these reforms were established by military regimes.

Since independence, the federal public service has been caught in a myriad of challenges: a weak political arrangement; nepotism; a lack of accountability and transparency; mismanagement and corruption; low productivity; redundancy; and an over-bloated staff structure (personal communication, 2 August 2013). These internal contradictions led most civil institutions to regard their output as money distributed instead of services delivered, resulting from inadequate administrative and technical skills (Easterly, 2002). Furthermore, “the public service remains inefficient and suffers from obsolescence, lethargy and a lack of enthusiasm in carrying out government policies” (Easterly, 2002: 223). The sector is characterized by inappropriate technology, and low productivity that has degenerated into an abyss of plunder, waste and redundancy. It is a common practice in Nigeria to refer to a lazy person as a ‘civil servant’.²

The Nigerian civil service is so politicized that most top officials and even junior staff openly support different political parties and criticize public policies (personal communication, 2 August 2013). It is not unusual for some within the civil service to ascribe political meanings and prejudices to government activities, policies and projects based on primordial, religious, ethnic and regional sentiments. The adoption of a quota system for employment and promotion, adherence to the federal-character principle³ and the government’s constant interference in the operations of the public sector (especially through recurrent alterations in higher positions and infringing on its recruitment processes) revealed that political considerations in place of merit have played a central role in the public institutions (Omisore and Okofu, 2014). It is challenging for strong institutions to emerge when senior officials of these government institutions are appointed on the basis of class affiliation, ethnic cleavages, religion and inter-personal relations, as well as other primordial allegiances (personal communication, 4 July 2014).

Overall, poor performance by national institutions in the power, health, education, petroleum and housing and transport sectors has stymied the actualization of the state’s development agenda. These weak institutions prevented the realization of the gains that should have accrued from oil income (Adedipe, 2004). Of course, this is not peculiar to Nigeria; other African resource-rich countries like Sudan have also suffered from poor public service performance (IMF, 2013b: 29), which led to the coining of the term, ‘resource-curse’.

Gelb (2001: 4) argues that African states lack the capacity to confront the specific challenges generated by globalization, resulting in their failure to fulfill their historical task of managing development. States like Nigeria lack the institutional provisions that underpin transparent and effective decision-making and management processes, while unaccountability, corruption and the other ills of public institutions characterize the public sector.

The majority of the population lacks sufficient basic services required for healthy, dignifying and industrious life (Onuoha, 2011). This explains the emergence of a frustrated population, and provides fertile ground for armed insurrection. The major challenge is not insufficient state resources, but rather civil servants and political elites’ failure to convert resources into services and infrastructure that will improve the lives of the population, due to widespread inefficiency and corruption. According to Onuoha (2011), this weakness jeopardizes any serious attempt at good governance and economic development.

Overview of the public sector in the downstream oil sector

The Presidency and Ministry of Petroleum

Over the years, successive Presidents have, directly or indirectly, assigned the control of the oil sector to the office of the Presidency due to the monetary importance of the crude oil industry to the state (personal communication, 2 August 2013).⁴ All the institutions, ministries and parastatals in the sector were established by Presidents (through direct promulgation or directives). Acting on behalf of the President, the Minister of Petroleum Resources has the authority to establish institutions in the oil sector. All policies relating to the oil industry, as well as increases in the pump prices of petroleum resources are at the direct discretion of the President, although the Minister has the constitutional right to approve such directives.

The President is always very visible when fuel price hikes are announced, while the Minister is always very active during any oil crisis: from fuel scarcity to increases in the prices of the products. For instance, the announcement of the deregulation policy and subsequent increases in the pumping price of premium motor spirit (PMS), which drew fire from the general public, imposed greater responsibility on the Minister to defend government policies. The Minister of Petroleum Resources, Diezani Alison-Madueke, was invited to different forums to defend the government’s actions and was also requested to respond to calls for accountability and prevention of corruption, waste and mismanagement in the oil sector (personal communication, 6 July 2014).

