Notwithstanding the Federal Government’s insistence that it will neither devalue the Naira nor deregulate the downstream petroleum sector, stakeholders participating in this year’s Oil Trading and Logistics, OTL, conference maintain that deregulation is the way to go, if the sporadic fuel shortages is to be permanently eliminated.
They argued that regulation has become not only a huge burden and strain on Nigeria’s fortunes, but also created massive debt portfolio for banks while stifling further investments in the nation’s downstream sector.
This was disclosed at the ongoing 9th edition of Oil Trading & Logistics Expo, taking place at the Lagos Oriental Hotel, Lagos.
The Chairman, OTL Advisory Board, Mr. Stanley Reginald, said: “There is no way the non- payment of subsidy cannot be attributed to the scarcity situation. The problem still remains that marketers collect loans from the banks and when those loans are not being paid, it rises and when such continues, it makes it difficult for us to access loans to import products that will service the country.”
According to him, about 70 per cent of those eligible to import petroleum products into the country are currently not able to do so because they don’t have the funds to do so. He added that since the government refused to pay the outstanding balance on subsidy the importers are constrained as the monies are trapped and they continue to pay interests on such funds.
Furthermore, because of the huge subsidy debts estimated at over N200billion, banks are no longer extending facilities to petroleum product importers as they cannot meet their outstanding obligations.
As a result, Reginald reiterated that the way out is to deregulate the downstream sector, saying, “Globally the trend is to deregulate,” citing Ghana and India, as examples of third world countries that have successfully deregulated their downstream sectors.
Reginald further argued that government’s focus should be to make policies that will create conducive environment for private sector operators to invest in the downstream sector.
“The government should let the private sector drive the downstream sector of the petroleum industry while it focuses on regulations. There is a need for policy shift that will enable us to refine our crude at home now,” he said.
He continued, “If we convert our crude oil to finished product we will not only create job for our teaming population but will derive more value. The capacity utilisation of the downstream sector today is less than 20 per cent and this implies that job creation is being constrained.”
Supporting the argument for deregulation, the Chief Executive Officer, Ghana National Petroleum Authority, Hon. Moses Asaga, noted that deregulation facilitates faster growth in the industry, saying that the downstream sector contributes about 12 per cent of Ghana’s gross domestic product, GDP.
He identified the development of infrastructure as a vital component for creating value in the industry. “We have taken our downstream so seriously now that there is no subsidy,” he added.
Vandalism frustrating development
However, highlighting issues hampering the petroleum industry, the Group Managing Director, Nigeria National Petroleum Corporation, NNPC, Dr. Ibe Kachikwu, said the difficulties in the supply chain is frustrating further development in the industry, which contributes about 7.79 percent to the country’s GDP.
Represented by Mrs. Aisha katagun, Executive Director, Petroleum Product Marketing Company, PPMC, kachikwu, said that oil theft, pipeline vandalism has continued to threaten development in the sectors.
“The rate of vandalism and crude theft has brought about short fall in Joint Ventures, JV cash calls. Due to this persisting threat, the inability to transport crude via it pipelines to the Kaduna refinery has made the already obsolete equipment weaker.
“Also, the non-passage of the Petroleum Industry Bill, PIB, which forms the basis of any petroleum operation, is yet to be approved by the legislature. It would be recalled that in 2009, the country had lost about $16 million to non-passage of the PIB,” he added.