Stakeholders in the oil and gas sectors are demanding holistic reform in the downstream sector to bring about the desired transformation and investment.
They are of the view that a deregulated downstream will attract huge investment that will help to shape the economy.
For the President of Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, a reform should be carried out in the country’s oil and gas sector in order to curb sharp practices and encourage development that will incentivise investors to set up refineries, and create new technologies for production and employment of hundreds of thousands of jobs through the value chain.
Speaking at the 2016 Petroleum Club Annual Guarantors’ Dinner in Lagos, Imoukhuede, stated that the oil and gas sector encourages wealth through arbitrary means.
In his presentation titled: “A new role for petroleum industry in the Nigerian Economy”, he argued that “in 2011, Nigeria paid over two trillion naira in fuel subsidy and alleged that “over one trillion naira of this payment was fraudulent”.
“Let us assume we mobilised 300 oil and gas entrepreneurs and gave them that one trillion naira to develop the sector and pay back, I cannot imagine what the developmental impact it would have made. In the interest of this nation, we have to get government out of operating in the oil and gas sector,” he explained.
“Sustained economic development is premised on the country’s ability to channel investment and entrepreneurial development into sectors where operators create values by producing goods and services at a cost that consumers are prepared to pay for, but more importantly at a cost lower than their counterparts in foreign countries. Nigeria will never see development if this continues,” Imoukhuede said.
Similarly, Emmanuel Iheanacho, Chairman, Integrated Oil and Gas Ltd, said that full deregulation of the downstream sector remained the best option to attract investors for market development.
Iheanacho, said that full liberalisation and deregulation of Nigeria’s downstream oil sector, with removal of all hindrances and bottle necks was 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.
“Government should move from uncertainty to certainty. We have a situation where prices are capped on one hand.
“Market prices in Nigeria and international market prices are outside the control of our local policy.
“ The current international market on imported petroleum products price template does not conform to the physical landing cost on the products when plunged into the country’s template, ‘’ he said.
Iheanacho appealed to government for payment of huge outstanding subsidy funds owing marketers of 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.
“For instance, a marketer is being owed over N5 billion and pays about N3 million to service loan on daily basis. This attracts an additional interest from the banks on the importers.
“We borrowed money from banks on specific terms, on conditions which must be met.
“The painful aspect is that the Federal Government does not consider such accrued interest when paying the subsidy after several months of delay,’’ he said.
In the 2017 expectations, Iheanacho urged the government to urgently resuscitate the country’s refineries to improve and increase local refining of petroleum products for local domestication.
According to him, in going forward, we need to put more efforts in locally- refined petroleum products which called for policy action to resuscitate existing refineries to create enabling environment for Nigerian private sector entrepreneurs to be able to invest in the reefing capacity.
“In 2016 expenditure, nearly 70 per cent of forex required for running the economy went into the importation of the products.
“If we need to turn our economy around from consuming economy to producing economy, we have to deal with exporting of crude oil by creating the opportunity that local entrepreneurs can build private refineries.
“So that Nigeria can become a net exporter rather than being a net consumer of petroleum products,’’ the mariner said.
He said that in spite of government’s efforts to eliminate the challenges of pipeline sabotage that was affecting crude oil transportation to the refineries on routine basis, crude oil theft and pipeline vandalism still persisted unabated.
Iheanacho said that this singular economic sabotage amounted to monumental loss of funds that could have been deployed into critical areas of national development.
He said that the menace continued to build up; weaning confidence in industry’s operators; and players and potential investors.
“Pipeline sabotage has continually strained Nigeria to resort to petroleum products’ importation and wastage of the limited resources meant for capital and human development programmes,’’ he said.
Iheanacho advised that the only way out of these challenges of pipeline vandalism was to ensure sound pipeline integrity that could guarantee safe transportation of the products all over the country.
He said that pipeline installation could now be done using state of the art technology in a manner that would be inaccessible to vandals.