Oil, gas stakeholders advocate total deregulation of downstream sector*** Need for sustainable liberalisation of the downstream sector
*** N10.7 trillion spent in the last 10-years on subsidy
****N750 billion spent on subsidy in 2019 alone
Stakeholders in the oil and gas sector have re-emphasised the need for total deregulation of the downstream sector to provide the right market template for investors and ensure maximization of investments.
The stakeholders who spoke at the 18th Annual Memorial Lecture Series 2021 of Chief Aret Adams, the first Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), said deregulation was critical to the viability and sustainability of existing and planned refineries.
The Aret Adams 2021 lecture was tagged: “Total Deregulation of Nigeria’s Downstream Oil and Gas Sector: Challenges and Opportunities.”
They noted that “As for the issue of the price of petrol, it is a work in progress. The federal government, governors and the NNPC are to discuss and find a solution to the issue of right pricing for petrol in the country.”
In his opening remarks, Mr Okechukwu Enelamah, a former Minister of Industry, Trade and Investment, said he aligned with the summation of full deregulation of the petroleum downstream sector to allow the industry to reach its full potential.
Enelamah, who also chaired the lecture, also advised the federal government to look for a win-win solution to the issue of removal of petrol subsidy, being the right thing to do from an economic perspective.
The former minister said a lot of capital would be freed up for developmental purposes if the sector was fully deregulated.
He also said that the deregulation of the telecommunications sector which had transformed to a $20 billion industry in less than 20 years was a pointer that same could be achieved in the petroleum sector.
According to him, true competition, independent market regulator, consumer protection and investor protection are some of the factors that can help achieve a fully deregulated petroleum sector.
Enelamah, who is also a co-founder / Chairman of African Capital Alliance said full deregulation of the downstream sector, would protect customers’ right, anti-monopoly and price- fixing rules in place.
He said that would also bring about robust protection of investors’ rights and framework for creating stable and enforcement of regulations.
Delivering his lecture, Mr Tunji Oyebanji, Chairman, Major Oil Marketers Association of Nigeria (MOMAN), said that total deregulation of the downstream had immersed opportunities that would increase the country’s local refining capacity.
Oyebanji said that if the sector if fully deregulated, it would increase investment in the rehabilitation and maintenance of industry infrastructure, storage facilities, pipelines, trucks etc.
He said that would also fast-track development of open access reception facilities and adoption of industry best practices.
On the future of the downstream, Oyebanji said that there was need to be a balance between ensuring the sustainability growth of the crude oil value chain (Upstream through downstream) and providing value for the Nigeria consumer and the Nigerian economy.
He said that the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop itself.
According to him, there is need for sustainable liberalisation of the downstream sector. Rehabilitation of infrastructures and accountability.
On the state of the country’s refineries, the MOMAN chairman said that Nigeria lost $13 billion in 2019 to non-functional refineries.
Oyebanji, who is also the Chief Executive Officer of 11 Plc noted that if the four NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.
He said: “Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space.
“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain and resulting in the growth in the nation’s downstream petroleum sector as a whole.”
Oyebanji said that though the government had announced the removal of petrol subsidy in March 2020, with the price of crude oil above $60 per barrel, the N162 the product was currently being sold was below the landing cost.
He said NNPC as the sole importer of petroleum products was currently defraying the cost through ‘under recovery”, stressing that was not sustainable in the long run.
The MOMAN chairman also disclosed that Nigeria had the cheapest fuel price among its African neighbours, which encouraged smuggling of the product across its borders.
He said deregulation would increase more investment especially with the taking off of the African Continental Free Trade Agreement (AfCFTA) which would give Nigerian businesses opportunities to expand.
Oyebanji said the coming of stream of the 650,000BPD Dangote Refinery, Bua Group Refinery, Waltersmith Refinery and others would transform Nigeria into a net exporter of crude oil in the near future.
In his address of welcome, Mr Charles Osezua, Chairman, Board of Trustees, Aret Adams Foundation, said the late NNPC boss had over 32 years ago championed the campaign for full deregulation of the downstream sector.
“Aret fought for the removal of subsidy and wanted to release the creative and entrepreneurial capacities of Nigerians.
“There was resistance which led to his removal as the GMD which was termed ‘national interest’, but 32 years later, the discussion of subsidy removal remains topical and emotive,” Osezua said.
Over 100 participants all over the countries attended the zoom virtual Aret Adams Memorial Lecture Series 2021.