The Minister responded to the public outcry by inviting the anti-corruption body, the Economic and Financial Crimes Commission (EFCC) to scrutinize the PPPRA. She also established an 11-person committee on governance and control in the NNPC and other structures of petroleum by-products which were mandated to submit their reports within a month (Social Action, 2012:. 24–25). The Presidency appointed two firms to audit the financial activities of all the institutions involved in the oil industry, and establish the amount of oil sales between 2009 and 2011. Former Chairman of the EFCC, Nuhu Ribadu, was appointed to head a 17-person committee to determine and reconcile both upstream and downstream oil taxes and royalties accruable to the state (Social Action, 2012).

The President accelerated the establishment of the Nigeria Extractive Industries Transparency Initiative (NEITI) in 2007, which made Nigeria the first state with a legal framework for the execution of EITI. The quest for accountability and transparency in the oil sector corresponds with the Obasanjo administration’s acclaimed fight against corruption that complemented the anti-corruption activities of the Independent Corrupt Practices Commission and the EFCC (Alex et al., 2011: 37).

Alex et al. (2011) maintain that EITI confronted several impediments such as the absence of strong political leadership, institutional delays and differences over power sharing and responsibilities between the NEITI secretariat and the National Stakeholder Working Group. The NEITI has been effective in auditing the financial transactions of the NNPC and its affiliates. However, many see the NEITI as a potentially important – although inadequate – entry point into the complex terrain of resource governance in the country (Amundsen, 2010: 27).

The Presidency approved the establishment of a National Refineries Special Task Force to assess the state of the countries’ four refineries, and to formulate strategies to guarantee the supply of petroleum products across the country at all times. Deregulation efforts and public reaction also compelled stakeholders to accelerate the passage of the Petroleum Industry Bill (PIB). The Minister supported the inauguration of the Udo Udoji House Committee to facilitate the approval of the PIB due to the protracted delay in its passage. By June 2014, the National Assembly had passed the 1st and 2nd reading in the Nigerian Legislature, sent it to the executive and re-submitted it back to the National Assembly for passage (personal communication, 6 July 2014).

Nigerians have constantly criticized both the Presidency and the Ministry of Petroleum Resources for their over-bearing influence on the operations of the NNPC and other state functionaries in the oil sector (personal communication, 4 July 2014). The respondent further asked: “How can it (government institutions in the oil sector) perform when the Presidency and Ministry of Petroleum preside over their affairs and breathe down their throats?” The wealth in the sector has heightened political control over the operations of public institutions in the oil sector. The result has been low productivity.

NNPC

The NNPC entry into the downstream oil industry was strategically intended to equip the oil institutions with much-needed capacity for periodic interventions in the market, which are most important during emergencies and fuel scarcity. It was designed to be the yardstick for major players in the distribution system, to guarantee the smooth and economically viable retailing of products and, lastly, to be an agent to achieve its world class aspirations by incorporating the upstream and downstream segments for the common goal of excellence. While the NNPC aims to provide viable competition to foreign companies and to replicate the giant strides of companies like Petrobras of Brazil⁵ and SASOL Oil⁶ in South Africa, it has become Nigeria’s ‘poster child for embarrassing irony’ (Social Action, 2012: 11–12).

The NNPC has made contributions to the oil industry and Nigeria’s quest for economic development, especially in terms of provision of employment and its engagement in human development. Aside from training workers and managing oil leases, it has encouraged local participation, maintaining uniform pricing in domestic markets and raising crude oil sales to $2.6 billion in 2005. It thereafter hit 81% of the state’s overall revenue, which was huge revenue for the government (Oyesanmi, 2011).

According to Oyesanmi (2011: 11), the oil giant was set to increase its contribution to providing employment opportunities, and accelerating economic growth and development by increasing crude oil reserves from 36 billion to 50 billion barrels by 2015. Furthermore, the NNPC has made concerted efforts to increase access to capital and its influence in domestic, sub-regional and regional gas markets, through establishing targeted partnerships with global players in the industry and becoming highly competitive in international markets.

However, Amundsen (2010: 26) categorizes the NNPC as the ‘biggest mess’, and as the most chaotic and one of the most mismanaged oil firms in the world. The late President of Nigeria, Yar’Adua, noted that the corporation “has not been transparent, and it is one of the most difficult agencies of government to tackle because of vested interests of very powerful people in the country” (Amundsen, 2010: 61), while it continues to be a political vehicle for personal wealth, embezzlement and gross corruption. Indeed, its potential and effectiveness have been jeopardized by an inept and weak labour force and political interference.

