Downstream Oil Sector Operators Seek Attractive Business Climate
Peter Uzoho
Operators in the downstream sector of Nigeria’s oil and gas industry have reiterated the need for the federal government to initiate policies that would pave way for an attractive and competitive business environment.
This, according to them, would lead to increased investments in the sector.
The also urged the federal government to unveil a pricing formula that would guide the monthly adjustments of the pump price of premium motor spirit (PMS) otherwise known as petrol in order to avoid dislocations at the retail end of the value-chain.
The operators made the call during a webinar organised by the OTL Africa Downstream in conjunction with Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and Petroleum Products Retail Outlets Owners Association of Nigeria, among others, to discuss the issues attendant to full market deregulation including pricing, business models, competition, new investments and valuecreation in the downstream petroleum sector.
They expressed concerns about the style of market deregulation including pricing, business models, competition, new investments and value-creation in the downstream petroleum industry.
According to the operators, many marketers are keeping low stock towards every month end due to the uncertainty surrounding the price of the commodity, especially as government, through the Petroleum Products Pricing Regulatory Agency (PPPRA), still determines the pump price of petrol despite deregulation.
They noted that a pricing formula would guide marketers and consumers on what to expect anytime there is a movement in the price of oil, especially as the country does not control the price of crude oil in the global markets.
Speaking at the online seminar, the Chairman MOMAN, Mr. Adetunji Oyebanji, said the COVID-19 has presented an opportunity for Nigeria to take some decisions as regards the downstream operations.
With some fundamental changes being proposed, he advocated the need for appropriate laws to back up actions, noting that with government retaining price control, it would always be under pressure to adjust the price due to political considerations.
“We believe that if the market determines the prices, there will be marginal changes rather than everyone rallying around to change prices. Marketers continue to advocate a proper legislation to allow market dynamics prevail. This because people keep low stock towards month end because they fear price reduction and are worried that they might be unable to plan effectively.
“Government must ensure that there is a level playing field by removing monopolies, while a strong anti-competition agent should be in place to discourage operators from taking advantage of a free system.
“Like it has been done in other countries, we need a strong agency that sanctions infractions and help to mitigate price gouging”, he said.
On the benefit of subsidy to marketers and the PPPRA’s decision to allow operators commence petrol importation, Oyebanji said petrol importation has no particular benefit to marketers because subsidy does not bring any income to operators.
“There was never a time government stopped anyone from importing fuel. Economics is what has allowed marketers to import. Government never stopped marketers from importing; it just didn’t make economic sense given the fixed price. The present situation allows operators to import and recoup their investments”, he added.
In the same vein, the Chairman of DAPPMAN, Dame Winifred Akpani, said deregulation was the way out of the crises confronting the downstream sector.
She decried the incursion of government into the downstream industry both as a player and regulator, lamenting that the gains recorded in the past when there was robust private sector involvement in the industry has been eroded and most players are now quitting.
Akpani, said some of the tank farms have been taken over by banks and the Asset Management Corporation of Nigeria (AMCON) due to the inability of some of its members to service their loans as at when due.