The Nigerian government is not committed and lacks a political will to end subsidy on premium motor spirit ( PMS ) by 2022. This was the consensual view of the stakeholders at the ongoing Oil Trading & Logistics 2021 Expo, Africa Downstream Week in Lagos.
According to them, political correctness ahead of 2023 general election, will make it quite impossible for the government to make critical decisions that would affect operators in the petroleum sector.
Mr. Tunji Oyebanji, Managing Director, 11 PLC , who doubles as the moderator of the session, in his remark on the topic: The Nigeria Fuels Congress”, warned that until government allowed market forces to dictate the prices of petroleum products, especially PMS, Nigeria would be mortgaging its future.
He noted that lack of political will, inefficiencies and policy inconsistency are some of the factors that would take the shine off the recently passed Petroleum Industry Act (PIA)
While speaking from a business strategy perspective, Dr. Muda Yusuf, Immediate Past Director Lagos Chamber of Commerce and Industry, in his statement as one of the panelists, insisted that full deregulation will not happen in the life of this administration due to inconsistency in the way issues of Petrol subsidy and other critical industry decisions are made by the Government.
He said, “Political considerations, especially as 2023 general elections draw near, the stance of labour and the activities of the entrenched interests profiting from the subsidy arrangement are still strong variables in the reform equation.”
“The petroleum downstream sector is the biggest victim of the political economy challenge posed by present administration.
According to him, Nigerian economy has suffered considerable setback due to political economy issues that have limited growth of the oil and gas sector for several decades.
He said, “One of the biggest shortcomings of the Nigerian economy is the policy and regulatory environment in the petroleum downstream sector.
“It been putting tremendous pressure on foreign reserves, weakening the exchange rate, creating liquidity problems in the forex market, perpetuating corruption, and creating a huge opportunity cost for the economy.
“It has been difficult to optimally unlock the huge investment and economic value in the sector over the past five decades.
“The sector has suffered a great deal of divestment, it has been difficult to attract quality investment, opportunities to create quality jobs has been lost.
He, therefore, warned industry stakeholders to be cautious of the optimism around the PIA, adding that over the years, Nigeria has seen a wide gap between the rhetoric of reforms and the reality of it.
He said, “Strong and entrenched interests in the perpetuation of the status quo are still very much in place to undermine the reform endeavours. Labour is still insisting that deregulation would only take place when there is adequate local refining capacity. Labour is still not shifting ground on this.
Dr. Yusuf cautioned stakeholders that pronouncements at the highest level of political leadership in the country are pointers to a lack of will to address oil and gas industry reforms.
Mr. Stilian Mitakev, Group Managing Director, Swift Oil Limited/ Assistant Secretary Depot and Petroleum Products Marketers Association of Nigeria, claimed that the Federal Government is not genuine and can’t be trusted with the planned removal of the petrol subsidy .
According to him, from rhetoric of Minister of Finance, Budget and National Planning, Zainab Ahmed over the plan to end petrol subsidy by June 2022, there is fear that the government is not serious about ending the subsidy regime.
He said, “ This is not the first time that the present administration will be promising to remove subsidy. There have been several failed attempts in time past by the present administration.
“The subsidy on PMS is likely to escalate to N3 trillion before the end of the year, which is about 44 percent of the 2022 proposed budget. This is the same amount needed to fix education, provide infrastructure ,develop the health sector and deal with other critical national development initiatives.
He claimed that the inclusion of the Petroleum Equilisation Fund (PEF) in the recently passed PIA will continue to enshrine arbitrage and round tripping in the downstream sector.