The NNPC struggles to effectively carry out its other important responsibilities in the oil industry. Although it is saddled with the responsibility of allocating contracts for oil lifting, NEITI audit reports⁷ have shown that it does not always align with advertised criteria or ensure competitive pricing (NEITI, 2013). Its poor handling of crude oil sales and remittance of earnings triggered confrontation with the Revenue Mobilization, Allocation, and Fiscal Commission (RMAFC), the body that monitors accruals to the Consolidated Revenue Fund (Baig et al., 2007). The RMAFC alleges that the NNPC does not remit all revenue, an accusation supported by the national legislature.

The necessity of institutional reforms, although the International Monetary Fund (IMF) notes that the proposed institutional setup, as contained in different templates for reforms, is costly and cumbersome; hence the need to streamline the institutional arrangements (IMF, 2013a: 60). The IMF notes government acceptance to unbundle the NNPC and separate the management of the state’s assets and investments in the petroleum sector from the regulatory and supervisory responsibilities.

The IMF recognizes the risks involved in the proposed division of the operations of the NNPC into four companies, namely the National Oil Company, an Assets Management Corporation to oversee government investments in the upstream industry, an Assets Management Company to manage joint ventures, and a National Gas Company (IMF, 2013a). These include high administrative costs, conflicts and clashes in roles and responsibilities among the established agencies, increased prospects for corruption and a lack of incentives and certainty for private investors.

The corporation is not competent to manage Nigeria’s oil resources, and more importantly, its refineries. Hence, its support for privatization of the refineries and continued fuel imports. The corporation has become a centre for wastage and mismanagement, which has compounded the fuel subsidy crisis and increased calls for complete deregulation of the downstream oil sector.

DPR

While the DPR was established as an independent regulator, as with other state institutions in Nigeria, it has failed to effectively assume this role. DPR’s major roles entails supervising all oil industry operations; “enforcing environmental and safety regulations; keeping accurate records on operations (reserves, production, and exports of products); processing applications for licenses; ensuring timely and adequate payment of all rents and royalties; and monitoring the local content policy” (Alex et al., 2011:. 28). Alex et al. note that, due to human and financial capacity constraints, the DPR has been treated just like an extension of the NNPC and subjected to its directives as well as those of the Ministry of Petroleum Resources, the Presidency, and other powerful public officials, including politicians chasing oil contracts. It has also faced undue pressure from international oil companies (Alex et al., 2011: 31). These constraints explain DPR’s failure to effectively perform. Cases of gross incompetence, mismanagement, bribery and corruption and unprofessional acts have limited its capacity to act as an effective regulator. For instance, the NNPC’s monthly returns on crude oil sales do not indicate the volume of crude, the applicable price, the exchange rate and method used to compute the proceeds. The DPR has not utilized its human resources to live up to its responsibility of effective monitoring of the oil business (personal communication, 3 July 2014).

The DPR’s inability to act independently has hampered its effectiveness. Personal observation and interaction with officials from the agency revealed the over-bearing influence of the NNPC, the Ministry of Petroleum Resources, the Presidency and ruling elites in its activities. More destructive is nepotism, which denies the agency the ability to recruit competent candidates to fill vacant positions. The duplication of the regulatory role of the DPR among other public institutions, like the PPPRA, is also cause for concern.

PPPRA

The PPPRA was established in June 2003 to reposition Nigeria’s downstream oil industry as a more efficient, viable and transparent governmental institution in order to ensure that oil refining, and the supply, distribution and marketing of petroleum products are self-financing and self-sustaining. The core functions of the agency are to drive the pricing policy for petroleum resources, control its supply and distribution, and create an information databank through engagements with other institutions for enhanced productivity of the petroleum sector. It oversees the implementation of relevant Federal Government recommendations and programmes, taking recognition of the phasing of specific resolutions and moderate volatility in the price of petroleum products while guaranteeing judicious returns to marketers; and establishing codes of operation for all operators in the distribution and marketing segment of the petroleum industry (PPPRA, 2004).

