Develop local production before deregulation, PENGASSAN tell FG

Solomon Ezeme

The leadership of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), said it would not support the Federal Government’s full deregulation of the downstream sector of the petroleum industry except domestic refining of petroleum products is guaranteed.

PENGASSAN President, Festus Osifo, stated this while speaking at the 2021 NAEC Strategic International Annual Conference held in Lagos on Tuesday.

He insisted that union will only support the deregulation of the downstream if the government is ready to develop local production capacity by rehabilitating the refineries.

PENGASSEN, he said used to be a strong supporter of deregulation until the federal government began to fail in its promises, resulting in what he described ‘trust deficit’.

He said: “We have spoken a lot about the advantages of deregulation but have not talked about it disadvantages.

“There is no system in the world where you have a policy direction that has advantages without disadvantages.

“We have seen societies grow without capitalism, for example China.

“It will be very difficult for government to transfer its inefficiency to the masses.

“If the refineries are working, I don’t think Labour would have opposed government’s plans to deregulate.

Using the power sector as a case study, Mr Isifo explained that the way and manner with which the Government had implemented deregulation in the energy sector, has made the masses lose confidence in them and doubt the sincerity in its current plans to deregulate the petroleum downstream.

“Our position before was that government should deregulate but fix the refineries.

“What Labour is saying today is that Government should fix the refineries. If they are working, we will support deregulation.

“We were in this country when power was privatized. After privatization, the GenCos and DisCos were sold to friends of the government.

“They used the tax payers’ money to fund them.

“When things later were not going well and they started complaining, Government again used the tax payers’ money to solve their problems.

“So, there’s the issue of trust deficit. Trust deficit is the greatest problem in this system.

“So, for us Labour, we are supporting deregulation but the deregulation must be based on local production,” he noted.

Buttressing the point made by PENGASSEN, Tunji Oyebanji, Managing Director/CEO at 11 PLC and former President, Major Oil Marketers Association of Nigeria (MOMAN), said Labour is not sure whether the Government will consider the interests of the masses when it removes subsidy on petrol.

He, however, noted that Labour has been one of the major challenges to the attainment of the planned deregulation.

“There has been resistance from Labour which is fighting for the interest of the masses. And I understand their position.

“They are concerned about the inadequacy in local production capacity that has led to all of our product being imported.

“For Labour, there has always been a great concern about what happens with the subsidy.

“Once we stop paying subsidy, will the money recovered now be used in the interest of the common man?

“For the investors, when price is fixed, it discourages investment. Investments won’t come because people are not certain about prices,” Oyebanji said.

On downstream deregulation, he said, “NNPC remains the major importer of gasoline in Nigeria.

“We have heard a lot of pronouncements about deregulation. No access to foreign exchange for private importers.

“There is a lot of poor infrastructure in the downstream.

There’s a lot happening outside Nigeria that we cannot fully apply here because of our margins.

“But we need to change the petroleum landscape by growing and developing the infrastructure, and by that, make Nigeria a hub for investments.

“There’s need for a balance between sustainability and the provision of value to Nigerians and the Nigeria economy.

“Deregulation will allow the market determine the prices itself.

“If Nigeria deregulates, it will not only become a net exporter of gas but it will also be able to employ a lot of its teeming unemployed youths roaming the streets today,” he said.

He further explained that Nigeria would become a net exporter of gas if it can maximize the opportunities [presented by the new PIA (Petroleum Industry Act) to deregulate the petroleum downstream, especially its pricing system.

Oyebanji strongly condemned subsidizing petroleum through borrowing, and therefore, asked for its removal.

“Our industry is very is very volatile. So, the need for deregulation is very imperative.

“It is better to have a situation where prices are responding to the market forces.

“You won’t even notice the daily changes. That’s the difference with having the market determine the price versus the government regulating the price.

“Hopefully, with the PIA and the encouragement coming, we will see more improvements in the sector which will help us become a net exporter as far as gas is concerned.

“There’s an argument for deregulation, and by extension, the removal of subsidy.

“Deregulation is aimed at improving business operations and removing regulated pricing system which would result in the growth of the oil and gas industry.

“It requires a strong regulator to enable a fair and effective price system in the industry.

“Borrowing to pay subsidy is not sustainable,” he said.