Full deregulation is impossible in absence of PIB – Analysts warn NGF
Some analysts spoken to by EnergyDay have urged the Nigerian Governors’ Forum, NGF, to focus more on the passage of the Petroleum Industry Bill, PIB, instead of recommending full deregulation of petrol, noting that full deregulation of the downstream sector of petroleum industry is not going to be effective without passage of the bill.
According to them, increasing pump price from N162 to N380 without palliative and incentive by the Federal Government to cushion the effect would amount to collapsing the economy by widening exchange rate which could lead to inflationary scourge.
Professor Wumi Iledare, Professor of Petroleum Economics and Policy Research, in an interview with EnergyDay Nigeria, picked holes in the NGF’s communique.
In his reaction to the communique, it would have been better for the Forum to focus on the passage of the PIB as a prerequisite for petrol price increase and full downstream deregulation.
“Honestly, I am lost for words, I read the communique but what needs to be evaluated is the technical report backing the communique. Deregulation cannot be drastic but gradual and partial over a period of time!
“I am also shocked that the motive is to engage federation account. That’s inviting trouble because it is all about having more money to share”, he said.
He stated further “ Full deregulation will not be effective without PIB becoming an act.”
The professor, who is also the Chairman, Petroleum Economics & Management, Institute for Oil and Gas Studies, Cape Coast, Ghana, disclosed that if the PIB is not passed into law, another populist Nigerian President can always come and revert back any policies of the government using the Petroleum Act of 1969 as amended.
He said, “Meanwhile, this is being pragmatic as we await the implementation of PIB. A partial and gradual decontrol will ameliorate the shock on Nigeria economy.
“Going from N162 to N385 per litre, may create disequilibrium beyond the sharp rise in the exchange rate. So let the Nigerian National Petroleum Corporation, NNPC continue to lower price only in NNPC filling stations for public transporters . Of course, it pre-supposes integrity in the avoidance of round-tripping”, he noted.
“Just thinking outside the box away from my usual what ought to be, N385 is still a competitive price, judging from prices in boarder countries, ” the Professor charged.
He also called for the decentralization of the product market, saying it is also important, especially where Private oil companies are allowed to import petrol into the country.
Adeola Adenikinju, Professor of Energy Economics and Director of the Centre for Petroleum, in an interview with this medium said that the price of PMS cannot be determined by the Governors.
“The prices are determined under a full deregulated structure by forces of demand and supply. The market will be fine when all other conditions that will lead to the liberalisation of the market are fulfilled”, he told this magazine.
He said, “So, it is not something that you do by fiat or decree. The sustainable framework is to liberalise the market, allow the private sector drive efficiency in the sector.
“Under this arrangement, anybody can enter once you meet the quality standard to bring in fuel. Anybody can set up refineries once you meet certain criteria. That will allow for competition, and that will be good. Eventually, competition will bring down prices and introduce efficiency to the system.
The Professor of Petroleum Economics further bemoaned the approach of the Governors’ Forum, adding that they cannot just wake up from a meeting to fix the price of PMS. He challenged them to rather mount pressure on the National Assembly to pass the PIB.
He said, “This bill when passed will address so many important things including revenue shortage, and further salvage the entire downstream sector. The PIB (the PIGB in particular) will ensure that that sector, in terms of governance.