Nigeria stands to become the refining haven for Africa if it allows full deregulation of the downstream sector.
The above assertion was made by Chairman, Major Oil Marketers Association of Nigeria, MOMAN, Tunji Oyebanji at the maiden webinar session of the Association of Nigerian Energy Correspondents, NAEC.
In his presentation as the guest speaker of the event, Oyebanji explained that full deregulation of the downstream sector would set Nigeria ahead of other African economy in the area of local petroleum products refining as against exporting crude oil for refining.
He listed other benefits to be expected from the process as; alignment with the Nigeria National Petroleum Policy, construction and maintenance of refineries, product availability in the country and for export, increased foreign exchange earnings, including transforming the country into a centre for innovation and technology.
Others are the growth of local refining capacity, leading Nigeria to become a net exporter of refined petroleum to West and Central Africa, and meeting local, regional demands and earning Nigeria increased foreign exchange, a win-win for the Nigerian consumer, industry stakeholders and the country, importation of PMS by marketers can resume, freeing the Federal Government from the unsustainable cost and increasing debt burden associated with a regulated pricing system.
This he said, will also lead to the beneficiation of all petroleum products and the increase in ancillary industries, raising the nation’s GDP and increased economic growth.
However, he said, that for Nigeria to take advantage of this opportunity, the right internal economic policies must be in place.
Admitting that price deregulation does not mean the outright end of regulation in the industry, he said there is still the need to regulate issues like product quality and how products are sold to give consumers value for their money.
He called for regulation of issues around Health, Safety and Environment (HSE) across the value chain of the downstream sector, adding another area that needs to be regulated is competition.
Oyebanji called for legislation to support deregulation, explaining: “Wherever you have a free-market operation, there needs to be a watchdog: a consumer protection agency that will oversee and make sure that operators are not colluding to exploit the public.
“That is an area that needs very close regulation. In countries like the US and parts of Europe, if you collude to fix prices in a particular area, whoever is involved is punished with a very stiff penalty and in some cases, possibly, jail terms.”
He, however, stressed the need to initiate right internal economic policies and legislations as Nigeria transitions from a regulated price environment to a deregulated environment. He also listed the opportunity cost of fuel subsidy, on which Nigeria has spent about N10 trillion in the last 10 years, to the economy, saying that subsidy deprived Nigeria huge social investment.
Themed: Challenges and Impact of a Deregulated Downstream Sector on Nigeria’s Economy, Oyebanji who was the guest speaker harped on the econometrics of a fully deregulated downstream sector.
In his opening remarks, Vice Chairman of NAEC, Ugo Amadi, said despite the challenges that came with the COVID-19, a good government is expected to take decisions that would reshape the economy, part of which was to remove subsidy, and deregulate the downstream sector.
“The issue of reforming our downstream sector such as Refining and Distribution of petroleum products has been on for quite some time, although, it was only recently that the federal government removed subsidy, leading to increment in petrol prices. As a matter of fact, the retail price of petrol increased by about 10 percent to about N160 per litre”.
“As a result, many Nigerians, including the Nigeria Labour Congress and the main opposition party, PDP, condemned the price increases which unfortunately happened amidst the biting impact of the COVID-19 pandemic”.
“Absolutely, the country is today plagued by multiple challenges such as COVID-19, low earnings, near-collapse of the oil market, floods, threats of terrorism and banditry, however, notwithstanding the challenges, a good government must take decisions for the people’s good”, he said.
In her closing remarks, the Association’s Public Relations Officer, OpeOluwani Akintayo added that the take home point for the attendees was for all to join hands in ensuring the smoothest transitioning of the downstream sector from that plagued by subsidy, to a free market where both consumers and investors would get value for their money.
Representatives from MOMAN members in attendance were Total Nigeria Plc, 11 Plc, Conoil Plc, Forte Oil Plc, MRS Oil Nigeria Plc, and OVH Energy Marketing Limited.
The session was also joined by representatives from Oando Plc, and the Nigerian National Petroleum Corporation, NNPC.