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NNPC:
Deregulation Not Fuel Price Hike
The Nigerian National Petroleum Corporation (NNPC) yesterday declared that the planned deregulation of the downstream sector of the petroleum industry would not necessarily lead to a hike in the prices of petroleum products as generally believed.
Instead, deregulation will boost local refining capacity and put an end to dependence on product importation, according to the government.
Meanwhile, Federal Government’s two-day meeting with the Nigeria Labour Congress (NLC) on the deregulation policy ended on an inconclusive note yesterday.
Presenting a paper entitled: “The Oil and Gas Industry – Mainstay of the Nigerian Economy” at the National Defence College, Abuja, the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Dr. Mohammed Sanusi Barkindo, explained that contrary to belief that the planned reform of the downstream sector would lead to a hike in fuel prices, “the reforms will end the circle of dependence on importation”.
Specifically, Barkindo, who was guest lecturer, explained that “deregulation is not synonymous with price increase as the reform is aimed at increasing local refining capacity to end the circle of dependence on importation which is one of the factors responsible for the high price of products and huge subsidies paid by the Federal Government”.
He added that “a major growth in refinery capacity is at the heart of the planned economic reform”, maintaining that a two-pronged approach has been designed to ensure the reactivation of existing refineries and stimulate the establishment and growth of new ones in the country.
The NNPC boss revealed that the plan to reactivate and run the existing refineries efficiently would involve the adoption of a new and more viable model for the management of the refineries, the empowerment of the leadership of the refineries in the form of increase in the approval limits from N25 million to N540 million for the Strategic Business Unit (SBU) Board, and tactical refinery repairs.
On the steps being taken to stimulate the growth of additional refineries, he said the government intends to introduce targeted fiscal incentives for those willing to invest, design Greenfield refinery initiative, and deregulate the downstream sector.
Barkindo noted that deregulation has become imperative because the subsidy regime is no longer sustainable in the light of present national economic reality.
“A key consequence of regulation is the high level of subsidy by the Federal Government of Nigeria. The subsidy level was about N655 billion in 2008, equivalent to one and a half times the size of the Federal Government capital expenditure, pointing to the unsustainability of the existing framework,” he said.
Yesterday’s meeting in Abuja between government and government commenced three hours behind schedule owing to the meeting of the Federal Executive Council (FEC).
It was attended by the Minister of Petroleum Resources, Dr. Rilwanu Lukman, Minister of Finance, Dr. Mansur Muhtar, Minister of Labour, Prince Kayode Adetokunbo, Minister of State for Petroleum Resources, Odein Ajumogbobia, and Chief Economic Adviser to the President, Dr. Tanimu Yakubu.
On labour side were the NLC President, Comrade Abdulwahab Omar, who moderated the meeting, General Secretary of the NLC, John Odah, Vice-President of the NLC, Comrade Ladi Iliya, Presidents and General Secretaries of State Chapters of the NLC and other members of the National Executive Committee of the NLC.
Federal Government continued its appeal to labour to support the policy as it would benefit Nigerians in the long run.
The money saved from the removal of subsidy would be channelled into development of other sectors including railways, education, power, roads, the government said.
Lukman insisted that the policy was not meant to make the populace poorer. No government worth its salt, he said, would go out of its way to institute policies that would impoverish its citizens.
Nigeria’s resources, he maintained, are not unlimited even though the country is endowed with oil. He added that the administration was working together with all arms of government including the legislature and the judiciary to ensure that the best interest of Nigerians is served at all times.
“It is only right that we interact the way we have been interacting so that we can go forward on issues affecting the nation. We would continue to work closely with organised labour because labour is the custodian of the nation’s economy. We hope your help would help translate to support for what we are trying to achieve on deregulation programme,” he said.
Muktar disclosed that due to the heavy expenditure of government on capital projects which are funded from the excess crude account, only $7 billion was left in the account, adding that importers are also paid from the same account.
He added that about N100 billion was charged for demurrage in 2008, an amount he said could have been put into better use.
“We have resisted the idea of setting money aside to be spent by bodies. Nobody can deny the fact the Petroleum Trust Fund (PTF) worked but the reality is that in a democratic setting we cannot do that because it is against the law. The constitution is very clear as every money must be put in the consolidated fund and such money has to be appropriated by the National Assembly,” he said.
Oil subsidies would be defendable only if it was actually reaching ordinary Nigerians, Muktar said, noting that it was only reaching average Nigerians who won cars.
“What we are subsidising is purely inefficiency. There are no plans by the NNPC or marketers to improve services. In fact, every month they push bills to us to pay on demurrage and if it has interest on it we have to pay and this is exactly what we have problem with,” he added.
Muktar disclosed that the government was putting serious efforts into fixing the refineries and was in the process of concluding the Turn Around Maintenance of the Kaduna and Port Harcourt refineries.
Adetokunbo said it has remained clear that a certain force is opposed to the deregulation of the oil sector because of the easy money it stands to lose.
He urged the NLC to embrace the change being planned for the sector, as “change is the only thing that is constant”.
Ajumogbobia said the issue is more of a finance issue since it is about how Nigerians spends from all sources.
He also lamented that the jobs that are being created by Nigeria’s oil resources are outside the country, not domestic, since the country does not have adequate refining capacity to meet up its petroleum needs.
Yakubu said some of the polices that the country has allowed over time have not been in its best interest.
He added that foreign investors were discouraged from establishing refineries in Nigeria because they would have to sell refined products at a government-controlled price.
In spite of all the arguments presented by the government delegation, labour leaders continue to express doubts about the sincerity of government to properly deregulate the sector especially as government is said to be “doing the last thing first”.
Odah said labour was not being unreasonable as being implied by government, but was concerned about the effects of fuel price increase on average Nigerians.
He faulted government’s analogy that deregulation of the telecommunications sector was what made GSM affordable to Nigerians.
“The analogy of GSM which the is being presented is faulty because the issue of the GSM was a failure of regulation by the NCC. If the NCC had done its work, we would not have had a situation where MTN of South Africa would make the amount in expended to take-off in Nigeria in just six months,” he said.
Odah disagreed that labour was holding the policy to ransom, saying government has to present a new argument other than that which it has been presenting for the past five years on the issue.
He however commended Yakubu for having been a “reasonable” person even though he argues from the side of the government on various polices.
“When we argued that refineries should not be sold, that Nigeria would be under the yoke of people who are profit driven, the Economic Adviser was one of those who reasoned with us, even when other government officials were trying to insist,” he said.
General Secretary of the National Union of Teachers, Comrade Obong Obong, said the government was protecting the cabal since it has refused to make their names public. He called on the government to show a will to fight their corrupt acts since it was showing much commitment to the take off of the deregulation policy.
He questioned the rationale behind the meeting with labour since it seemed that government had already made up its mind on the policy.
NLC President, in his closing remarks said the NEC of the NLC would continue with an indoor meeting to deliberate on the issues at hand.
He however refused to make a general comment saying he could not pre-empt the decision of the NEC.
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