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Deregulation: FG puts measures in 2010 budget to cushion effects

BY Oscarline Onwuemenyi
ABUJA — In what might appear as a final declaration of its intent to deregulate the downstream sector of the oil and gas industry, the Federal Government announced on Thursday that it has put in place measures in the 2009 supplementary budget and the 2010 budget to cushion the effects of the policy.

Flare stack of a nuclear power plant.

This was disclosed by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Shehu Ladan, while presenting a paper entitled: Downstream Petroleum Sector: The Imperatives of Deregulation, before a coalition of legislators at the National Assembly in Abuja.

The NNPC helmsman disclosed that complimentary measures have been included in the 2009 supplementary and 2010 budgets to cushion the likely effects of the policy, adding that the measures included the provision of intra_city rail transportation in six major cities of Lagos, Kano, Port_Harcourt, Jos, Enugu and Maiduguri as pilot projects.

Mallam Ladan also said plans were underway by the federal government to commit N373 billion to massive road rehabilitation and new construction interventions across the entire country in addition to procurement of 25 railway locomotives.

He added that, “Part of the complementary measures to cushion the effect of deregulation on the low income and the poor household include the provision of low income housing scheme and civil servants mortgage scheme and N10 billion revolving mass transit scheme in 2009 supplementary budget.”

Meanwhile, for what appear like the umpteenth time, the management of the NNPC has thrown its full weight behind the planned deregulation of the downstream sector of the petroleum industry by the federal government.
According to Mallam Ladan, the speedy implementation of the deregulation policy would go a long way in encouraging inflow of private sector and international investment in the downstream sector.

“Without mincing words, let me join my predecessor to state that NNPC is 100 percent in support of deregulation not just because it will support our business, but because this is the only way that majority of Nigerians will derive fair deal from the abundant petroleum resources in the country. With deregulation, consumers will enjoy fair product prices and operators will be in a position to recover full cost and reasonable margins on their operations,” Ladan stated. He argued that implementation of the policy would give rise to efficiency in product usage, product availability and effective competition among investors hence putting an end to the so called NNPC monopoly.

Ladan further observed that it is only when a deregulated regime is put in place that the private refineries that have been licensed can really take off, noting that investors who have been given licenses to build refineries are scared of venturing into the multi_million naira project because of the regulated regime in Nigeria. He informed that deregulation is the bedrock for the transformation and growth in the downstream sector.

“Clearly there is the need to move away from the current ad hoc pricing to an automatic price adjustment mechanism that is truly de_politicized. In the transition to full market liberalization, the regulator has the responsibility to monitor and check anti_competitive behaviour such as price gouging and predatory pricing.”

The NNPC Group Managing Director enthused that government was prepared to bring organized labour on board in the monitoring and evaluation of the deregulation initiative as a way of delivering on its promises.

In his remarks, the Chairman of the Coalition, Honourable Bassey Etim Bassey, said the GMD was invited to outline the merits and demerits of deregulation to members of the National Assembly to enable them take informed position about the policy.


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