The need for Nigeria to fully deregulate the downstream petroleum industry has been constantly emphasised, especially with the current economic challenges facing the country.
The arguments for and against the issue had over the years revolved around the benefits of the decision on the citizens, the economy or to a few groups and/or individuals exploiting the deficit in political will to take a stand on the issue.
No doubt, the economy seems to encounter immediate impact with any change in the oil price, especially the Petroleum Motor Spirit (PMS), otherwise known as petrol.
This section of the oil sector brings noticeable effect because it is the most used by Nigerians and mostly for consumption rather than manufacturing purposes. Most industries in Nigeria use Automotive Gas Oil (AGO), diesel.
According to the Petroleum Products Pricing Regulatory Agency (PPPRA), deregulation of the downstream oil and gas industry entails the opening up of the sector for healthy competition where prices reflect market realities. It is not a price-ceiling system where government or its agencies manage over- or under -recovery.
In addition, stakeholders in the oil and gas sector also share the same view, stating that deregulation remains the way forward for the industry and for economic growth of the country.
The Federal government had in March 2020, announced full deregulation of the oil downstream, but its implementation had been stalled by organised labour as the impact of the Coronavirus pandemic on the global oil market had made prices to continue to hike.
However, according to the PPPRA, in the wake of the global financial crisis and increasing sovereign debt risk, it has become imperative for the government to look inward to finance its development needs and revitalize the economy.
Petroleum subsidy removal, and the subsequent deregulation of the Petroleum downstream were among the measures the government adopted to free up funds for developmental work by shaking off some of its resource-draining burdens.
Before the introduction of the deregulation policy in March 2020, yearly subsidy payments had become exponentially high and unsustainable due to increased fuel consumption as a result of Nigeria’s increasing population as well as oil smuggling.
According to PPPRA, records show that Nigeria loses almost a trillion Naira annually subsidizing PMS, also known as petrol, a product used mainly for consumption rather than production (manufacturing industries) which led to no real economic benefits for the country.
Subsidy, it noted, gulped a huge chunk of scarce government funds that could have been used to finance critical infrastructure like hospitals, roads, rails, schools and pipe-borne water among others.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, had also at several fora, noted that the benefit of deregulation cannot be over emphasized.
He said that having survived two economic recessions recently, coupled with the impacts of the Covid-19 pandemic, subsidy removal and the deregulation of the petroleum downstream industry were among the measures the government sought to free up funds for developmental projects.
He said “When I first came in, one of the things that confronted us was the issue of deregulation–the issue of fuel subsidy. Frankly, between you and I, that is a black hole I cannot fully understand.
“Who is the person benefiting from the subsidy? I do not think it is the common man. If you look at the issues around subsidy, you will know that there are interests that are benefiting from subsidy beyond what the common man can understand. But you try to touch subsidy and it is the common man that comes out to defend subsidy.
“But I think, frankly speaking, these are some of the things we must discuss, and come to terms with. Can subsidy be sustained? So, when we came, that was one of the things that confronted us and I thought that one of the ways we can achieve deregulation was to encourage the use of gas for our vehicles.”
Corroborating what the minister said as an alternative to PMS, the PPPRA said that since the National Gas Expansion Programme Committee (NGEPC) was established to reposition the harnessing of our gas resources for auto use and other purposes, there is room on the table for the use of Liquefied Petroleum Gas (LPG) Autogas as a viable alternative to PMS.
As at January 2019, Nigeria’s proven natural gas reserves was 200.79 trillion cubic feet (tcf) and 600 tcf potential reserves, with research proving that natural gas is a cheaper and cleaner fuel than PMS.
Compressed Natural Gas (CNG) has recently been touted as a cheaper, environmental-conscious alternative to Premium Motor Spirit (PMS). This January, the Minister of State for Petroleum, Timipre Sylva, announced a N95-N97 per Standard Cubic Metre (SCM) price point for CNG, making it N50 cheaper than PMS, therefore, begging the question of why we need autogas at all?
Furthermore, experts in the industry have also fully supported the deregulation of the downstream oil and gas sector, as some of them have urged the federal government to deploy the political will to ensure its full implementation, because of its benefits to the citizenry.
Prof. Wunmi Iledare, Professor of Petroleum Engineering, said that with the increase in global crude price, pump prices had increased in some countries.
“The price of a litre in Ghana is almost N400 equivalent.
“It will take transformational leadership to take a decisive decision on subsidy irrespective of plausible social unrest now.
“But if you don’t do something now and move away from price control or modulation, the government after government will continue to live under the threat of the unions.
“President Muhammadu Buhari knows better because he has been there before.
“My advice remains the same, deregulate,’’ he added.
The PPPRA further noted that absence of full deregulation in the downstream sector was one of the reasons for the stagnation and impoverishment of the masses.
It noted that apart from Lagos, Abuja and Port Harcourt, people rarely buy petroleum products at official prices.
“In some rural areas, you find out that most times these products are adulterated and bad for engines.
“Deregulation will change all that and even reduce the cost of transportation and food in the long run,’’ the agency said.(NAN)