The 26-member PPPRA Board appointed by the government is responsible for achieving the agency’s objectives. Membership of the agency cuts across all the stakeholders in the oil sector. This raises high expectations of the PPPRA’s performance; however, it has not lived up to these expectations (personal communication, 1 July 2013). The agency has attempted to promote transparency and reduce corruption in the subsidy scheme, which required reforms that have been greatly beneficial to the country and its population. The stringent measures and controls initiated by the PPPRA and implemented in the petroleum products marketing and distribution organs of the oil industry, yielded desirable results that are reflected in the reduction of subsidy payments from N2.09 trillion in 2011 to N1trillion in 2012 (Ugwuanyi, 2013).

In 2013, Reginald Stanley announced that local consumption of PMS had reduced drastically “from 60.25 million litres per day in 2011 to 40 million litres per day in 2013” (Channels Television 2013). Invariably, the subsidy payment was also drastically reduced. However, it appears that fuel consumption was not reduced. Rather, false claims of consumption by some oil marketers, who had given inflated figures to the government, were reduced. This is made possible with the connivance of the public officials in the DPR, NNPC, and the PPPRA responsible for the regulating and monitoring of fuel imports and consumption.

There was also about a 67% decrease in the number of oil marketers in the subsidy regime, from 128 marketers in 2011 to 39 by December 2012 (Ugwuanyi, 2013). This dropped further to 32 participants, but increased thereafter because new filling stations were licensed and new individuals and companies were given permits to import fuel. This was a positive development due to the rejection of unprofessional and unregistered oil marketers on the part of the oil business. While this should be understood in the context of public calls for accountability in the oil business, it remains a laudable achievement of the agency under the leadership of Stanley.

The measures taken by the agency to restrict fuel importation to owners of coastal discharge/depots facilities has limited participation in the Petroleum Subsidy Fund (PSF) scheme to genuine and proficient oil marketers (personal communication, 5 July 2014; Yakubu, 2012). The result was extensive investment to improve petroleum handling facilities, which strengthened local content development and promoted improved management of the participants in the PSF scheme. However, other loopholes in the PSF scheme were exploited by marketers, facilitating fraud in this sector (personal communication, 5 July 2014).

Approved cargo inspectors were introduced to boost operational effectiveness and combat corruption in the area of product receipts that align with global best practices. Three inspectors appointed by the PPPRA verify the volume of import fuel in vessels; another three confirm the quality of the fuel discharged; and two officials approve the quantity of fuel actually trucked-out of the oil depots (Yakubu, 2012). Overseeing the control of discharge values at depots was another initiative that has helped to eliminate false claims in fuel loading and distribution to consumers.

The PPPRA drafted stringent requirements for import documents such as a Bill of Loading, DPR License, and Shore Tank Certificates, among others (Yakubu, 2012). This was necessary due to the risk of Bill of Loading manipulation and in order to certify the integrity of the products discharge record for laying claim to subsidy payments. The PPPRA also embraced the Lloyd’s List of Intelligence Sea Searcher facilities, which helps to track the movements of vessels around the world and identify their true origins and monitor oil from the loading point up until the ships berth on Nigeria’s shores.

Despite the improvements recorded by PPPRA, it failed to combat fuel scarcity, corruption and price disparities and effect the sanitization of the downstream sector. Nwokolo (2012) strongly condemned the leadership of the body between 2009 and 2012 for engaging in diverse forms of maladministration and corruption. According to Nwokolo, the institution flouted many regulations by allocating licenses to ineffectual companies to import oil and through their inability to advance copies of allocations and vessel arrival notification papers to relevant organs like the navy. Like the DPR, the PPPRA’s ability to successfully combat irregularities and perform competently depends on its capacity to liberate itself from the stronghold of the Ministry of Petroleum and NNPC that continue to benefit from the PSF scheme (Alex et al., 2011). The agency should effect payment on what is loaded in tanks and discharged at different filling stations rather than on the volume of ‘unverifiable’ import fuel.

