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Stakeholders Make Case For Deregulation As Fuel Subsidy Hits N1.4trn

Stakeholders in oil and gas industry yesterday said that total deregulation of the downstream sector of the petroleum industry would unlock the huge private investment potentials in the sector and stimulate sustainable growth.

They expressed worry over the huge amount of money spent by federal government annually on subsidy payment, saying that such sum could be used to develop other sector of the economy.

Minster of State, Petroleum Resources, Dr Ibe Kachikwu said that subsidy on Premium Motor Spirit (PMS), otherwise known as petrol, currently stands at over N1.4 trillion.

The stakeholders said this huge sum makes it became imperative for government to embark on total deregulation of the downstream sector to attract investors and to also save the country from the huge amount spent on subsidy.

The director-general, Lagos State Chambers of Commerce and Industry (LCCI), Mr Muda Yusuf,  said that perhaps the biggest burden on the economy today is the petroleum subsidy regime.

Yusuf said the government should encourage private sector players to take over the downstream sector of the petroleum business.

He said, “When this is done, most of the challenges we see as regards subsidy, refineries and others will be adequately addressed. The government should only play a regulatory and not an operational role.

“Government has no business refining petroleum products, retailing or distributing fuel as well as the marketing of these products. We cannot continue to carry that kind of burden in the oil sector.’’

Also, an energy expert, Mr Felix Andrew said that continuous payment of subsidy is not sustainable, while urging government to liberalised market and encourage “free entry, free exit’’ to attract investors in the sector.

Andrew, who is also the executive director, Blue-Sea Energy Limited, said that currently, Nigeria spends about N1.7trn on fuel subsidy annually whilst its education and health     sector can only access a paltry budget of N300million and N400million respectively.

For his part, the Western Zone chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Alhaji Debo Ahmed urged government to liberalise and enforce total deregulation of the downstream sector to boost the country’s economic growth.

Ahmed said that deregulation remained the best option to move the economy forward, adding that full deregulation would bring in investments into the sector.

He said that only deregulation would encourage the establishment of private refineries in the country.

According to him, government should summon the courage to fully deregulate and remove subsidy totally to open the market for investors.

“If government likes, they can introduce gradual removal of subsidy but it should not go beyond 6 to 18 months period.

“If fully deregulated with rules, you will have the serious investors coming in to invest adequately,’’ he said.

According to him, deregulation is the answer and the government must talk to the people and let them understand the advantages.

“The government must also show that in the areas where there have deregulation, people are gaining and that whatever comes in as funds will be used for the benefit of the people.

Ahmed  said that passage of the Petroleum Industry Bill (PIB) remained the best options that would usher in deregulation, adding that even if the current PIB was not perfect, it could be amended after the passage.

“Once you deregulate, these refineries will be coming up. So, we will plead that we get the National Assembly to expedite action on the passage of the PIB. We believe that the PIB will go a long way in encouraging deregulation but if we want a PIB that will be faultless before it will be passed, then we are thinking that we are not human beings.

“Why do we have the word amendment? How many amendments have they done on the American constitution?

Also, president of the National Association of Liquefied Petroleum Gas Marketers, Mr Nosa Ogieva-Okunbor, has said that only full deregulation can bring the much needed investment to the sector. Ogieva-Okunbor, said that full deregulation remained the best option to attract investors for sector development, against the backdrop of huge amount spent on subsidy.

He posited that full liberalisation and deregulation of Nigeria’s downstream oil sector will remove of all hindrances and bottlenecks that having been discouraging improvement of private investment and market competition.

According to him, government should fully deregulate the downstream sector to attract investors. We need full deregulation of the downstream sector. We do not need partial deregulation.

“Market prices in Nigeria and international market prices are outside the control of our local policy.

“The current international price and imported petroleum products pricing template do not conform to the physical landing cost on the products when interpolated with the government’s template.

The president also lauded the commitment of government to reposition the sector, said the fact that Nigeria is one of the lowest LPG consuming countries in Africa remained pathetic.

It would be recalled Nigeria spent N2.582 trillion on fuel importation in nine months, from January to September 2018, rising by 12.9 per cent from N2.289 trillion recorded in the first three quarters of 2017.

The amount spent on fuel import in the nine-month period is 28.3 per cent of Nigeria’s N9.12 trillion budget for the 2018 fiscal year and 36 per cent of the N7.17 trillion proposed expenditure in the budget.