For the downstream oil and gas sector to be completely deregulated, the federal government must take steps to repeal provisions in the petroleum Act which empowers the Minister of Petroleum Resources to fix prices of petroleum products, industry expert has said.
In his presentation during an online workshop on the ‘Urgent Case for Reforms in the Petroleum Industry’ Mr. Isreal Aye, said S.6 (1) of the Petroleum Act which states that “The Minister may by order published in the Federal Gazzette fix the prices at which petroleum products or any particular class or classes thereof may be sold in Nigeria or in any particular part or parts thereof,” must be repealed to ensure proper deregulation of the downstream sector.
“It is worthy of note that this law is at variance With the Federal Executive Council (FEC) approved oil and gas policies which prescribes that petroleum subsidy be discontinued within 1 year of the Nigerian Oil and Gas Policies coming into effect…,” Aye said.
“The law precedes the Policies both in time and hierarchy. So the Law prevails until it is changed,” Aye added while speaking at the workshop hosted by the Media Initiative on Transparency in Extractive Industries (MITEI), and facilitated by the Facility for Oil Sector Transformation (FOSTER II).
“In order to deregulate the downstream sector, we need to amend or expunge S.6(1) as it is currently written,” Aye said, and replace with the price modulation mechanism.
He further explained that a framework which prescribes the role and responsibilities of each institution taking decisions at every point in the product pricing process will be needed. “We need a framework that show how the pricing template was arrived at, the intervals of the price modulation adjustments, whether monthly, quarterly, weekly or daily,” Aye said.
He emphasised the need for an agency legally empowered to handle the responsibility of modulation of petroleum products prices in the country outside the Nigerian National Petroleum Corporation (NNPC). He said the NNPC should concentrate on handling its commercial operations to avoid overlapping roles.
“We must demand for an open and transparent process to handle all the issues in the price modulation value chain to remove arbitrariness and exploitation,” Aye stated.
According to him, subsidy which was intended to ameliorate the poor and vulnerable Nigerians hasn’t been meeting its objective, hence the need for government to holistically rethink the scheme.
Instead of a subsidy regime which does not directly benefit the poor, Aye recommended that government can instead create other measures such as electricity tokens, bus vouchers, cash transfer or tax rebate to citizens directly after removing subsidy.
While noting that spending about N1trillion annually subsidising fuel, which mostly benefit the rich, makes no economic or social sense, the expert said monies saved from subsidy removal, can instead be used to fund critical infrastructure development, social programmes and capacity building for citizens.