Kunle Kalejaye 27 August 2015, Sweetcrude, Lagos – Operators in the downstream sector of Nigeria’s oil and gas industry have called for the total liberalisation of petroleum products price regime, maintaining that government’s regulation of petroleum products prices has created more obstacles than incentives in the system.
Downstream operators seek liberalised fuel price regime
Some of the obstacles, according to the Chairman/Managing Director of Mobil Oil Nigeria Plc, Mr. Tunji Oyebanji, include fixed margins, delay in subsidy refunds, product adulteration, indiscriminate construction of stations and terminals, distortion in the market and prolonged products outages.
He listed opaque allocation of imports quotas, which gives opportunities to importers with no retail outlets, as another obstacle arising from continued regulation of the price regime.
Mr. Oyebanji stated, however, that marketers could operate in either a regulated or deregulated environment as long as they were receiving economic returns that allow them to cover their costs, encourage investment and make reasonable returns.
Citing the Indonesian experience on subsidy, Oyebanji said reduction in petroleum subsidies in Nigeria will result in an increase in the price level and a reduction in household consumption.
“Even though higher-income groups lose the most from subsidy reduction, the poor are also affected; the later could be protected by well-targeted social safety nets, using some of the fiscal savings generated by subsidy reform.
“Given the contribution of subsidy reduction to fiscal sustainability, higher petroleum prices are unlikely to adversely affect the poor in the long run,” he said.
The Mobil Oil boss therefore called for a sustainable downstream sector that would witness a liberalised petroleum products pricing, improve large scale investment, efficient competitive landscape, effective technology tools and anti-monopoly legislation as well as improved consumer protection and quality products.