By virtue of the oil and gas page which we pioneered in the maritime media genre, we have been exposed to a lot of oil and gas- centred issues and we have come to appreciate the sector the more, to the extent that we have in the last three months devoted at least two editorial opinions to the very sensitive sector, called oil and gas.
When in January this year, we decided to devote attention to that sector; it was based on our conviction that the relationship between the maritime sector and the oil and gas industry is too symbiotic to be ignored. And since the ports were concessioned about three years ago, a lot more visibility is enjoyed by the oil and gas sector.
We have since January become more educated about the political economy of both the downstream and the upstream oil and gas business in Nigeria.
We have seen why Lagos has avoidably become the hub of the downstream operations; serving the entire South West and associated states, some parts of the North and so on.
More petroleum products laden vessels now dominate activities at the dedicated terminals so much so that more than 60 per cent of ships that come into Lagos pilotage district are laden with petroleum products. It is commendable that using Lagos jetties has tremendously assisted in products distribution. To a large extent, the days of nationwide scarcity are gone.
Due to the failure of its interventionist policy of price regulation, leading to the creation of agencies such as: Petroleum Products Pricing and Regulatory Agency (PPPRA), Petroleum Equalisation Fund (PEF) to address all issues relating to pricing and availability of petroleum products, the Federal Government is cleverly warming up to embrace full deregulation of the down stream sector and this entails total removal of subsidy on petroleum products.
At the moment, government subsidises petrol based on the template prepared by the Petroleum Products Pricing and Regulatory Agency (PPPRA).
To address the perennial problem of scarcity, government had earlier set up a presidential committee which was headed by Bauchi state governor, Malam Isa Yuguda to come up with a workable solution to the problem. It is that committee that recommended full deregulation.
Presently, the PPPRA says that it costs N85 to import a litre of petrol while the official pump price is N65. But the Yuguda committee says that the template price is unrealistic. It has therefore proposed that the price should be N77 per litre of petrol. If deregulation comes on stream, it will cost a lot more than N77 to buy a litre of petrol. In fact, we are told that it may cost more than N90.
In calling for the reduction in the template price, the Yuguda committee had alleged that there were leakages in the template that was being used by PPPRA and that the figure was not realistic.
The celebrated template comprises of: products landing cost, a ‘small’ margin for marketers, dealers and even transporters. These are in addition to provision for jetty or depot throughput, taxes as well as provision for demurrage.
At the moment, petrol sells for between N75 and N100 per litre in Lagos, it goes for as much as N150 in some parts of the country.
Nigerians are beginning to lose fate in the ability of the present government to fix the problems of the oil and gas sector; a problem which culminated in the tacit endorsement of deregulation by the government. This will eventually lead to removal of subsidy. It may also eventually signal the death of the PPPRA; a creation of former President Olusegun Obasanjo.
Trying to justify deregulation and narrowing down the reason to the need to cripple the oil importation, marketing and distribution cartel, the President Umar Yar’ Adua had assured Nigerians that once the so called oil cartels are removed from the chain of local petroleum importation and marketing, the problems are going to be over and fuel will be available at all filling stations and at a competitive and reasonable cost.
One thing stands out here and that is that the prevailing problems in the down stream segment of the oil and gas sector can not be solved simply by embracing deregulation hook, line and sinker.
Before deregulation, Nigerians will appreciate it if the federal government can repair the refineries. Or else, the poor will be at the mercy of the shylock called importers whose obsessive love for profits have been explained away by some people as just pandering to the natural forces of demand and supply.
It is very uncharitable and a clear demonstration of total disconnect from the people to romance a policy which has the tendency to further impoverish the people.
We insist that rather than deregulate and further strangulate the people, government should give attention to our dead refineries, reactivate them and increase their capacities. It is a shame that Nigeria is the only petroleum producing country that still imports refined petroleum products.