SEBASTINE OBASI

Experts and stakeholders in the nation’s oil and gas industry have cautioned government on the need to implement policies that would put the industry on a good pedestal in 2015.

The Country Senior Partner for Price Waterhouse Coopers, Nigeria and the Company’s Africa Oil and Gas leader, Uyi Akpata said that though the industry looks promising, government should remove the uncertainty associated with some regulatory issues.

“The outlook for the industry is positive and operators can look forward to an exciting and dynamic future with an ever-changing competitive landscape characterized by divestments and new acquisitions as new market entrants continue to seek a share of the industry’s significant growth potential.

“The onus however sits with government to ensure that they continue to provide acceptable regulatory environments with attractive fiscal systems. The main difficulty that investors have is the risk associated with uncertainty. “Should uncertain regulations persist especially surrounding the passage of the PIB, the country might become less attractive to new investments which is considered very important in increasing the country’s revenue,” he said.

The Director of Operations, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi said that government should deregulate the downstream sub-sector following the falling global crude oil prices. He explained that government should put in place adequate measures to cushion the effects of deregulation and protect the citizenry from the effect of the dwindling economic situation. According to him, the best time for the deregulation of the downstream sub-sector of the nation’s oil and gas sector is now that the crude oil price is low.

“Deregulation could have been the best automatic price adjustment mechanism that responds to the market forces without any need for intervention by the government.

“Just as the price of crude oil is dropping and some countries, such as United States of America (USA), adjusted the price of petrol from three dollars to two dollars, the price mechanism in Nigeria should also be able to adjust to a reduction in the prices of refined products (petrol, diesel and kerosene),” he said.

For Basil Ogbuanu, President, Nigerian Association of Liquefied Petroleum Gas Marketers, NALPGAM, the nation should focus on its local content policy so as to encourage indigenous players in the industry.

“The focus now and beyond 2014 should be for the federal government to embrace sincerely the local content development drive such that Nigeria’s crude oil is refined locally, less of importation, total eradication of oil theft (which is actually possible) and less of capital flight. Most importantly, the Petroleum Industry Bill (PIB) must be passed into law; for the much expected revolution to commence in earnest. At this point, we might be talking about the real “transformation agenda”, he said.

The President, Lagos Chamber of Commerce and Industry (LCCI), Mr. Remi Bello, said that high inflation rate is a factor Nigerians will have to deal with in the incoming year. “A natural outcome of depreciating exchange rates is inflation for an import dependent nation like Nigeria. Cost -pushed inflation will be pronounced in the next few months. This will be driven by high cost of production and high cost of imported finished goods,” he said.

Bello also explained that there would be decline in government businesses and high risk of payment default by government. “Businesses driven by government patronage are likely to experience a decline in the short term given the current government revenue outlook. Capital projects of governments will reduce drastically and this would affect some segments of the private sector. Other expenditure heads such as training and travels may also suffer major reductions. Generally, government contractors would experience a slowdown in tempo of activities.

“With declining revenue, the risk of default in payment for jobs executed for government agencies will be higher in the short term. This situation calls for cautious engagement with government contracts at all levels of government. As government revenue contracts, the capacity to meet financial contractual obligations may be difficult.

“With the current developments, many contracts, especially the medium to large ones will come with variations. Clearly the exchange rate depreciation will alter many cost parameters. This is a new challenge that many contractors and suppliers as well as their clients will have to confront. This will happen in public and private sectors,” Bello explained.