‘ Poor implementation of downstream reforms responsible for fuel price dilemma’
As the Federal Government seeks ways out of the fuel price dilemma due to rise in oil prices, Major Oil Marketers Association of Nigeria ( MOMAN) has stated that the poor implementation of downstream reforms is responsible for the present dilemma. According to the marketers, government’s inability to follow through the implementation of the downstream petroleum sector reforms is partly responsible for the present challenges in the country, adding that government should be transitioning to a market- driven environment through policy- backed legislative and commercial frameworks.
MOMAN’S Chairman, Adetunji Oyebanji noted that full deregulation of the downstream sector remains the most glaring boost to potential investors in the local refining space, adding that non- functional refineries cost Nigeria over $ 13 billion in 2019. He added that if the NNPC refineries were operating at optimal capacity, Nigeria would have Imported only 40 per cent of what it consumed in 2019.
He also noted that the country spent a total of N10.7tn on fuel subsidy in the last 10 years, while N750bn was spent on subsidy in 2019.
Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture said: “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, resulting in the growth in the nation’s downstream petroleum sector as a whole”.
According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.
“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.
He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable. He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘ net importer’ to one of ‘ net exporter’, spurring the growth of the Nigerian economy”.
Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji. He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.
“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain ( upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy”, he added.