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Why licence beneficiaries can’t build refineries , Mojekwu

As controversy continues to trail the recent approval of new licences to private firms to build 18 refineries in the country, stakeholders are divided over the development. While some said that the exercise may  fail as those granted the licences are the same people importing petroleum products into the country, others are of the opinion that government must be strict about such companies meeting the deadline or revoke  their licences.

The managing director and chief executive officer, Beco Petroleum Products  Plc, Mr. Henry Mojekwu, who spoke  on the  issue, told Sunday Vanguard, that the regulated regime of the down-stream sector of the petroleum industry does not favour building of new refineries because the pricing structure is very rigid. “If you look at government  policy critically and carefully analyse  it, you would realise that the pricing policy is fixed. In that case, constructing refineries in the country becomes extremely difficult.

But notwithstanding, individuals granted new licences should be able to utilise them to boost production capacity in the sector”, he said.

On whether the decision by government to issue 18 new licences to  private refineries was a wise one, considering the fact that those granted licences before  could not meet the construction deadline given by the Department of Petroleum Resources (DPR), he explained, “Government is trying to boost the production capacity of petroleum products to prevent reoccurring cases of products scarcity in the country, without addressing the factors involved in the deregulation process  like power supply, good road network and the Land Use Acts, which makes it difficult for companies to acquire land for business expansion. If government could tackle the post deregulation challenges in the sector, the exercise would bring a positive outcome”.

Speaking  on the issue of fuel subsidy, he said, “The truth of the matter is that, petroleum subsidy benefit only few individuals as far of the downstream sector is concerned. To start with, subsidy on imported products would not propel economic growth and development in any way. So, l support total removal of fuel subsidy. The refineries should be made to function optimally to increase daily production capacity and to also reduce the level of products importation into the country.

“The overwhelming government involvement in business is the major reason for persistent scarcity of petroleum products in the country. I am not an advocate of government being in business because they do not have any reason to be in business. The sector is not fully deregulated, Nigerian factor is seen in all facets of the business, the supply chain in inefficient and there is also panic buying often caused by consumers each time government makes a public pronouncement on certain issues in the sector. Another issue is that of corruption, which also brings scarcity in the system.

“Any arm of Nigerian National Petroleum Corporation (NNPC), that is incurring losses should wind up because they do not have to be active participant in the business. I believe they may be incurring losses at their retail arm and not in sales of crude oil and refining. The reason most International Oil Companies (IOCs) are against the Petroleum Industry Bill (PIB) is due to government involvement in the business.

Their fear is monopoly, because government has the power to make laws. In that capacity, it could make laws that would favours its interest in the business, thereby creating monopoly in the sector. Even some independent oil marketers are not in support of the Bill”.

On the outlook at the economy, he said, “The global financial melt down is almost over, the shake_up in the banking sector is also over. If the power sector is restructured and basic infrastructures provided, the economy may pick up. Government must be practical about growing the economy and not giving a target of Vision 2020. Vision 1990 did not work, 2000 was not realistic, so we should all do our best to move the country forward and stop talking about vision”.


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