MOMAN, IPMAN, FCCPC, others recommend strategies for effective implementation of petrol subsidy removal
Major stakeholders in the Nigerian midstream and downstream sectors have called on the Government to implement appropriate transport palliatives for the public and movement of agricultural produce, ensure transparent and effective communication, improve access to foreign exchange and trade finance, guarantee strategic stock, and provide access to crude oil for indigenous refineries ahead of the plan to embark on the total removal of petrol subsidy.
These were some of the recommendations of the panelists at the virtual workshop with the theme: “Deregulation of the Nigerian downstream sector: The day after” put together by the Nigerian Petroleum Downstream Industry, in collaboration with the African Refiners and Distributors Association, and hosted on Thursday.
The workshop offered the industry regulator and all the players within the midstream and downstream value chain, the opportunity to deliberate on measures that needed to be put in place ahead of the full implementation of the deregulation of the downstream sector of the oil and gas industry and the Petroleum Industry Act (PIA) in Nigeria.
The panelists at the online session also charged the operators in the industry to institutionalize the professionalization of the midstream and downstream petroleum sectors ahead of the take-off of full deregulation.
Mr. Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PricewaterhouseCoopers (PwC), in his presentation charged the government and the industry regulator to identify potential pitfalls that could trigger resentment from the citizens before, during, and after the removal of the petrol subsidy.
According to him deliberate public sensitization, industry engagement, and collaboration with civil society organisations are needed to entrench public buy-in during the implementation of the full subsidy removal by the government.
He said, ” In the course of implementing the policies, the government’s interpretation of its strategy on full deregulation and subsidy removal must be issues-based and not confrontational.
“The policymakers must also weigh the risk scenario and public responses. They must also put in place measures to safeguard the public trust.
The PwC Africa Tax leader also recommended that the deregulation policy could also be implemented in phases and a sustained manner, with a commitment by the government to guarantee petroleum product availability.
He said, “Government should also identify stakeholders who are for, indifferent, and against the deregulation policy.”
Oyedele noted that the current cost of subsidy on petrol is under-reported, inaccurate, and not reliable, charging the government to establish the true cost of the subsidy.
Fiscal Policy Partner however encouraged the Nigerian government to embark on evidence-based impact assessment and narratives concerning forex, inflation, and cost. He mentioned the need for policymakers to conduct modeling and simulation of the deregulated regime to identify possible pitfalls.
Mrs. Morayo Adisa, Technical Consultant to the Executive Vice Chairman/CEO, Federal Competition and Consumer Protection Commission (FCCPC) who represented Mr. Babatunde Irukera, CEO FCCPC, in her presentation charged the government to protect the rights of petroleum products consumers by implementing measures that would help to regulate the prices of the product and services in the downstream sector, including setting maximum retail prices or implement price stabilization mechanisms.
She also emphasised the need for the Authority to establish quality and safety standards for petroleum products including fuel quality standards, safety regulations for storage and transportation, and environmental regulations.
She said, “Safeguarding consumer’s interest ensures that they are accessing petroleum products and services at affordable prices, which would in turn promotes economic stability.
She revealed that implementing consumers’ rights will help the industry maintain a positive reputation and trust with customers and stakeholders.
Alhaji Lawal Yusuf Othman, National President of the Nigerian Association of Road Transport Owners, (NARTO) in his presentation explained that the full deregulation of the downstream sector and full removal of petrol subsidy will not throw up a bundle of opportunities and challenges into the operating environment.
He however urged the Government and industry regulators to take proactive measures before the full implementation of the policy by addressing any foreseeable dangers that are likely to emanate after the take-off of the deregulation.
He said, “The loading of petroleum products from the depots takes longer periods, about a week on average, and it sometimes takes another one week to move the products to the retail stations.
“Loading and discharging of products at the depots and retail ends should be done expeditiously to reduce the waiting time of trucks. This will improve their turnaround time.
“Major roads across the country should be rehabilitated and new ones constructed to make the transportation of petroleum products safer and easier.
“The existing government refineries and pipelines should be overhauled and revamped refineries, to boost local refining capacity and reduce illegal bunkering and refining activities,” the President of NARTO said.
He also encouraged petroleum marketers to be prepared to guarantee prompt freight payment to transporters.
Elder Chinedu Okoronkwo, National President, Independent Petroleum Marketers Association of Nigeria (IPMAN), who was represented at the session by Mr. Mike Osatuyi, IPMAN’s National Operations Controller, revealed that the marketers are in full support of the plan by the government to embark on full deregulation of the downstream sector.
He urged Nigerians to prepare to spend up to N750 on every litre of petrol, after the full implementation of the subsidy removal, adding that the pump price is likely to drop to around N500/litre if the Central Bank of Nigeria (CBN) showed readiness to provide forex to marketers at the official rate.
Osatuyi also charged the government to channel savings of subsidy provisions to provide palliative to the masses, asking the government to be alert and sensitive to resentment from the masses.
Mr. Olumide Adeosun, Chairman Major Marketers Association of Nigeria, who moderated the session, emphasised the need for the government and industry regulator to consistently limit and mitigate against petroleum product supply gaps and price volatility related to exposure to international markets.
He said urged the major players in the sector to promote best practices in Health, Security, Safety, Environment, and Quality (HSSEQ), embrace automation and technology, managing customer expectations as part of strategies to win public support strategies to ensure a sustainable future for the petroleum downstream sector.
He disclosed that the gains from the removal of fuel subsidies can only be achieved through effective change management, identifying potential pitfalls, and mitigation strategies.
He said, “As we journey towards full deregulation, there is a need for the government to open access and optimize the country’s logistics infrastructure, including pipelines, pumping stations, and storage depots.
“As part of the preparation for a fully deregulated market, the Nigerian Midstream and Downstream Petroleum Authority(NMDPRA) needs to continuously determine local refining capacity, project and request crude oil requirements from the Nigerian Upstream Petroleum Regulatory Commission.
“To address the unmet national demand, the Authority must establish transparent, inclusive, and competitive guidelines for importation. These guidelines, which should provide the pathway for obtaining foreign exchange, need to be made public, and implemented in good time before the
commencement of price deregulation,” Adeosun said.
The MOMAN Chairman however revealed that participants at the workshop emphasised the need for continuous industry engagement, collaboration, and public sensitization to aid public buy-in on new policies by the government.