Operators in the downstream sector of the oil and gas industry have advised the Central Bank of Nigeria (CBN) to make it easy for importers of petroleum products to access foreign exchange (forex) in the short term.
The advice is coming on the heels of the Federal Government’s move to create a transparent market-driven system by publishing fuel prices.
A communiqué by industry players and stakeholders, at the end of this year’s Oil Trading Logistics (OTL) Africa Downstream Week in Lagos, explained that fuel subsidy is a disincentive to the supply chain infrastructure investment, market innovation and consumer value. It added that in view of low crude oil prices and naira devaluation, the country could no longer afford to pay subsidies.
They urged the government to remove fuel subsidy and deregulate the downstream sector. Deregulation of the industry will attract appropriate investments, promote optimal efficiency, healthy competition, ensure efficient supply of petroleum products to the country and improve the infrastructures in the downstream sector, the communiqué added.
They want local refining of fuel to be prioritised and a deliberate shift initiated from importing products to building refineries. There is a need for a national refining policy, which defines the framework for encouraging investment in petroleum refining in Nigeria to facilitate increased national revenue and infrastructure development, the communiqué said.
It noted that in view of the significant number of jobs created by the downstream sector, the private sector should be encouraged to drive the growth of the industry through appropriate policies, while the government should provide the legal framework on which the sector will be anchored, including the Petroleum Industry Bill (PIB). The PIB needs to be clarified and enacted with a view to ensuring legal certainty and promoting efficiency and competitiveness, it added.
The communiqué said the downstream expansion of natural gas utilisation, with regulated gas price for domestic sales, governance limitation and institutional deficiency, constitute both a challenge and opportunity for gas supply. To stimulate investment in liquefied petroleum gas (LPG), multiple taxes and high tariffs should be reduced while the development of infrastructure and distribution channels such as local cylinder manufacturing, storage facilities, filling plants, bob-tail trucks, gas pipeline for residential consumption, automobiles and petrochemical plants, should be encouraged to enable the growth of LPG.
The industry players also called for the removal of subsidy on kerosene to encourage the growth of LPG consumption in Nigeria. Also to encourage the development of the lubricants and base oils market, regulators, operators and consumers need to work together to stop the importation of substandard lubricants as well as the activities of illegal blenders while research and development should be ongoing for production of base oil in Nigeria.
They stressed the need to have a strong advocacy group to work with the regulatory body, to drive home the point that a good standard of quality of lubricants must be maintained, they added.
The communiqué read in part: “There is need to commercialise the pipelines by concessioning or outright sale, for an efficient distribution of the products. It is prudent to invest in an oil spill surveillance technology to monitor oil spillage through pipeline vandalism.
“Oil companies are encouraged to undertake good corporate social responsibility to preserve the communities where they operate and to create a form of investment through job creation; thereby reducing threats of piracy and sea robbery.
“There is need for government to ensure the roads are fixed and the rail system reactivated either by itself or through Public-Private Partnership (PPP), to enable the trucks move the products safely and promptly to the storage facilities while the rail assists the road networks.
“Truck drivers should be enjoined to undertake trainings to improve their driving skills, for their safety and safety of the community.”
By Pita Ochai