- Asks Buhari to assent to bill before beginning his re-election campaign
Chineme Okafor in Abuja
The Nigerian Association for Energy Economics (NAEE) saturday stated that the imminent promulgation of the Petroleum Industry Governance Bill (PIGB) which the two chambers of the National Assembly have harmonised for presidential assent would take away every excuse proffered by the Nigerian National Petroleum Corporation (NNPC) as reasons for its loss-making streaks and under-recoveries for importing petrol in the country.
NAEE, which stated this in Abuja at a pre-briefing on its forthcoming annual conference scheduled for this week, also asked President Muhammadu Buhari to immediately assent to the PIGB before he begins his 2019 re-election bid.
The bodyâ€™s president, Prof. Wumi Iledare, explained that the continuous loss-making records of the NNPC would be curtailed once the PIGB becomes effective, adding that at that time, very clear business demands would be made of its management by its shareholders who would give to it some key performance indicators (KPIs) to meet.
Iledare, stated that the NAEE had in 2015 warned the Buhari administration to avoid the temptation of regulating the downstream petroleum sector of the country, and instead deregulate it to escape the current challenges that are currently overwhelming it.
He inferred that if the government had listened to the associationâ€™s advice, the country would perhaps not have under-recoveries in petrol supply which the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, recently said had shot up to N1.4 trillion per annum.
â€œI think also that if you look at the industry, we are not in any way operating a deregulated downstream, what we have is what I will call a price ceiling that has been misinterpreted as a price floor.
â€œThat means that when you have a price ceiling, you do not want the price to go beyond that, yet the equilibrium price is somewhere high because when you have a price floor, equilibrium is supposed to be below the price floor, and that is more or less a misinterpretation.
â€œWe warned the government then, at that particular time there was an opportunity not to put any price because the price on the seat was already N200 (per litres of petrol) and you just say that you are out, unfortunately, you cannot recover what you pay for in dollar using naira when the exchange rate is unstable and that is what we have,â€ said Iledare.
He stated further: â€œNNPC cannot announce that they are subsidising that is why the idea of under-recovery came. In that case, NNPC is the sole importer of petrol because they have access to dollars. You cannot tell a marketer to import petrol using his dollars.
â€œThe government can only spend money if approved by the National Assembly but the NNPC Act allows it to do the business as part of the strategic goals of the national oil company. NNPC is saying: â€˜yes, we are the one bringing the products and we are not recovering some of the money they use to bring productsâ€™.
â€œWe are not going to continue this under-recovery for a long time because when the PIGB is assented to, the NNPC that we have today becomes a commercial entity with shareholders that will receive dividends and there will be key performance indicators that whoever is heading NNPC will deliver to shareholders.â€
Speaking on the need for Buhari to assent to the PIGB as soon as possible, Iledare said: â€œI think the PIGB has a 12 to 24 months transition period after the president assents the bill. If I were the president, I will sign it before the election campaigns begin because it will give him something to say look, I have done it after 18 years.â€
Also speaking in the same vein, a member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) and one-time NAEE president, Prof. Adeola Adenikinju, stated that the subsidy paid on petrol was beneficial to Nigerian elites and not the average members of the society.
Adenikinju also warned that the current rise in price of a barrel of crude oil in the international market was also impacting on the cost of importing petrol into Nigeria.
According to him: â€œI am particularly worried about the structure of subsidy in Nigeria, if you look at kerosene, the poor people buy it at market price, diesel, the companies buy at market price and petrol which is the product that is widely used by the elites is the one that has this kind of issue. I am worried because again, if price is not playing the signalling role to investor, it becomes difficult to activate investments in that downstream sector.
â€œI think that we should keep in mind that even if we are not going to get there in one day, there should be a process towards some liberalisation of the downstream sector, and my hope is that if we do that, we will have initial costs, but competition will come in, because what we do now is export the crude and import refined products, the cost implication around that is not good for this economy and that is very clear because the price of oil is going up (now) but on the other hand we are paying more for the refined products that we consume,â€ he added.