Major oil marketers have consistently accused the PPPRA of being the repository of corruption in the sector. The agency is directly in charge of the subsidy scheme, which has become an avenue for corruption. The corruptible are associates of the ruling class, who are celebrated and not prosecuted (MOMAN, 2012). The Major Oil Marketers Association of Nigeria (MOMAN) noted that, from its inception, participants in the PSF were restricted to marketing industries with a minimum storage of 5,000 metric tons and a web of fuel stations and retail points around the country (MOMAN, 2012). Pressure exerted by different players reversed this situation, opening the door to all manner of oil businessmen, including inexperienced individuals to suddenly become oil marketers.

The PSF is funded by all the levels of government (federal, state and local) and also by funds provided by the participating marketing companies. The scheme only allows companies that possess substantive assets in the downstream sector to be held liable. However, MOMAN (2012) notes that a change to Part V of the standing rules of the PSF in 2007 empowered companies and marketers that did not have assets in this sector to benefit from the PSF simply on the basis of agreements with PPPRA officials. This explains the large number of inexperienced oil companies, without an asset base that participated in the scheme until 2012. It is therefore not surprising that the marketers submitted false subsidy claims (House of Representatives, 2012). What is surprising is that the government was inactive and allowed this situation to continue until the public exerted political pressure during the January 2012 fuel crisis (House of Representatives, 2012; Social Action, 2012).

Players in the marketing sector belonging to the Independent Petroleum Marketers Association of Nigeria, MOMAN and other oil companies and marketers are at the forefront of agitation for deregulation – MOMAN in particular has always advocated for the complete deregulation of the downstream oil sector and regarded the subsidy administration as a transitional measure, which would always be unsustainable (MOMAN, 2012; personal communication, 6 July 2014). The oil marketers are in charge of fuel importation, distribution and marketing. MOMAN maintains a direct link with the NNPC to supply and distribute fuel across Nigeria. For instance, during the March 2014 fuel shortage, the NNPC supplied an additional 33 million litres of petrol to MOMAN for immediate distribution to fuel stations in the country (NNPC, 2014a).

The Reginald Stanley-led executive improved the performance of the PPPRA, especially by announcing a reduction in fuel consumption and the downward review of registered oil marketers. However, the appointment of representatives of civil society organizations has not led to the desirable efficiency in the downstream oil sector. The agency has been involved in many irregularities, mismanagement and corruption (personal communication, 3 July 2014). For instance, a probe panel initiated by the National Assembly in 2012 and headed by Farouk Lawan indicted the PPPRA (House of Representatives, 2012). The report found that the subsidy administration was immersed in corruption, with exceedingly overstated subsidy payments. It disputed the scale of payment of fuel subsidies and the figures provided.

Furthermore, the House of Representatives’ (2012) report identified a series of “inflated consumption figures and landing costs, and a lack of due process in prequalification, allocation, verification, certification and payment for supplies”. For instance, it was claimed that the daily “consumption of PMS by Nigerians is 31 million litres while that of kerosene is 10 million” (House of Representatives, 2012). This was “contrary to official figures that imply a daily consumption of 60 million litres and 9 million litres, respectively” (IISD, 2012: 12). The agency failed to provide accurate data in respect of quantity of fuel imported and consumed. Rules and regulations with regard to registered marketers were violated (personal communication, 5 July 2014). The agency failed to ensure fuel availability, while acts of pipeline vandalism and bunkering continued. The data on the number of incidents of vandalism of oil facilities, pipeline destruction and bunkering were repeatedly inflated because public officials diverted oil for personal aggrandizement (personal communication, 5 July 2014).

Public institutions in the oil sector: Exploring the NPM theory

In both developed and developing countries, government has the responsibility to manage public affairs. The growth of the public sector is thus inevitable, and consequently, its effectiveness becomes the yardstick for measuring government’s performance. Thus, public bureaucracy is the means through which the state’s social and welfare responsibilities are executed. The state eventually performs both administrative and management roles (Quadri, 2008).

