The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr Emmanuel Kachikwu, has given a vent into the mindset of his administration of the key institution in Nigeria’s oil sector, by breaking against subsidy.
Subsidy creates distortions in government revenue distribution, he said.
Kachikwu, alongside other stakeholders the National Association of Energy Correspondents (NAEC) Conference held at the Eko Hotel & Suites, Victoria Island, Lagos, on Thursday, that fuel subsidy was an unsustainable drain on the economy.
For him, there is urgent need to speed up deregulation of the nation’s oil and gas sector.
The NNPC boss, who was a keynote speaker at the event, said, “Subsidy creates distortion in government revenue distribution as a result of round-tripping and unnecessary carryover of expenditures every year in a way that is difficult for government to control or sustain.”
His paper was titled “Energy Crisis and Sustainable Development in Nigeria: The Way Forward.”
The NNPC boss, who was represented by Mrs Bolanle Ashafa, Acting Managing Director of Nigeria Engineering and Technical Company (NETCO), said deregulation would encourage domestic private sector participation and inflow of foreign investments.
According to him, deregulation will also provide a fair deal for Nigerians from the abundant petroleum resources, through fair product prices for consumers, full cost recovery, and reasonable margins for operators.
“Subsidy accounted for 20 per cent of the federal government budget in 2013. Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors, hence ending products shortage.
“However, critical enablers such as security of supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices,” he said.
Kachikwu said that the corporation was fully committed to reforming existing refineries, to boost domestic petroleum products supply.
He said that the refineries had been re-streamed, but were yet to attain optimal capacity in production.
“Removal of price control mechanisms is deemed imperative to ensure full growth of the sub-sector, by allowing private stakeholders to complement the effort of government in developing the industry,” he said.
He reassured Nigerians that NNPC would continue to maintain stability in the supply and distribution of petroleum products nationwide. He added that the Nigerian oil and gas industry would be transformed for greater efficiency and sustainable growth, through market reforms, diversification of the revenue base and monetisation of the natural gas resources.
“We will focus on the need to address infrastructure constraints, to ensure sustainability of gas and petroleum products supply and distribution nationwide. We will be tackling infrastructure gaps and promoting inclusive growth, as well as capacity building,” he said.
On his part, Comrade Francis Johnson, National President, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) stated that for deregulation to be sustainable in the oil and gas industry, there must be entrenchment of consistent, stable and globally comparable policy and institutional framework.
Meanwhile, Chairman, Managing Director, Mobil oil Nigeria plc, Mr. Tunji Oyebanji, stated that the regulated prices of petroleum products can’t sustain the country’s economy.
According to him, “a sustainable downstream sector would liberalize pricing, produce large scale investments, competitive landscape, create technology tools (that involves pricing, control systems), support services, making NNPC an effective competitor and not a regulator, ensuring safer trucking and operations, encourages anti-monopoly legislation, consumer protection and product quality.
Moreover, the implications of subsidy removal will bring about: possible increase in the pump prices, significant reduction in government expenditure, increased confidence from the international community in the Nigerian economy, improved transparency and accountability in the downstream sector for all stakeholders and increased competition and investment in the sector by players.
In his remarks, Mr Deji Haastrup, the General Manager, Policy, Government and Public Affairs, Chevron Nigeria Ltd., said that the cost of executing projects and services in the industry, remained high in spite the dwindling price of crude oil.
Haastrup also identified oil theft and illegal refineries as other challenges facing the industry in Nigeria.
