THE way forward: I make bold to state that the Country has no business importing refined products when we can ‘fix’ the Refineries to work and build new ones to increase our refining capacity. It is a paradox sort of. It will be cheaper in the long run than sustained importation. Local refining will engender Job creation, building of technical human capacity, sustenance of our economy instead of foreign countries economy, growth in GDP, cheaper fuels, income for Government etc.
Deregulation is the only viable solution, definitely not arbitrary pump price fixing and subsidy suspension. Deregulation is all encompassing. Government should remove itself from active participation in the Supply and Distribution/Marketing of petroleum products and focus only on standards, guidelines and consumers’ protection for the industry.
While we have lost better timing to deregulate under this Government, I am persuaded that it is still a good time to deregulate, the President should not lose this great opportunity. Somebody should shout it to the ears of the President to go for it now. We lost a good opportunity in 1999 under Gen. Abdulsallam. The President should be concerned about building an enduring structure that will outlive him. Deregulate both PMS and Kerosene Now!
Some positives of deregulation are: economic growth; stimulation of investment opportunities, full cost recovery for business operators, which promotes sustainable business and business continuity; uninterrupted fuel availability; discouragement of corruption; job creation and freeing of vital scarce funds for developmental programmes.
Suggested roadmap to Deregulation : The four Government Refineries should be urgently and immediately sold off. Whatever needs to be done to achieve this must be emplaced immediately. “BuhariPhobia” cannot sustain a dead system. Structures need to be built and this cannot be achieved by perceived ‘fear’ of Buhari. A good case is that of electricity supply. There was perceptible ‘improvement’ in electricity supply early in the life of this regime but where are we today? We have almost gone back to where we were before; my yardstick is in the hours Nigerians get light not any statistics on MW generation!
Unfortunately, Government will always need to sacrifice sound economic judgment on the altar of political exigencies. State-run businesses are often poorly run and susceptible to corruption. Government, however, should retain nominal shares in the refineries. Processes for the establishment of private refineries should be hastened and the major multinational oil companies should be made to buy into the project.
Government should also privatize PPMC with the Industry major players as shareholders, but still hold nominal shares and make equal accessibility of the privatized PPMC distribution assets (Storage depots, pipelines etc.) a condition for the privatization. Uniform pricing of PMS and HHK should be abrogated.
The government should also emplace policy and guidelines for deregulation with capped pump prices adjustable bi-weekly. The capping will be only for the first few years of deregulation, after which the system is to run on its own. When we have enough local refining capacity, there may be no need for continued capping of the pump price.
An Industry Regulatory body, rather than a parastatal should be set up. This Body should design template of cost build-up, using the advised Refineries conversion or processing cost known for locally produced petroleum products. Refineries should buy crude oil from NNPC at internationally quoted price;The pump price should still be import-parity denominated. This is to hold only in the period that local refining capacities cannot sustain local demand.
The import-parity-price should be for full cost recovery by the Importer-Marketer, without any subsidy component.The difference between the local refining price (for locally refined product) and import parity price for (for import product) should be kept in a Price Stability Fund for future use. The Stability Fund should be used to absorb any spikes in import parity price within the two-week window of fixed price.
The 445,000 barrels daily allocation should be processed by NNPC through sound off-shore processing arrangement. As local refining capacity increases, the off-shore processed quantity reduces. Obviously, the cost of this will be higher than locally refined but lower than import parity price presently used in PPPRA template. The finished products components not required locally should be sold off off-shore and the proceeds used to buy needed PMS or transferred to the stability fund.
In the interim, the privatized PPMC should continue to be the marketer of finished refinery products selling to the Distribution and Marketing Companies.
Only duly registered Marketing Companies should be allowed to import products and only real Marketing companies should be registered by DPR, PPPRA, and PPMC etc.
Refineries should buy crude oil from the NNPC at internationally quoted price. Private Refineries should have access to buy crude oil from NNPC at international price. Both the sold Government Refineries and new private Refineries should be allowed to sell to both the local market as well as international market (Export).
A template for export-parity-price should be developed by Regulatory Body, in such a way that it is more profitable for the refinery to sell into the local market. Private Refineries should sell directly to the registered Marketing Companies only. These are suggested roadmaps that could be worked out in details and modified.But Buhari should go for deregulation now. Of course, necessary consultation and information should be done.
-Concluded
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