Taking final stand on Nigeria oil, gas downstream sector deregulation


By Edith Ike-Eboh

The need for Nigeria to completely deregulate the downstream oil industry has been constantly emphasized, especially with the current economic challenges facing the country.

The arguments for and against the issue had over the years revolved around the benefits of the decision for citizens, the economy or for a few groups and / or individuals exploiting the lack of political will to take a stand on the issue.

Without a doubt, the economy appears to be taking an immediate impact with any change in the price of oil, especially Petroleum Motor Spirit (PMS), otherwise known as gasoline.

This section of the petroleum sector brings a noticeable effect as it is most used by Nigerians and mainly for consumption rather than manufacturing. Most industries in Nigeria use automotive gas oil (AGO), diesel.

According to the Petroleum Price Regulatory Agency (PPPRA), deregulation of the downstream oil and gas industry opens up the sector to healthy competition where prices reflect market realities. It is not a price ceiling system where the government or its agencies deal with over- or under-recovery.

Moreover, oil and gas industry players also share the same point of view, stating that deregulation remains the way forward for the industry and for the country’s economic growth.

The federal government announced in March 2020 a complete deregulation of downstream oil, but its implementation was blocked by the unions because the impact of the coronavirus pandemic on the global oil market had caused prices to continue to rise.

However, according to the PPPRA, following the global financial crisis and the increase in sovereign debt risk, it has become imperative for the government to turn in on itself to finance its development needs and revitalize the economy. .

The removal of oil subsidies and the subsequent deregulation of downstream oil were among the measures adopted by the government to free up funds for development work by getting rid of some of its resource draining burdens.

Prior to the introduction of the deregulation policy in March 2020, annual subsidy payments had become exponentially high and unsustainable due to the increase in fuel consumption due to the increasing population of Nigeria as well as the oil smuggling.

According to PPPRA, records show that Nigeria loses nearly a trillion naira per year by subsidizing PMS, also known as petroleum, a commodity used primarily for consumption rather than production (manufacturing industries), this which has not resulted in any real economic benefit for the country.

The grant, he noted, swallowed up a huge chunk of the scarce public funds that could have been used to finance critical infrastructure such as hospitals, roads, railways, schools and running water, between other.

The Minister of State for Petroleum Resources, Chief Timipre Sylva, also noted in several forums that the benefits of deregulation cannot be overstated.

He said that after surviving two recent economic recessions, coupled with the impacts of the Covid-19 pandemic, the removal of subsidies and deregulation of the downstream oil industry were among the measures the government was seeking to unleash. funds for development projects.

He said: “When I first arrived, one of the things we faced was the issue of deregulation – the issue of the fuel subsidy. Frankly, between you and me, it’s a black hole that I don’t fully understand.

“Who is the person receiving the grant? I don’t think it’s the common man. If you examine the issues with grants, you will know that there are interests that benefit from grants beyond what ordinary man can understand. But you try to touch the subsidies and it is the common man who defends the subsidies.

“But I think, frankly, these are some of the things we need to discuss and come to terms with. Can the subsidy be continued? So when we got there that was one of the things we were faced with and I thought one of the ways to achieve deregulation was to encourage the use of gasoline for our vehicles.

Corroborating what the Minister said as an alternative to PMS, PPPRA said that since the establishment of the National Gas Expansion Program Committee (NGEPC) to reposition the exploitation of our gas resources for automotive and other purposes, there is room on the table for the use of liquefied petroleum gas (LPG) as a viable alternative to PMS.

As of January 2019, Nigeria’s proven natural gas reserves stood at 200.7 trillion cubic feet (tcf) and 600 tcf of potential reserves, with research proving that natural gas is a cheaper and cleaner fuel than the PMS.

Compressed natural gas (CNG) has recently been touted as a cheaper and environmentally friendly alternative to Premium Motor Spirit (PMS). Last January, the Minister of State for Petroleum, Timipre Sylva, announced an N95-N97 price per standard cubic meter (SCM) for CNG, making it N50 cheaper than PMS.

In addition, industry experts have also fully supported the deregulation of the downstream oil and gas sector, with some urging the federal government to display the political will to ensure its full implementation, due to its benefits for citizens.

Professor Wunmi Iledare, professor of petroleum engineering, said that with the increase in the world price of crude, prices at the pump had increased in some countries.

“The price of a liter in Ghana is almost the equivalent of N400.

“It will take transformational leadership to make a decisive decision on grants, regardless of the plausible social unrest now.

“But if you do nothing now and move away from price control or modulation, government after government will continue to live under threat from unions.

“President Muhammadu Buhari knows better because he’s been there before.

“My advice remains the same, deregulate,” he added.

The PPPRA further noted that the lack of total deregulation in the downstream sector was one of the reasons for the stagnation and impoverishment of the masses.

He noted that outside of Lagos, Abuja and Port Harcourt, people rarely buy petroleum products at official prices.

“In some rural areas you find that most of the time these products are adulterated and bad for the engines.

“Deregulation will change all of that and even reduce the costs of transport and food in the long run,” the agency said. (NOPE)


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