A Review of the Nigerian Energy Industry

Nigeria: Fuel importation’ll continue after PIB becomes law – Dakuku

Dakuku Peterside04 November 2014, Lagos – The Chairman , House of Representative Committee on Petroleum Resources (downstream) , Honourable Dakuku Peterside is optimistic that the Petroleum Industry bill (PIB) which has suffered delays for over 8 years due to lack of harmonization of contending interests, would be passed into law before the end of the 7th legislative regime . He spoke with the Acting Energy Editor, Anayo Korie on wide range of issues concerning the downstream sector of Nigeria’s oil industry. Excepts:

What is the House of Representative doing to ensure that Federal Ministry of Finance settle subsidy claims of oil marketers to avert fuel scarcity now that Christmas and 2015 General Elections are fast approaching?

The commitment of National Assembly is to serve the interest of all Nigerians by making good laws for the governance of the country and for the welfare of the citizens, as most of the oil marketers are Nigerians. For the fact they are Nigerians they are serving the interest of Nigerians .Therefore, our interests in payment of importers claims is for them to continue to import fuel which is an interim measure to sustain the running of Nigerian economy.

On the long term , we will not support the importation of fuel into the country when regulatory frame work is okay to guarantee the refining of petroleum products in-country .For now that is one of the measures that keep the nation moving .The marketers will continue to import fuel for the nation to have uninterrupted supply of Petroleum products ,because if they stop importation of fuel today there will be crisis ,none of us can imagine the dimension of the crisis. .If the downstream sector of the oil industry is shut down today it will affect all sectors of the economy.For instance it will affect homes, industries,transportation .The reason for our interest in the downstream sector is to protect Nigeria businesses.We don’t have to throw people out of employment.

Therefore, the question is what are we doing?, we are doing three things to keep Nigeria moving on the right track. One is to accelerate the passage of petroleum industry bill. Secondly, we are engaging the Ministry of Finance to pay for the imported products into the country .We have told the Ministry of Finance ,there is no justification for owing the importers .The truth is that the bench mark for crude is $77.05 ,crude oil price has not fallen below $90 per a barrel ,absolutely there is no justification for the delay in the payment for now.

The target at the time we passed that budget was 2.3 million barrels per a day ,again the fluctuation of 2.4 million barrels is not the justification for owing the marketers. When we approached the Ministry of Finance to pay, they complained of not having money. Therefore, in this issue of corruption, they are delaying things ,we have to investigate the matter properly again. We know of the incidence of oil theft, but not to the extent of saying ,there is no money to pay for service rendered.

On the preparation for the payment for importation, I want to commend Petroleum Products Price Regulation Agency PPPRA for their role in the area of processing and documentation for the marketers who imported fuel . The House of Representative is pleased with their conduct.

We are still talking to Ministry of Finance on the best way to pay marketers for fuel imported into the country. The House of Representative is searching for the best approach to handle the subsidy regime. We have observed that subsidy in itself is not sustainable. No matter how we look at it, the initiative cannot last for long ,Addressing it with legislation now is not the appropriate time. For now, we have to block some loopholes. We are not resting on our oars, because whatever happens now will impact on the economy. We don’t want Nigerians to suffer or the economy to be grinded to a halt.

You will understand that we are approaching 2015 General Election , which is critical to Nigerians. If we get it wrong, the nation will begin to witness demonstrations and riots all over, thereby affecting Christmas celebration and most importantly, 2015 transition .We don,t want such negative vice to happen to the nation. We are committed to ensuring that peace thrives.

What is the National Assembly’s role in mitigating the risk undertaken by oil marketers in fuel importation?

Every business venture comes with its associated risks. An entrepreneur is the one who takes risks. One of the risks associated with business is that of anticipation. If it goes well, will the businessman bring the profit to national purse ? The answer is no, or any one of us the answer is also no. They should have the ability to absorb the shock. In the interim ,the National Assembly will not do anything to combat the risk associate with anticipation.

Very soon when the House of Representative resumes from recess, the PIB would be laid on the floor for deliberation and approval. The Senate will follow suit ,before it will presented to the President for ascent . There is transitional legislation for PIB that will take care of Pre and post PIB regime .For instance, downstream regulation is done by multiple agencies such as Department of Petroleum Resources, (DPR ) and the Petroleum Products Price Regulation Agency (PPPRA) to an extent. If you talk of the quality of petroleum product that is regulated by DPR, the importation of Fuel is regulated by PPPRA,there are some aspects of regulation done by Petroleum Product Marketing Company (PPMC), and Nigeria National Petroleum Company.