The Nigerian state was built on the public administration model inherited from the British colonial powers, which limited its involvement in economic activities. Despite a series of civil service reforms, the bureaucracy did not explore the establishment of state-owned business enterprises until the oil boom of the 1970s. This was characterized by the Murtala/Obasanjo nationalization policies that saw the state assuming ownership of many hitherto private investments and universities that were under the control of regional or state governments. Hence, the scope of public administration began to expand, but service delivery remained inefficient. Yahaya provides a justification for the state’s interventionist role in the economy:

‘The dominant roles of the state is historically conditioned…The failure of the market for efficient economic transactions and, consequently, for the promotion of economic growth and social welfare, led to the dominance of the Keynesian macro-economic model as a policy option’ (Yahaya, 1992: 5).

The attack on the ‘administrative state’⁸ coincided with inefficiency and the failure of the public bureaucracy to deliver services in line with the material and economic aspirations of Nigerians. After independence, many developing states imbibed the nature and character of the administrative state rather than the management state that was embraced in advanced, developed societies. The ‘administration state’ operates under the public administration framework which sets out the modus operandi of the major organizational units in the public sector (Quadri, 2008).

The core capitalist countries have dramatically limited the role of the public service by relinquishing investments, enterprises and corporations to private hands under the control of market forces. However, it should be noted that this occurred only after these societies had achieved appreciable levels of development, rather than on the brink of launching development initiatives. For instance, under Prime Minister, Margaret Thatcher, the United Kingdom embarked on privatization from 1979 throughout the 1980s. This coincided with Reaganomics in the United States (personal communication, 3 January 2015).

Towards the end of the 1970s and through the 1980s, the failure of many states across the world, particularly in Africa, and the associated incapacity of political institutions to promote enduring development sparked global responses. International financial institutions responded by addressing institutional decay and public service ineffectiveness. This coincided with the spread of globalization with its doctrine of limited government. Hence, consensus was reached on the changing role of the state towards what Yahaya (2004: 170) calls a ‘lean and effective state’.

Based on Ogunrotifa’s (2012) analysis, the development of the bureaucracy manifests in five different ways. Firstly, the function of the government in the new arrangement is to facilitate the fulfillment of the objectives of good governance, which has been lacking in Nigeria since the introduction of the Structural Adjustment Programme. Democratization has increased government’s responsibilities to the people, but citizens have not significantly appropriated the dividends of democracy since 1999; thus, bad governance has been the lot of Nigerians. Secondly, the public service is established to promote human development, another achievement that has eluded Nigeria’s bureaucracy.

The third factor is the state’s ability to foster partnerships with the private sector and other non-state actors in order to promote rapid economic growth and development. With systematic privatization and joint partnerships in the Nigerian oil sector, the civil service ‘gladly’ partners with foreign firms but the benefits contribute to personal affluence (through corruption) instead of state wealth. The fourth element is creating an impetus to exploit opportunities presented by the external environment (globalization); here, the Nigerian state has found itself at a crossroads and has not been able to concretely appropriate the benefits of globalization to promote the interests of the downwardly-mobile population partly due to the inefficiency and failure of public institutions and the personal aggrandizement of public officials (elected, recruited or nominated) (Akinola Adeoye, 2014; Amundsen, 2010).

The final manner in which the development of the bureaucracy manifests itself is its ability to explore the development of information and communication technology (ICT) for enhanced performance and improved management systems. However, the Nigerian bureaucracy is reluctant to embrace ICT due to the fear that it will expose and impede their illicit activities. Government initiatives to explore the utility of modern technology to monitor the importation and supply of petroleum by-products in the oil sector have been vehemently resisted by both the civil service and private investors in the sector (personal communication, 6 July 2013).

Lane maintains that in a situation of big government, the principles of the science of public administration neither describe the nature, structure and workings of the multiple levels of the public sector adequately nor present clear guidance on solutions to practical policy complexities (Quadri, 2008: 42). Public management is required in states such as Nigeria that intend to accept the IMF/World Bank prescription for limited government. Privatization and deregulation pose a great problem to Nigeria’s obsolete bureaucracy.

