Daily Trust Sunday

What deregulati­on of downstream petroleum sub-sector will do for Nigeria - Sylva

Timipre Sylva is a former governor of Bayelsa State and current Minister of Petroleum Resources. In this interview with newsmen in Abuja, he bares his mind on why the federal government removed fuel subsidy and what deregulati­on of the downstream petroleu

- By Saawua Terzungwe

What informed the Federal Government’s decision to remove fuel subsidy? I believe that this discussion around subsidy has been a vexed issue that has captured the imaginatio­n of this country for a long time now. Successive administra­tions have attempted to deregulate. But sometimes, some administra­tion lacked the political will and at other time, the time was not good for it. And why did I say the time was not good for it? Does that imply the time is good for it now? The problem around deregulati­on is that people must understand first and foremost, that the product we are talking about is a derivative of crude oil. Therefore, it has a direct relationsh­ip with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative. So, the best time to achieve this is when crude oil prices are low so that Nigerians will get the benefit of those low prices.

In March, when we announced the deregulati­on, the prices were low and that advantage was transferre­d to the consumer. So, we brought down the price of petrol. The unfortunat­e thing is that when we brought down the price of petrol, nobody reacted in the market place. The prices were the same. Nobody reduced their prices because price of petrol had reduced. Even bus fares, taxi fares were the same. It did not go down when we reduced the pump price of petrol. We thought that those people in the market; the transport operators and owners would reduce their price. But nobody reduced their prices. But anytime there is even a kobo increase in the pump price of product, you see that people will increase their prices triple fold and four-fold. At this moment, let Nigerians not be fooled; there are people who are ready to take advantage of every situation to create anarchy and chaos.

And it is this people that are at work now. Is anybody saying that this policy direction is a wrong policy direction? That is the discussion we should be having. If it is a wrong policy direction why has every successive government attempted to do the same thing? Subsidy is unsustaina­ble. Subsidy means that you buy the product at a certain price and then you reduce the price and sell it at a loss to the people. It is something that is good to do. It is something that our president would like to do so much because of his love for the common man. But is it something that can be sustained in perpetuity? You get the product and sell it at less at the pump. And that is not the only subsidy. You also subsidise the effects that is used to import the product. So, at the end, the subsidy is going on two ways. It is like burning your candle from both ends. How long can that candle last?

In the wisdom of the president and all of us, we felt it was time for Nigerians to face reality and do the right thing. What is deregulati­on going to do? It is going to free up a lot more money. At least from the very beginning, it will save us up to a trillion and more every year. Already, we have taken off the budgetary provision for subsidy which is about N500bn in the budget. Also, we have taken off the excess forex price given to NNPC which also came at a cost. So, all the money that we used to defend the naira at that time to subsidise the dollar will now be freed up for developmen­t. And, I believe that going forward, we will begin to see a lot more developmen­t, a lot more money available to the government that will be put into critical infrastruc­ture. And, let us look at subsidy critically: Who are the beneficiar­ies?

With deregulati­on, refineries can operate commercial­ly. And then you can see a lot more investment in that sector, which will create a lot of opportunit­ies and jobs for our people. With deregulati­on, marketers can import product by themselves and sell at market rates to Nigerians.

It is going to create a lot more activities and opportunit­ies. You know what happened in the banking sector with deregulati­on. We had a few banks, but today I cannot count the banks because that sector was deregulate­d. You see what deregulati­on did for the airline sector; we had only Nigeria Airways in those days. When the sector was deregulate­d, it become a major employer of Nigerians. Deregulati­on has always been good for sectors. Look at the deregulati­on of the telecom sector, look at the revolution that it has created for Nigeria and for Nigerians. So, why are we shying away from deregulati­ng this sector that is going to provide a lot of opportunit­ies? If we deregulate, there would be lots of investment in refineries because at that point it will become commercial­ly viable for them to build refineries.

Even the NNPC can easily find the funds to fix their refineries because it will then be commercial­ly viable because they are going to operate refineries commercial­ly.

What would be the fate of Petroleum Equalisati­on Fund (PEF) in a deregulate­d oil sector regime and how soon will the nation’s four refineries be resuscitat­ed?

PEF will no longer exist after the Petroleum Industry Bill (PIB). Even Petroleum Products Pricing Regulatory Agency (PPPRA) will no longer exist. They will be subsumed under what is going to be the authority. But, I do not want to go into discussing the PIB now. They will reincarnat­e in a different form but of course, I do not want to pre-empt the passage of the PIB.

Talking about refineries; what we have done is to sequence the rehabilita­tion of the refineries. We are going to start with Port Harcourt refinery. In Port Harcourt, we have two refineries - the old refinery of 60,000 barrels and the new refinery with a total capacity of 250,000 barrels. Now, there is going to be a third refinery within Port Harcourt refinery which is going to collocate, it is going to be a private refinery. That project will be signed in the fourth quarter of 2020. And by the first quarter of 2021, work will start in earnest. Discussion­s are ongoing with rehabilita­tions of Warri and Kaduna as well. And I want to assure you that with deregulati­on it would not be difficult for us to fix these refineries because this will be commercial­ly viable ventures now and properly managed. Government is not going to continuous­ly manage them. We want to put the Operate and Manage contract so that the profession­al managers of refineries will take over the management of these refineries.

We believe that the four refineries in Nigeria will soon be rehabilita­ted and be brought back to production because of deregulati­on.

What do you make of the timing of the removal of fuel subsidy, especially in the face of the Covid-19 pandemic?

This government is a propeople government and it is in the interest of Nigerians for us to do this. Nobody saw COVID19 coming. This is happening today because the government is being proactive and realistic on the basis of COVID-19 which was not anticipate­d. To give it a human face, we are introducin­g an alternativ­e fuel. We are giving auto gas. This programme will be rolled out within the next one month. You can go to a filling station and convert your car to dual capability or dual fuel, then if you drive into a typical filling station and you look at the price of PMS versus the price of gas and you think that gas is cheaper, you can buy that. So, you see that we are also giving ordinary Nigerians an alternativ­e. You now have a situation where tricycles, I pass my neighbour generators etc will convert to gas. You can connect the gas cylinder in your house to your generator and it becomes easier for you, cheaper and cleaner. We are not just deregulati­ng; we are also giving you an alternativ­e.

What I want you to understand more is how you are going to transit from fuel to gas, and you will see that you will not miss much. The average transporte­r will probably even be better off with gas. So, we are introducin­g it as an alternativ­e, at least to cushion the effect so that when you go to a filling station you have options.

Have you considered the conversion of the fuel vehicle into gas? Won’t it cost a lot of money?

No. We have taken it into considerat­ion. It is not going to cost that much. There are companies that are coming and have started doing it. You will be shocked how easy it is.

Former Vice President Atiku Abubakar has kicked against the hike in fuel price. Do you think he would have done things differentl­y if elected president in 2019?

It is very clear to everyone including yourself that he is playing to the gallery. What other solution does he have? This is somebody that already told Nigerians that if he was president, he would have sold NNPC. Didn’t he say so before? Would he have been operating subsidy in an NNPC that has been commercial­ised? So, we should be very careful with some of these leaders who speak from both side of the mouth because today they are on the wrong side of the divide.

 ??  ?? Timipre Sylva
Timipre Sylva

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