Full deregulation panacea for private sector investment —Marketers

Since the Federal Government announced in April the end of fuel subsidy, stakeholders have been looking for policy statement that will provide legal backing to the pronouncement. However, the Petroleum Products Price Regulatory Agency (PPPRA) announced that private oil marketers have been granted license to join the Nigerian National Petroleum Corporation (NNPC) in importing premium motor spirit (PMS) otherwise called petrol into the country. OLATUNDE DODONDAWA writes on the need for the full deregulation of the downstream sector.

Since 2017, the NNPC has been the sole importer of petrol into the country. With the announcement made by the Group Managing Director (GMD) of NNPC, Mallam Mele Kyari, that there is no more fuel subsidy on petrol, it is expected that more markets will be allowed to import.

Besides, the General Manager, Corporate Services, PPPRA, Kimchi Apollo, was reported to have said the sole petrol importer status of the NNPC had changed, as his agency recently gave various oil dealers permission to import.

“Well, as far as I am concerned, many of them (marketers) have gone to import because they took QMs from us to bring in products and I am sure they are doing that already. The QM is just like a pass to go and bring in products. You come to us to say you want to bring in products and then we say go ahead based on the pass that we give. So, some marketers came and they got the go-ahead permit to bring in products. So, they will be bringing in products,” he said.

He explained that the market had been liberalised, with both the NNPC and other marketers now shopping for refined petroleum products from international refiners. He said all qualified marketers who approached the agency and had the competence to import petrol were cleared for such operations.

Speaking during the Nigerian Petroleum Downstream Summit Webinar at the weekend, marketers opined that the much needed private sector investment can be attracted when there is full deregulation of the downstream sector.

The panelists are delighted that the government is taking the issue of full deregulation seriously and has taken some important steps, however, they believe that the country will benefit by going beyond the current steps taken.  The ongoing conversation with continued engagement with government and other stakeholders will ensure the process is completed as soon as possible and create a win-win situation for Nigerians, the government, stakeholders and the industry.

The panelists also opined that maintaining the petrol subsidy (which results in operational inefficiencies and is not sustainable) would not be an appropriate channel to support or plan for the future of Nigeria. Instead the removal of price controls and allowing market forces and competition to determine prices will benefit the country and the industry.

They argued however, that appropriate new legislation needs to be put in place and enforced as deregulation can only be as effective as the legal framework that is in place to guide it.

“Full deregulation is an enabler for any private sector investment.  The downstream industry requires significant investments to raise the standards along the supply chain, from improving the refining capacity, pipelines, trucks, depots and filling stations to supporting the ancillary and derivative industries that will emerge from an improved downstream sector.  However, investors require an attractive environment, devoid of uncertainty.

“The survival and indeed, the growth of the downstream oil industry is important to Nigeria and Nigerians as it provides employment directly and indirectly to millions of Nigerians via the industrial sector, construction sector, transportation sector, station sales and administrative personnel, regulatory personnel and other businesses that service and support the downstream.

“The downstream petroleum sector has a role to play in liberating the economy by saving the government from spending trillions of Naira on fuel subsidies. The money saved can be used to grow the economy by investing in infrastructure, educating the next generation of Nigerians and keeping the population healthy. This in turn will generate revenue for the country, creating an avenue for Nigeria to leave the poverty trap and emerge as the refining hub for West and Central Africa,” they said.

 

Conclusion

Without a proper template that shows the landing costs, and the forex rate for the importers, there may be opportunity for arbitrageurs to manipulate the system.

According to Mr Henry Adigun, an oil and gas governance expert, “As it stands now, the government should have left everyone to see the template they have if truly they have deregulated. The lead question for the government is what is the landing cost for petrol and kerosene, if truly they have been deregulated? The deregulation should ensure marketers get their forex from the market. Is it N360 to dollar in the template or N425 to a dollar?

“These are issues the government needs to clear for the marketers to really move in properly not just the PPPRA saying we have cleared the marketers to import.”

Meanwhile, participants at the webinar concluded that full deregulation of the downstream sector will be beneficial to all Nigerians and the economy. And more importantly, they believed that all aspects of the downstream sector need improvement. These include: supply, transportation, filling stations, depots and storage facilities etc. Participants at the webinar included: Mr Adetunji Oyebanji, Managing Director, 11 Plc and Chairman, Major Oil Marketers Association of Nigeria (MOMAN); Dame Winifred N. Akpani, MD/CEO, Northwest Petroleum and Gas Company Limited and Chairman, Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN).

Others included Hajia Amina Maina, Group Chief Operating Officer, MRS Holdings Limited; Mr Huub Stokman, CEO, OVH Energy Marketing Limited; Dr Billy S. Gillis-Harry, National President, Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN); Dr Timothy E. Okon, Managing Partner, Teno Energy Resources Limited and Mr Stanislas Drochon, Head of Africa Strategy and Transformation PUMA Energy.

 

 

 

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