Nigeria’s central government intended to transform the public service into a management industry, prior to implementing privatization and deregulation policies. This would have led to the successful privatization of public enterprises and corporations, while the state’s role would have been limited to that of oversight and control. Paradoxically, successive administrations have revealed confusion regarding the proper place of the bureaucracy in the developmental agenda of the Nigerian state; many public corporations have been privatized⁹ and some sectors have been deregulated while others are undergoing ‘complex’ deregulation as witnessed in the downstream oil sector, yet, very few successes have been recorded.

Conclusion: Towards a management-driven public institution

This paper has examined how the public institutions managing Nigeria’s oil industry have engaged in maladministration, wastage and corruption to aggravate the crisis in this sector. Inefficiency of the institutions was compounded not only by the structural deficiencies of Nigerian federalism but also by the composition of the civil service and the quality of its personnel. One of the major problems of the Nigerian bureaucracy is its inclination towards administration (controlling inputs and expenditure) as against results-oriented, service delivery. Furthermore, the preservation of weak public institutions jeopardizes any attempts to ensure effective management of the downstream oil sector. The need for well thought-out reform¹⁰ of public institutions to align with the rigours and complexities of globalization is long overdue in Nigeria; hence, the article has reiterated the call for the transformation of the Nigerian public service into a service-oriented management structure. This could be achieved by holistic reform of Nigerian bureaucracy and concerted re-orientation of its personnel towards effective service delivery. Highly-skilled professionals should replace the mediocre personnel that has hijacked the leadership position of Nigerian public institutions.

It is clear that public institutions have failed to perform their roles of oversight and monitoring of the oil business, and that, in many cases, public officials collude with oil marketers and multinational corporations to manipulate data in support of excess subsidy payments. Maladministration has curtailed the drive towards development and improving the livelihoods of the majority of Nigerians. Ill-advised policies such as immediate subsidy cuts and hastily-generated efforts to deregulate the downstream oil sector have exacerbated the situation. The complicity of the state actors that occupy strategic positions in the civil service, which explains the weakness and ineffectiveness of public institutions in the oil industry, was directly responsible for the deregulation efforts and other gridlocks that surround oil management in the country.

The article also draws attention to how political factors have curtailed the performance of public institutions in the country. For instance the Presidency wields too much power and excessively controls the oil sector. Also, the faulty federal arrangement complicates the institutional deficiency of Nigerian public institutions. There should be a constitutional reconsideration of the power of the President as well as a separation between the bureaucracy and politics. Political interference in the management of the oil sector should be curtailed. Also, the civil service should be transformed into a reward-driven institution, where staff is rewarded according to the quality of their performance; hence, there should be performance measurement and auditing.

Nigeria has the capacity to ensure that sanity prevails in the oil sector through serious public management, institutional efficiency, micro-economic discipline, and well thought-out economic policies that recognize Nigerian social realities. This is only attainable under a responsive, strong and economically-active state. What Nigeria requires is a situation in which the state allows market forces to operate but under a very strong state that is not simply a regulator. The state is required to actively participate (perhaps through state–private partnerships) in sensitive areas of the economy. This would prevent crippled market mechanisms and aggressive monopoly and result in market efficiency in the oil sector. The state also has the responsibility to find a balance between sustaining social stability, effecting tangible developmental programmes, and improving the economic life of its population. This can only be achieved under a re-energized public service driven by a visionary and responsive leadership. Nigerians could only enjoy such responsive leadership when the wishes of the majority prevail during elections, which is only attainable under free and fair election. We conclude by reiterating the point that sound public performance in the oil sector is an essential corollary of socio-economic development in Nigeria.

Footnotes

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

Notes

Author biographies

Adeoye O. Akinola holds his Doctoral degree (Political Science) from the University of KwaZulu-Natal, Pietermaritzburg, South Africa. He is a Lecturer and a Post-Doctoral Fellow in the School of Management, Information Technology and Governance, University of KwaZulu-Natal, Pietermaritzburg, South Africa. His research interests are International Relations, African Political Economy, Resource Governance, Democratic studies, and Peace and Conflict studies.

Henry Wissink is the Dean and Head, School of Management, Information Technology and Governance, University of KwaZulu-Natal, Westville Campus, Durban, South Africa. He is broadly skilled in the fields of public sector governance, public policy analysis, development studies, organization, and leadership development.

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