IN SUPPORT OF A VERY TRANSPARENT AND HONEST DEREGULATION OF THE DOWNSTREAM OIL AND GAS SECTOR AND PRIVATIZATION OF THE OBSOLETE REFINERIES.

SUGGESTED WAYS FORWARD .

Realistically today, if the FGN/ NNPC transparently and honestly deregulate the downstream oil and gas sector, eliminate all the criminal consumption subsidies (including PEF), totally unbundle the NNPC, stop the criminal tariffs on the imported white petroleum products by FGN agencies- NPA,NIMASA, PPPRA etc and Privatize the REFINERIES (the sleaze conduit of the rogues in the system), the price of a liter of the Pms will not rise up to N160 anywhere in Nigeria, as some people have envisaged.

OYA, LETS CRUNCH THE NUMBERS TRANSPARENTLY.

As at close of business yesterday, September 3, 2020, the FOB price of a metric ton of Gasoline (Premium Motor Spirit) closed at $430.

If you apply the CBN retail window exchange rate (N393/$1) to compute it in naira, the FOB cost per liter of the pms as at close of business yesterday will come to N126.00 per liter (Offshore Lome waters)

Over 70% of the volume of PMS consumed in Nigeria takes place between Lagos, Ogun state, River State, Delta State, and Edo State . (PMS consumed in this states do not attract any PEF (Petroleum Equalization Funds) payments).

One of the reasons why they are still retaining this line of petroleum consumption subsidies, when 70% of the volume of products imported and consumed in Nigeria are not PEF allowable is because it affords the criminal elements in the industry room to play games, smuggle large chunk of these products outside Nigeria and still claim PEF on them. (These madness must stop now).

Back to the number crunching.

COMPUTATION OF EX-DEPOT LANDING COST OF THE PMS IN LAGOS DEPOTS THROUGH WHICH OVER 50% OF THE PMS CONSUMED IN NIGERIA ARE DISTRIBUTED.

1. FOB Price per liter of the pms = N126.00

2. Freight Cost per liter to Lagos Depots= N 5.00

3. LC Commission per liter = N 0.88

4. Insurance cost Per liter = N 0.30

5. LC Negotiation fee per liter = N 0.60

6. Interest Cost on Funds per liter (if CBN provides enough dollar to clear LC obligation to suppliers within 90 days) =N 2.58

7. The Criminal Tariff by NIMASA, NPA and PPPRA per liter =N 6.30

TOTAL EX-DEPOT LANDING COST Per liter=N141.66

DEPOT OPERATORS MARGIN =N 5.00

Ex-Depot Price with the criminal FGN agencies tariff charges included =N146.66

IF YOU REMOVE THE CRIMINAL TARIFF OF N6.30 per liter imposed by the agencies of the FGN - NPA, NIMASA, PPPRA etc of over N6.30, the Ideal Ex-Depot Price should drop to N140.30 in Lagos state (without introduction of the fraudulent PEF Subsidies)

Additional Product Distribution cost of N15.00 per liter will make the pms to be dispensed at the filling station at average price of N152-N156 per liter anywhere within this locations of Lagos, Ogun, Edo, Rivers and Delta state, where over 70% of the volume of PMS imported into Nigeria are consumed.

SUGGESTED WAYS FORWARD TO ENABLE US END THIS CYCLE OF 21 YEAR MADNESS IN THE NIGERIA DOWNSTREAM PETROLEUM SECTOR

No sane and rational person will fault President Buhari for finally agreeing to a total deregulation of the downstream oil and gas sector and allowing market forces to determine the production, distribution and prices of the products.

However, what Nigerians demand is honest and transparent execution of it. What they are currently doing at the NNPC and Petroleum ministry are fraudulent variants of deregulation.

YES, things are tough now . It is painful now , but we must have to endure this temporary pain to move forward progressively as a nation

All those threatening hell and brimstone should sheat their sword. The NLC, TUC and all the other agitators in Nigeria are part of the problems and should allow us to do the right things and move forward .

