CSOs Back NNPC on Petrol Price Deregulation

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•Say labour’s resistance could cripple NNPC, cause shortage

Emmanuel Addeh in Abuja

A coalition of civil society organisations (CSOs) in the country yesterday endorsed the current deregulation of petrol prices by the federal government, saying the Nigerian National Petroleum Corporation (NNPC) risks bankruptcy if it continues to pay the difference between the product’s landing cost and pump price. In a press briefing in Abuja, the Coalition of Nigerian Civil Society for Petroleum and Energy Security maintained that the deregulation of the petroleum downstream would liberalise the sector and allow petroleum products marketers to source their supplies from anywhere and sell at prices dictated by prevailing market forces.

The group stated that the current agitation of labour that government should withdraw the deregulation policy meant that NNPC would continue to absorb the cost differentials, stressing that this will not do Nigeria any good.

Convener of the coalition, Mr Timothy Ademola, advised the labour leaders spearheading the resistance to deregulation to realise that it had largely stabilised petroleum products supply in the last one year. Ademola urged Nigerians to be patient with the policy, explaining that once foreign exchange is stabilised, everyone would begin to see the fruits of deregulation and a free downstream market.

The coalition stated, “The competition arising from that (deregulation) would have helped to force pump prices down to the benefit of the citizens. But the scarcity of foreign exchange has made it difficult for the marketers to import products, thereby making NNPC the sole importer in keeping with its statutory role as marketer of last resort.

“This would most likely put NNPC in a very bad spot financially and eventually lead to a situation where it would be difficult to further import products. The obvious implication of that is fuel scarcity and the return of fuel queues.
“If this happens, organised labour that is presently resisting deregulation would be forced to castigate NNPC for not supplying enough fuel to guarantee zero fuel queues and for not making a profit at the end of its financial year.”

It said instead of a stance of outright opposition to deregulation, labour should partner government to explore how to achieve patriotic, people-centred deregulation. The coalition also advised labour to leverage the new government policy for the expected resumption of Nigerian refineries, approval of modular refineries, and Dangote refinery.
The group explained that once the foreign exchange issue that made it difficult for major and independent marketers to engage in importation of petroleum products was resolved, the gains of deregulation would kick in and Nigerians will be better for it.

“The market stabilisation that has been brought about by the past one year of deregulation is strong assurance that full deregulation is the way to go if Nigerians are to enjoy the full benefits of their hydrocarbon wealth,” the group said. “Resisting deregulation may only slow down our national progress in this regard,” it added.
It maintained that the current rise in the price of crude oil in the international market would inevitably cause the price of petrol to go up in the local market.

An energy expert and member of the coalition, Mr Henry Adigun, said the impact of the Dangote refinery would remain marginal under the current price regime since the company will be buying crude at the international prices.
Adigun explained, “Dangote refinery is export-based. He has taken loans. Those loans will be paid back. Imagine him selling your petrol at the current exchange rate in the country today. So, all that expectation is a no-brainer.
“The difference would only be in freight cost and that is if we link it with the already supplied depots in Lagos. We have four modular refineries in the country right now and none of them is producing petrol. Why don’t they?

“Nobody would produce a product in a market where they are not able to control the price at the point they can make a profit. One of the mistakes we make about deregulation is that it means the absence of government. There will always be consumer protection in deregulation.
“The problem is that we can’t afford subsidies on petrol. We spend N2.1 billion as of today weekly in a country where we are borrowing N37.4 trillion to support our budget and it won’t work. The refineries may work but the difference will be marginal because the refineries will not buy crude using naira.
“This is because crude is an internationally priced product. We are a member of OPEC. So, even the local refineries will buy crude at $61 as it is today.”