Yemisi Izuora
The Lagos Chamber of Commerce and Industry, LCCI, has commended the decision of the Nigerian National Petroleum Corporation, NNPC, to put an end to the subsidy/under recovery regime.
This according to the Chamber will be a game changer for the oil and gas sector and the economy as a whole while the impact on the economy would be invaluable.
Muda Yusuf Director General, DG, of the LCCI, said however, it is vital to ensure that this new policy direction will be entrenched so that there will be no contemplation of any form of reversal.
According to Yusuf, “We are aware that similar attempts to undertake this crucial reform in the past have not been successful. However, we are confident that in the current dispensation, this will not be the case.”
The DG stated that the measure will unlock the huge private investment potentials in the downstream oil sector especially in petroleum product refining and ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as the burden on our foreign reserves.
The Chamber also demanded that urgent steps be taken to consummate the reform process with an appropriate legislative framework.
Such a legislative review, Yusuf noted would reconcile the initiative with some extant laws which include those setting up the Petroleum Subsidy Fund (PSF), the Petroleum Product Pricing and Regulatory Agency [PPPRA] and the Petroleum Equalization Fund [PEF].
“It is imperative to ensure clarity on access to foreign exchange for petroleum marketers to import petroleum products. Operators [who are currently in a quandary on this matter] are eagerly awaiting guidelines from the central bank of Nigeria on this critical aspect of access to forex for the importation of petroleum products.” said the DG.
The Chamber commended the NNPC’s pronouncements on the future involvement of the private sector in the operation of the countries moribund refineries saying this is another laudable initiative which will ensure that these national assets are put to use for the growth and development of our economy.
Yusuf also observed that one of the critical elements of the Oil and Gas Sector reform, particularly the downstream sector, is the complete deregulation of the sector and that this was the spirit of the Petroleum Industry Bill which, regrettably, has got stuck in the legislative processes for close to two decades.
He listed a number of advantages of the reform for the economy, to include freeing resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc.
He observed that the deficit in all of these infrastructure areas are phenomenal and that fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.
Other advantages include eliminating the patronage, rent seeking activities and corruption that currently characterise the downstream oil sector, creating more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.
“The investment opportunities in our Oil and Gas sector are huge, considering our crude oil reserves and the even bigger prospects in respect of our gas reserves. We have a population now estimated at close to 200 million people. That is a big domestic market for energy, presenting huge opportunities for the downstream investments.
We thus have a strong competitive advantage in oil and gas.
The abundance of investment opportunities is not in dispute, but investors are constrained by the policy, governance and political environments.
These have slowed down the pace of development in the sector. Nigeria has been in the business of oil for over 50 years, but we don’t have any private refineries operating on a commercial scale. This is a big issue. No oil producing country imports refined petroleum products on a scale that we do in Nigeria. It is inexcusable.” said Yusuf.
He stated that pipelines are very critical infrastructure for refineries and for the sector, but the current ones are ageing and have deteriorated due to poor investment and maintenance and this is because the pipelines are in public sector space.
Also, the story of the petrochemicals and fertiliser plants are not different, although the latter has witnessed some measure of privatisation, he said.
Yusuf said that the dominance of the public sector in this space has significantly slowed down the progress and development of the oil and gas sector adding that the sector is so strategic that it could easily have provided the lever to accelerate the diversification of the Nigerian economy.
