08 November 2015, Lagos – Determined to eliminate the long queues in many fuel stations across the country, the Federal Government recently approved the payment of N413 billion to petroleum products marketers in the country, being the outstanding payment for subsidy claims , although marketers insisted they are owed about N470 billion. The Nigerian National Petroleum Corporation, NNPC, also said it has injected additional volumes of petrol across the country to boost supply of the product.
Professor Joseph Ezigbo is the Managing Director of Falcon Petroleum Limited. In this interview, he insists that the way out of the problem was for government to remove petroleum subsidy so that the players can buy using appropriate price mechanism. Excerpts:
Fuel scarcity has continued to cripple economic activities in the country and many are kicking against subsidy removal because they consider cheap petrol their sole benefit from living in a major crude oil producer which loses billions of dollars to corruption. What is your view on the controversial issue?
I think it is something that needs to be done now but it requires both the political and economic will. The turning point is highest now from every group and there are still a few people who must be against the withdrawal of subsidy but they are enemies of this country. Today, if you go to Enugu, Benin or Lagos up to the North, nobody is buying fuel now at government approved price of N87 per litre. Many buy at the rate of N110 and N120 per litre, yet the country is running and so why are we deceiving ourselves by saying that subsidy removal may trigger inflation and price hike which may not be good for the common man. So, why are we still keeping it there.
We are keeping it there again for the few people that are still making money from it and it is a problem. I keep referring people back to when GSM came in newly into the country, the SIM card alone was about almost a hundred thousand Naira. Today, it is cheap and even offered to people free of charge. That is what we need to do and now those that have licenses to build refineries, we should make it possible for them to build , remove the subsidy so that the players can buy using appropriate price mechanism. If we get there, a lot of people will come in and the price too would be driven down.
So, why are we still having subsidy. It does not make sense. Let us not take corruption with the right hand and say we are throwing it away and then give it to the left hand to fight it. If we want to kill it, we should kill it and move the nation’s economy forward. Lets revamp our refineries and if people now want to import, let them import and then sell at the right price. If the refineries are working, we can put appropriate pricing to it and if anybody is bringing the product at a higher price, nobody would buy from you.
How would you react efforts made so far by the government to check the rot in NNPC?
I think the on-going exercise will auger well for the system . We pray that it does not drag and muddle things up particularly as the government strives to recover funds that were stolen. Anything short of that would simply be a distraction to the system. So far, they are still changing people at the NNPC and we don’t know what the restructuring is going to be like. Changing people does not mean restructuring and therefore we must wait for the reforms that these people are going to work with. So, we are still expectant. However, with the new GMD who is a very focused man in the oil and gas industry, I know that he can still come up with something that would actually drive and benefit the country.
Nigeria still imports most of the fuel it consumes because its four refineries are decrepit, producing far below their installed capacity. Do you think things would get better if NNPC becomes the sole importer of petroleum product in the country?
I don’t know much about that but I am wondering why would NNPC import fuel . If the refineries are working properly, then there is no reason why this country should import fuel . The country gave out several licenses for refineries to be built but not even one has been built simply because the conditions were wrong. So, if we are serious, we should ensure that people that got these licenses are in the position to build the refineries but the problem remains that there were no good policies in place to drive the process and that is why they could not build them and if they do they would eventually lose money. What the government needs to do is to look at these policies guiding the setting up of refineries , correct the grey areas and encourage other investors to build so that NNPC would not have to import fuel from anywhere. All we need to do is to set up properly the Port-Harcourt refinery, Warri and Kaduna and then things would move properly.
The down turn in the global crude oil price has been a source of concern to most economies. As a major player in the sector, how has it impacted in your business?
For us, we distribute natural gas to industries and we are doing our best to ensure that gas is distributed to all our customers. But having said that, what is worrisome is that now the price of oil has got so low. In the past, gas infrastructure is derived from the sales of crude oil. Now the price of crude oil has dropped so low that you can no longer get to produce it. So, unless gas is priced appropriately, we are going to have issues very soon because nobody is going to start developing gas when he knows he is going to lose money because the price of gas is deregulated. I agree it should remain deregulated but it should be deregulated to a point to allow investors in gas production to make enough money and to begin to gain so as to sustain their investment as if they discourage them they would stop and once they stop, then we would not have gas. That is where we are at the moment. I am hoping that government would wake up early enough to this responsibility to deregulate gas price up to a point where the revenue from gas would be appropriate for drilling and production of gas which is not so at the moment. This is essential for development and growth of the economy.