Crude oil
Oil pipeline

By Michael Eboh

The Federal Government has been told to clarify its recent stance and policies on the Nigerian downstream petroleum industry, if it intends to attract increased private sector participation and address the challenges facing the industry.

The Federal Government had recently slashed the pump price of Premium Motor Spirit, PMS, also known as petrol; while it said nothing about deregulation of the downstream sector, but went ahead to add that it would hands off the management of the country’s refineries, as well as discontinue fuel subsidy payments.

Speaking yesterday, at a virtual workshop for journalists on the oil sector reforms, Ms. Ronke Onadeko, a downstream petroleum industry expert, noted that the stakeholders in the Nigerian petroleum industry and potential investors were yet to understand the policy behind the Federal Government’s recent fuel price reduction and the claims by the Nigerian National Petroleum Corporation (NNPC),  that fuel subsidy is gone forever.

Onadeko, who has over 27 years in the downstream petroleum industry, and who is Principal Consultant, Delt-R Company Limited, further called on the NNPC to immediately begin sensitizing Nigerians on the reasons behind for its decision to hands off the management and operations of the country’s refineries.

She stated that the NNPC should provide clarity, especially in the area of the model it plans to adopt as it concerns the refineries, the utilization of the domestic crude allocated to the refineries going forward, as well as other legal and regulatory issues.

She insisted that until the government clarified its stance on whether it has deregulated or planned to deregulate the downstream sector at a set date, uncertainty would continue to prevail among participants and potential investors in the industry.

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In coming out with a clear policy on the downstream sector, Onadeko disclosed that the Federal Government should consider issues and questions bordering on: “What would make an independent marketing company take the risk of importing, that is, assurance that the government is serious this time and will not go back; what regulations and road map would make a successful liberalization and eventual deregulation;

“Potential systemic failures that are envisaged; what will happen when crude prices climb back up and post-COVID-19   NNPC,  PPPRA, marketers and retail consumers; issues that should be brought to the governments attention; and what communication should be made to the public to keep them informed and manage their expectations; such as in the area of benefits of deregulation, oil price habits and influences of foreign exchange (forex).

She further stated that the government should clarify its stance on the issue of subsidy and under-recovery in petroleum products; the future and role of the Petroleum Equalisation Fund (PEF); the plans for the refineries, especially in the crude allocation to the facilities, the lease or other management options planned for the refineries and issues surrounding feedstock for the refineries if the existing arrangement is allocated to the Dangote Refineries.

Onadeko added that the NNPC’s outstanding indebtedness to oil marketers should also be clarified by the government, as well as the issue of the ability of petroleum marketers to source foreign exchange for fuel import; regulatory and legal matters .

She called on the government to immediately commence a sensitization of Nigerians on the benefits of deregulation and on what would happen to the pump price of petrol if the prices of crude oil in the international market rises above its current levels; and if the naira is eventually devalued.

According to Onadeko, once the naira is devalued, irrespective of the low price of crude oil in the international market, the pump price of Premium Motor Spirit, PMS, also known as petrol, and other petroleum products, would rise.

She noted that all these clarifications and sensitization would help attract the much-needed private sector investments in the sector and also help manage the expectations of Nigerians.

Vanguard

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