World Bank’s curious push on oil imports

The recent spike in petroleum prices, triggered by the US–Israel war on Iran, has exposed not just Nigeria’s vulnerability but also the curious instincts of its external advisers. In a move that startled many, the World Bank reportedly urged Nigeria to issue import licences to “break the monopoly” of the Dangote Refinery which is currently […]

The recent spike in petroleum prices, triggered by the US–Israel war on Iran, has exposed not just Nigeria’s vulnerability but also the curious instincts of its external advisers. In a move that startled many, the World Bank reportedly urged Nigeria to issue import licences to “break the monopoly” of the Dangote Refinery which is currently the country’s main supplier of refined petroleum products.

That recommendation, quickly withdrawn, was as puzzling as it was revealing. It underscored a deeper problem about Nigeria’s enduring reliance on policy prescriptions from Bretton Woods institutions that often ignore local realities. Time and again, such advice has proven detached, impractical and, in many cases, counterproductive to the country’s long-term economic stability and growth.

A case in point is the now-withdrawn recommendation to issue import licences for petroleum products. Ostensibly, the recommendation may appear positive, in the sense that importing the product could help drive down the current high pump prices. Such a measure may also appear to address the possibility of market monopolisation by the Dangote Refinery, the dominant player in the country’s downstream sector.

It may well be argued that, as the sole functioning refinery in Nigeria, the Dangote Refinery—currently supplying the bulk of the nation’s petroleum products—could wield overwhelming market influence. Yet, for many Nigerians, the reality is far more nuanced. The fact that, with Dangote, Nigeria has been spared the agony of interminable fuel queues—as is presently being witnessed in several countries grappling with scarcity—is, for many, sufficiently reassuring. Indeed, a significant number of Nigerians consider the consistent availability of petroleum products, made possible by Dangote, far more gratifying than the discomfort of higher pump prices.

Accordingly, the suggestion by the World Bank that import licences be issued to break a presumed monopoly and force down prices is unconvincing. The reason is simple as Nigeria has been down that road before, and the outcome was anything but salutary for both the oil industry and the broader economy.

The massive corruption and structural distortions that accompanied the importation of refined petroleum products were, in large measure, responsible for the near-total collapse of Nigeria’s oil and gas industry. This dysfunction stifled much-needed foreign investment and contributed to a wave of divestments by long-established international oil companies, many of which opted to scale down or exit the Nigerian market altogether. In response, corrective measures such as the Petroleum Industry Act (PIA) and the deregulation of the downstream sector were introduced in a bid to restore order and credibility. To further encourage local participation and investment, the government issued licences to indigenous investors to establish refineries—of which, thus far, only the Dangote Refinery has become operational.

For the World Bank to recommend that Nigeria contemplate a return to the discredited oil import licensing regime that nearly wrecked the sector should, by itself, serve as compelling evidence that not all multilateral policy prescriptions are suited to the country’s peculiar circumstances. Indeed, the institution’s swift withdrawal of the statement betrays not only a lack of rigour but also a worrying disconnect in some of its policy engagements with Nigeria.

Over the years, Nigerians have had ample cause to question and, indeed, to vigorously contest the efficacy of policy recommendations advanced by the World Bank and the International Monetary Fund. Since the implementation of the Structural Adjustment Programme (SAP) in 1986, under the military government of Ibrahim Babangida, Nigeria’s experience with World Bank and IMF-inspired policies has fallen far short of the promised outcomes. Rather than delivering sustained growth and stability, successive governments have struggled to reconcile these externally driven prescriptions with domestic realities, often with adverse consequences for the economy.

Empirical studies indicate that Nigeria is not alone in this experience. Across the developing world, the application of World Bank/IMF policy frameworks has, in numerous instances, resulted in debt traps, balance-of-payments crises, rising unemployment, deepening poverty and, ultimately, persistent underdevelopment. Countries such as Malaysia, having endured similar economic dislocations, eventually found the resolve to recalibrate or, in some cases, outright reject these prescriptions in favour of carefully designed, home-grown policies. These domestically driven strategies, implemented with discipline and oversight, proved far more effective in delivering sustainable economic growth and development.

Daily Trust believes that, given Nigeria’s long and largely disappointing experience with externally prescribed economic frameworks, the time has come for a fundamental reassessment of such engagements. Having come this far, the country requires no further persuasion that its economic destiny rests primarily on the strength of its own ideas, institutions and policy discipline. Nigeria must, therefore, prioritise credible, home-grown solutions over the often jaundiced and insufficiently contextualised recommendations of foreign economic institutions that fail to take full account of the nation’s complex realities.