A Review of the Nigerian Energy Industry

Fuel scarcity blamed on govt’s subsidy debt

28 October 2015, Abuja – The lingering fuel scarcity being witnessed in some states has been attributed to the refusal of Federal Government to pay outstanding subsidy debt to petroleum marketers.

IPMAN-fuel pumpThis was stated by industry stakeholders at the ongoing Oil Trading and Logistsics Expo in Lagos.

Government’s inability to pay the outstanding balance had not only hindered marketers from having the resources to further invest in product importation, but had led to huge loan portfolios in the books of importers.

The Chairman, OTL Advisory Board, Mr. Stanley Reginald, said that the scarcity cannot be left out of the debt government owed marketers.

He said: “There is no way the non-payment of subsidy cannot be attributed to the scarcity.

“The problem still remains that marketers collect loans from the banks and when those loans are not being paid at the said time, it rises and when such continues, it makes it difficult for us to access loans to import products that will service the country.”

According to him, about 70 percent of those eligible to import petroleum products into the country were currently not able to do so due to lack of funds. He added that since government refused to pay outstanding balance on subsidy, the importers were constrained.

Reginald said: “There is need for a policy shift that will enable us to refine our crude at home now. If we convert our crude oil to finished products, we will not only create job for our teaming population, but will derive more value.”

Reginald added that the way out was to deregulate the downstream sector of the industry, noting “globally, the trend is to deregulate.”

. He cited the example of Ghana and India which have chosen to deregulate their downstream sector in recent time.

Government focus according to him should be to make policies that will create conducive environment for private sector operators to invest in the downstream sector. “The government should let the private sector drive downstream sector of the petroleum industry while it focuses on regulations”.

“The capacity utilization of the downstream sector today is less than 20 per cent and this implies that job creation is being constrained”.

Also speaking, Mr. Moses Asaga, Chief Executive Officer, CEO, Ghana National Petroleum Authority affirmed that the deregulation of the downstream petroleum sector has led to faster growth in the industry. According to him, the sector contributes 12 per cent to the Ghana’s gross domestic product (GDP).

He identified the development of infrastructure as a vital component of creating value in the industry. “We have taken our downstream so seriously now that there is no subsidy”, he added.

However, highlighting issues hampering the petroleum industry, the Group Managing Director, GMD, Nigeria National Petroleum Corporation, Mr. Ibe Kachikwu, said the difficulties in the supply chain from the downstream are part of the reason for the 7.79 percent contributed to the country’s GDP.

Represented by Mrs. Aisha katagun, Executive Director, Petroleum Product Marketing Company, PPMC, kachikwu, said that pipeline vandalism and oil theft have continued to threaten the sectors’ development.

“The rate of vandalism and crude theft have brought about short fall in Joint Ventures, JV cash calls. Due to this persisting threat, the inability to transport crude via the pipelines to the Kaduna refinery has made the already obsolete equipment weaker.

“Also, the non-passage of the Petroleum Industry Bill, PIB, which forms the basis of any petroleum income, has yet to be approved by the Legislature,” he added.



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