‘Full downstream deregulation necessary to attract investment’
Stakeholders in the Nigeria’s oil and gas sector have identified full deregulation of the downstream subsector as the best option to attract investors and save the country from fuel supply challenges.
Deregulation will herald free market regime, where the forces of demand and supply will dictate price, and free government’s interference and price fixing.
The stakeholders, which included the Minister of State for Petroleum Resources, Ibe Kachikwu; Chairman, Integrated Oil and Gas Limitd, Emmanuel Iheanacho; and former Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley, at different fora in Lagos emphised the need for quick deregulation of the subsector.
Speaking on the Federal Government’s goal is to deregulate the downstream sector of the petroleum industry, Kachikwu said though the government is not there yet, it will continue to fine-tune the process until the goal is achieved.
According to Kachikwu, “at every given time in the history of every country, you will always have partial deregulation. The reason being that you have to catch up each time and make an amendment, and even if it is just one day, you might have some level of subsidy for that one or two days before it is removed.
“What is important is the goal post; where are we headed? Where we are headed is to try and free the industry, so that it make do its own rules, set its own prices itself. There are few mechanics that we still need to get in place properly. We can’t forget the fact that we still have foreign exchange challenges and that income to government is still very tight.
“You still have to find a way to balance that. But what is important is what the objective is. The objective is still to fully deregulate to find private capital to get them to where they should be.”
Speaking with energy reporters in Lagos at weekend, Iheanacho argued that full deregulation of the downstream sector remained the best option to attract investors for market development.
He said full liberalisation and deregulation of Nigeria’s downstream oil sector, with the removal of all hindrances and bottlenecks are needed for the improvement of private investment and market competitiveness,
According to him, “we should note that there is no provision of subsidy payment in the 2017 budget, which calls for government to fully deregulate the downstream sector to attract investors.
“We need full deregulation of the downstream sector. We do not need partial deregulation. I do not understand the so-called price modulation we are seeing and how it can work because presently, it is not working.”
Iheanacho appealed to government for payment of huge outstanding subsidy funds owed marketers for imported petroleum products, which ran into billions of naira.
He said that marketers are rattled with the huge amount being paid as interests to banks whenever there was any delay in the payment of the subsidy.
Stanley on his part, said it is imperative to establish and empower a strong independent regulator to oversee activities in the subsector and ensure the implementation of open and transparent rules for the downstream value chain.