Now in the new post PIB regime, it will be one -stop shop down stream to regulate the demand and consumption of fuel in Nigeria. Between that time, the PPPRA will transit to DPRK After that transition, regulation will take care of what is happening now.

The importation of fuel will still continue even when PIB is passed into law,that is when regulation will be paramount. The fact that the PIB becomes law does mean that refineries would be built immediately. Certainly not. The fact is that we will continue to import fuel while regulation will cheek quality to avert oil traders going to bring substandard fuel to the country .In post PIB, the players will still remain the players because they have the facilities already.They have tank farms, trucks, marine vessels and other logistics that will enable distribution of fuel nationwide .What will happen is the change of operation.

However, for any importer to bring petroleum product into the country there is the need for him to have import license in order to bring the right quality. We have to know the source of the fuel, and to know if the products meet our specification.

When will Nigeria stop importing fuel, considering the fact that she is one of the largest producer of hydrocarbon in Africa?

We are not happy that Nigeria is still importing fuel to meet our domestic needs, We are not pleased that the nation is also importing , almost all the components used in the formulation of lubricants. That is not where we desired to be ,or wanted to be. That is not our vision. It never makes us happy, We are concerned like every other Nigerian .The reality is that , though it may not be palatable that today ,we don’t have refineries to produce these derivatives locally. Our refineries are not working to our desired level .

However, in the short term, we have to import fuel because we cannot build refineries over night . The most important thing we want to do is to provide the regulatory business environment for investment to flow in to the country . We are making efforts to provide that environment .In terms of power, you know that we are not getting it right,in terms of regulation. We are still grappling with PIB.

In the area of funding, most Nigerian banks are not interested in long term funding .It’s not blaming government alone, both government and the private sector should partner to develop the nation.

Licenses were awarded to private sector to build 18 refineries , but not one was built today. A lot of factors was responsible for that. One is regulatory environment: marketers were mandated to sell at a particular price. The importing environment is tight.

In terms of security, you are aware of the prevalent challenges. Every day, the oil pipeline is vandalised or destroyed. Even when you are bringing vessels ,piracy is there to contend with. We have not got the issue of security right .There is a lot of things we need to put in place to get our bearings right. You must be aware of government plans to build green refineries in Bayelsa,Lagos and Kogi states. Have you asked why those refineries have not started producing fuel? The model is that government wants to own maximum of 40 percent ,while private investors 60 per cent. You understand that government is not a good business man.We need private sector inputs not only to drive efficiency and effectiveness but also ensure that business is run efficiently to guarantee returns on investment .The investment should be run efficiently to avoid people coming to claim the business are their political patronage or dividend of democracy. We don’t have private investors. To that extent, private investors are insisting that certain regulatory policies must be addresse. Nobody puts his funds down for investment for mere fun of it. Investors invest to earn profits. The issue of corruption in downstream sector has to be addressed. The question is, are we okay with the situation we find our self now ,and are we addressing it? We are using PIB legislation and other legislations to address the challenges.

Why are private investors shunning investment in the downstream sector?

Why private investors are shunning investment in the downstream sector is due to heavy regulation. It is a fact that deregulation will not solve our problems, but that is critical to moving the sector forward. If we go to international lenders to borrow funds for investment, we have go there with a balance sheet on how the borrowed funds will be re-paid .We have to show how their money will be re-paid over time including profit. I don,t see any investor committing his funds if the challenges of regulatory environment are not addressed.

We have to find a way to stop importation of fuel which is creating jobs for the citizens of the exporting nations .Nigeria is affected due to this practice with its negative impact of job loss that affects citizens of Ngeria. Of course, our role in Africa will be undermined. Like the saying that one of every four black man in Africa is a Nigerian, they are looking unto Nigeria for assistance and we will not fail them.

When are we expecting the passage of PIB?

When the bill is laid on the floor of the house of Representatives ,it will be circulated to members , observation and correction will made. After studies, it goes to third reading and committee stages, subject to the Senate adding their inputs . Thereafter, the bill would be forwarded to the President for his ascent .Hopefully, by the grace of God before the end of May 2015 which is end of the 7th legislative period, it will become one of the laws of the land.

The passage of the bill would definitely drive the efficiency of the operation of the downstream of the petroleum industry , develop individual and corporate businesses, and create wealth for Nigerians via employment opportunities etc.

*Daily Independent

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