Home Energy Buhari in more trouble as pressure mounts on abolition of fuel subsidy

Buhari in more trouble as pressure mounts on abolition of fuel subsidy

Global crude demand worries drag down oil prices

…oil firms flare N875bn worth of gas in 1yr

UGO AMADI

Federal government has again come under pressure to embark on full deregulation of the nation’s oil and gas sector with the view to ending the now controversial fuel subsidy regime.

President Muhammadu Buhari had while campaigning for his election in 2014 insisted on the abrogation of the subsidy clause in the nation’s oil lexicon arguing that the issue of oil subsidy was nothing short of a conduit pipe for the siphoning of the nation’s common wealth. He had promised to stop the practice if elected president.

Unfortunately however, the leadership of President Buhari appear to now lack the political will to stop the oil subsidy structure. Instead, Nigeria is spending more now under the guise of fuel subsidy with the Nigerian National Petroleum Corporation (NNPC) as the sole importer of refined petroleum products into the country.

The need to end the fuel subsidy and upscale market induced pricing resonated at the just concluded Oil and Gas Conference and Exhibition in Abuja where the Group Chief Executive Officer, Oando Group Wale Tinubu asked industry players to rally support to end fuel subsidy in the country.

Stakeholders in the oil and gas industry have insisted that until the downstream sector of the oil sector is fully liberalised, the spectra subsidy on imported refined products will continue to be a recurring factor in Nigeria’s energy mix.

The struggle to open up the nation’s oil industry competitive and thus attract more foreign investments came on the heels of the revelation that oil producing companies in Nigeria have flared gas worth $2.5billion, about N875 billion in the last one year.

The firms include the International Oil Companies (IOCs), Independent Producers and the Nigerian Petroleum Development Company (NPDC).

Data from the Department of Petroleum Resources (DPR), revealed that volume of gas that was not commercialised (flared or re-injected) in March 2019 alone rose to 42 per cent.

Corroborating the DPR data, AfriPERA, an Energy and Infrastructure Policy research organisation, said that Nigeria lost an average of N875 billion, about $2.5 billion between March 2018 and March 2019 from gas flaring.

The company’s Chief Executive Officer, Mr. Chinedu Onyeizu said, said the loss, was aside the unattended impact of negative externalities associated with gas flaring.

“Since the 1950s, Nigeria has been burning off its natural gas at flare points and, despite efforts by successive administrations to curtail the wastage, the country loses an estimated 2.5 billion dollars each year to gas flaring as well as the unattended impact of negative externalities associated to gas flaring,’’ he said.

Various stakeholders have continually emphasized the need for government to have a re-think on the measure to deregulate and libralised the downstream to pave way for huge more attractive investments in the sector

As private marketers continue to stay on the sidelines in terms of petroleum products importation, stakeholders have reiterated the need for the Federal Government to fully deregulate the fuel market.

Tinubu declared that Nigeria spent $5 billion on fuel subsidy last year. The sum, he said, represented funds that could have been used to finance other critical infrastructure needed by vast majority of the populace.

He advocated that all stakeholders must support the deregulation of the oil and gas sector to engender growth.

Speaking at the conference, Tinubu said stakeholders in the petroleum industry should rise up and discourage the practice.

According to him, other critical sectors of the economy, like education and health among others, were in need of funding, adding that such amount expended on subsidy should have been directed to other critical sectors or towards infrastructure development.

Tinubu said there was need to discontinue the current consumption-based government spending.

It will be recalled that ,Oil Marketers, under the aegis of Major Oil Marketers Association of Nigeria, MOMAN, Independent Petroleum Marketers Association of Nigeria, IPMAN, and Depot and Petroleum Products Marketers Association, DAPPMA, have called on the Federal Government to urgently deregulate and liberalize the country’s downstream petroleum sector for unfettered private sector participation and investment, which is course subject to an appropriate regulatory framework.

According to the Chief Executive Officer/Executive Secretary, MOMAN, Mr Clement Isong, said the downstream petroleum industry regulations should be in line with international best practice.

He said the implementation and compliance with these regulations, the concept of cost recovery and competitive investment returns will ensure the sustainability of the downstream petroleum industry.

He said, “As the market players grow their business, they will increasingly become exposed to risk management challenges and will move their capital to areas where return matches the risks.

“We recommend that government should deregulate pump prices and focus on enforcing compliance with adequate regulations on health, safety, environment and quality.”

Isong said only total deregulation would save the situation. Contending that doing so will help attract more investments to the oil sector, he said only deregulation would encourage the establishment of private refineries and other related infrastructure in the country.


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