The fixing of petroleum products’
prices is denying the country
investment in the downstream sector of the oil and
gas industry and depriving Nigerians certain benefits
from the country’s petroleum resources, industry
stakeholders said on Thursday.

The Federal Government currently regulates the
prices of Premium Motor Spirit, otherwise known as
petrol, and kerosene, and subsidises their prices to
enable Nigerians to get the products at the regulated
prices.

The regulated price of petrol is currently N87 per litre
while that of kerosene is N50 per litre. But the
products are sold above the regulated prices in parts
of the country, despite government’s subsidy.

The Group Managing Director, Nigerian National
Petroleum Corporation, Dr. Emmanuel Kachikwu, in
his address at the National Association of Energy
Correspondents’ conference in Lagos, said, “Subsidy
creates distortions in government revenue
distribution as a result of round-tripping and
unnecessary carry-over of expenditures every year in
a way that is difficult for government to control or
sustain.”

He noted that subsidy accounted for 20 per cent of
the Federal Government budget in 2013.

Kachikwu, who was represented by the acting
Managing Director, National Engineering and
Technical Company Ltd, Mrs. Bola Ashafa, said,
“Deregulation policy is essential to the
transformation and growth of the downstream sector
of the oil and gas industry.

“Speedy implementation of this policy in Nigeria
would go a long way in encouraging inflow of private
sector and international investment; ensure that
Nigerians derive fair deal from the abundant
petroleum resources in the country through fair
product prices for consumers and full cost recovery
and reasonable margins for operators.”

He said the implementation of the policy would
entrench efficiency in product usage; product
availability and effective competition among
investors, hence putting an end to product shortage.
He, however, said critical enablers such as security of
the product and distribution infrastructure must be
assured to guarantee the availability of the petroleum
products at affordable prices.

The NNPC boss said, “We are fully committed to
reforming the existing refineries and boosting
domestic petroleum product supply. Currently all the
refineries have been re-streamed but are yet to attain
optimal capacity.

“Removal of price control mechanisms is deemed
imperative to ensure full growth of the sub-sector by
allowing private stakeholders to complement the
government efforts in developing the industry.”

He said the NNPC would continue to maintain
stability in the supply and distribution of petroleum
products nationwide to avoid energy crisis.

According to him, the corporation has enough stock
of petrol to service the country for 25 days at a
national consumption rate of about 40 million litres
per day.

“Unfortunately, the stock is not immediately available
across the 21 depots in view of the challenges facing
the distribution pipelines facilities,” he said.

The Chairman and Managing Director, Mobil Oil
Nigeria Plc, Mr. Tunji Oyebanji, said, “What we are
talking about is deregulation of the prices; for the
prices to be determined by market forces,” but that
“there has to be government regulation in terms of
standard and quality.”

He noted that there was a time in the country where
prices were not fixed by the government.

According to Oyebanji, the lack of full deregulation
generates uncompetitive climate and lack of
investment and innovation.

He said, “We are looking for a sustainable industry
where pricing is liberalised, leading to steady supply,
increased profitability, large-scale investment in
refineries, increased competition, and an industry
where technology plays a role. But currently there is
no incentive.”

He said the government had yet to pay them their
subsidy arrears.

On his part, the Director-General, Lagos Chamber of
Commerce and Industry, Mr. Muda Yusuf, decried
what be called the absence of clear policy direction
from the government with respect to the oil and gas
industry.

According to him, there are people who want to
invest in the industry but who are being discouraged
by lack of a clear policy direction.

“It is important that we quickly deregulate the
downstream sector to attract investment,” Yusuf said.

The Managing Director, NIPCO Plc, Mr.
Venkataraman Venkatapathy, said the move from a
regulated market to deregulation should be done in a
phased manner, adding, “We must take a holistic
approach rather than one pre-determined solution.”

The President, Petroleum and Natural Gas Senior
Staff Association of Nigeria, Comrade Francis
Johnson, said, “As a labour union, we are not averse
to deregulation but that the focus of deregulation
should be based on local production rather than
importation.