PIB: Experts count prospects of oil sector
... Want new law to address Nigeria’s strategic imperatives for oil sector
Experts have identified the prospects of the Nigerian oil sector when the Petroleum Industry Bill (PIB) 2020 recently transmitted to the National Assembly by President Muhammadu Buhari is passed and sign into law.
The experts who spoke at the technical session on the PIB organized by the Facility for Oil Sector Transparency (FOSTER) in Abuja asserted that various provisions of the new law particularly on deregulation would enhance the country’s prosperity and transparency in the oil sector.
In a presentation on:”end of Fuel Subsidy and the Future of the Petroleum Downstream Sector”, Uche Uwaleke, a Financial Economist and Professor of Capital Market at the Nasarawa State University, Keffi said there is bright future ahead of the downstream sector following deregulation.
Uwaleke, however said the level of brightness depends on the passage of the PIB with which the goal of Nigeria becoming a net exporter of refined products and the refining hub of West Africa is made more realistic.
He explained the West African market holds significant potential as refineries such as SIR (Ivory Coast), SOGARA (Gabon) and SAR Senegal) cannot meet current demand for refined products in the region, estimated at 39 billion litres.
According to the scholar, there is potential uptake by neighbouring countries if refined products from Nigeria are readily available, noting that substantial local supply of refined petroleum products is imminent with the 650,000bpd Dangote Reflnery which is currently under construction.
Uwaleke also said the takeoff of Waltersmith refinery in lmo State, Azikel Refinery in Bayelsa State and other modular refineries are expected to drive increased local refining capacity in the future.
He supported the end of fuel subsidy regime as it is not in the long term interest of the ordinary Nigerian, stressing that experience in the country has shown that petrol subsidy is like a drug that temporarily dulls a pain which manifests later with renewed vigour.
“So, it amounts to wasteful spending. Subsidies benefit the poor only if they are on production than on consumption which the rich are in a stronger position to corner.
“Therefore, I think the government has taken the right decision. The challenge now is to ensure that what is saved is channelled to implementing pro-poor policies especially in the area of health, education and job creation”, the Professor of Capital Market stated.
On why fuel subsidy must be ended, he said: “Fuel subsidies are contributing to the debt burden costing around N1triilion each year - over 10% of government budget. Since 2017, these subsidies now feature as a cost item and are characterised as underrecovery in NNPC’S books. Not only are energy subsidies an unsustainable fiscal burden, but they also fuel black markets”.
Giving further justification, Uwaleke posited that end of subsidy will curtail smuggling of petroleum products due to price differentials across borders, crowd in resources which could be used to promote economic and social development, encourage multiple exchange rates inimical to investments.
He however stressed that government should be prepared to deal with the new challenges arising from deregulation of the sector such as possible cartels in the emerging oligopolistic market structure, fluctuations in pump price arising from volatile oil prices, product availability in rural areas and tackle instability in exchange rates.