PRESIDENT Buhari should stand firm and allow an end to the criminality in the system starting from now. We must pursue and immediately execute the following Reform Programs

1. Totally privatize the refineries now and allow private sector players with deep technical and financial capacities to collocate new refineries at the current site of the obsolete ones by utilizing their facilities.

It is the highest demonstration of madness and wickedness against Nigerians for Mele Kyari and Buhari to continue to CLING TIGHTLY to these refineries under the control of the NNPC. These Obsolete relics have cost Nigerians over N700billion wastage from 2015 to now ( by ways of failed TAM program and losses/looting at the refineries)

2. Totally eliminate all forms of consumption subsidies in that sector and scrap or merge the PPPRA and other agencies that are drain pipes to our national treasury.

3 Totally unbundle the NNPC to allow its operation to become very transparent like that of the BPs , ENOC, Petrobras, Petronas etc of this world.

4. Divest and reduce the FGN holdings in the JVs with the IOCs down to 40%, let indigenous investors take up the divested stake and allow the JVs to become incorporated . By doing this, we shall be eliminating the cash call program and allow the JVs to become incorporated and have it's own balance sheet . This will help to deepen the market, inject more transparency, attract more investment in that sector and make the JVs to run transparently and profitably like the NLGN .

5. The FGN should totally scrap the PPPRA or merge it to DPR and spin off the PPPMC to operate as a stand alone and enterprise driven entity ( without recourse to subsidized purchases of petroleum products and fx as they doing now . This fuels corruption )

It is the actions and continued meddlesomeness of the PPPRA and PPPMC that created the outcry and outrage in the land today .

If the downstream oil and gas industry had been totally and transparently deregulated and the subsidies removed as the FGN and the NNPC GMD made us to believe in February /March 2020, most deep pocketed oil marketers would have locked in huge cargoes of products when the prices were low in March 2020 . This would have resulted in the provisioning of many low long term price options to the consumers and allowed the market to slide up gradually or slide down at the same pace without Nigerians experiencing periodic sudden and massive jerk up of prices of the products based on the whims, caparices and dictates of the PPPRA and PPPMC as we are currently experiencing .

It is the unending uncertainties in the market, and the lousy/nuisance medlings of the PPPMC and PPPRA in the market , that have continued to derail the positive impacts of deregulation and removal of petroleum subsidies in the system.

Many Nigerians are not aware that even at a period (June 2020) , when other nations were providing Palliatives for their citizens, the PPPRA jerked up by 1,230% their agency fee. What kind of agency will jerk up their agency fee from N0.10 to N1.23 under this covid 19 pandemic . This additional costs on the white petroleum products have been passed over to poor Nigerians. What does the PPPRA plan to do with the estimated N20billion they want to cream out from Nigerians annually under this pandemic?

6. The FGN should also waive all the charges that are collected by the agencies on white petroleum products imports in Nigeria. Agency charges collected by the NIMASA, PPPRA, NPA contribute to the high cost of the white petroleum products in Nigeria. These charges should be scrapped immediately.

Removing the combined charges of N6.30 per liter collected by NPA, NIMASA and PPPRA will help reduce the burden on Nigerians and bring down the pump price of the petroleum products from the current N161 per liter to a manageable N155 per liter today

This country require honest and creative minds to make it work for the good of all.

If this dowmstream oil and gas in transparently and totally deregulated today while eliminating all forms of consumption subsidies and price controls by the PPPRA, many deep pocketed investors will swoop into the Nigeria market . It will also help marketers to plan for the long term and buy commodities hedges and futures that will allow price stability and market competitiveness that will crash the prices of the commodities over time.

Nigeria is a mega hub that will take over the transparent supply of products to other west Africa countries, who do not have the kind of deep and robust petroleum distribution facilities that we have in Nigeria today

President Buhari can still redeem his image amongst his teeming supporters. We have freely provided an honest template above that can help this country

However, if he allows the ravenous wolves and hyenas that he surrounded himself with to continue to deceive him as they have done over the last 5 years so that they can continue to line their filthy pockets, good luck to him

God Bless Nigerians

Dr Nnaemeka Onyeka Obiaraeri, FICA