Subsidy no longer sustainable — Marketers
Oil marketers say subsidy is no longer sustainable, calling for dialogue on its implementation to save the downstream sector of the petroleum industry.
The marketers made the remarks during an online webinar organised by the Major Oil Marketers Association of Nigeria (MOMAN) on Monday.
According to the oil marketers, having subsidised Premium Motor Spirit (PMS), for so long, Nigerian institutions now have a diminished capacity to deal with the current local energy crisis.
The marketers said disruption in any part of the supply chain causes ripple effects and results in queues at petrol stations.
Chairman of Dankiri Farms & Commodities, Mr Bello Rabiu, explained that full deregulation was not limited to the removal of government subsidies but creating a competitive market environment that could guarantee the supply of products at commercial prices to customers.
Rabiu, also a former Chief Operating Officer (Upstream) of the former Nigerian National Petroleum Corporation (NNPC), said a strong regulator was required not only for fixing prices but to monitor and enable transparent and fair competition among players.
He said effective control of natural monopolies such as pipelines to protect consumers and prevent market dominance was another role the regulator should play.
According to him, “Deregulation of Downstream Petroleum Sector is a critical national economic and strategic endeavor requiring the support and cooperation of all stakeholders to implement.
“All hands should, therefore, be on deck to ensure the attainment of a transparent, competitive, efficient and sustainable liberalised downstream petroleum sector in Nigeria.”
Also, the National President of Nigerian Association of Road Transport Owners (NARTO), Mr Yusuf Lawal, noted that distributing petrol via trucks was no longer sustainable, as trucks had been depleted with little or no investments in new ones.
“After staking almost N70 million on a single truck, the cost of doing the business is not sufficient to keep the business running.
“The return on investment on trucks is not encouraging and that is why people are moving away from the trucking business.
“Assets renewal is hinged on cost recovery.
“We need to explore ways to efficiently deliver products nationwide,” he added.
In his remarks, Chairman, MOMAN, Mr Olumide Adeosun called on the Federal Government to commence dialogue with the Nigerians on the need for deregulation in order to reduce inefficient subsidy, address local energy crisis and mitigate further shocks.
Adeosun is worried that subsidy is no longer sustainable, hence, the need to dialogue with Nigerians to identify, negotiate and agree on identified concerns and begin implementation to save the downstream industry.
As a country, he said, “We must begin the process of price deregulation to reduce this inefficient subsidy.
“If the country wishes to implement a subsidy, it must be in areas targeted to help those it should help such as in agriculture and transportation to reduce food price inflation and generate more jobs for Nigerians.
“In tandem, the country must find a way to liberalise supply. It must bring transparency and competition into supply to ensure steadier, more efficient supply at optimum prices.
“Imported products must compete with locally refined products to find a meeting point between the need for local refining and competitively low but cost-recovered prices for Nigerians for sustainability.
“These lack of investments contribute in no small measure to fuel distribution inefficiencies and high costs.
“Neither the new refineries nor the refurbished refineries will survive with the refining margins at current pump prices,” he said.
The Vice President, Crude and African Markets, Argus Media, Mr James Gooder, explained that lower oil prices had made deregulation easier to approach.
He, however, said freight and other issues remained significant factors to consider as prices were not static.
Gooder reiterated MOMAN’s position on the need to prepare the consuming public for the effect of deregulation, adding that the volatility in the oil market could not be predicted, even though prices were currently low.
