Energy experts to FG: Stop fixing PMS price, deregulate petroleum downstream sector

ENERGY experts have told the federal government to stop fixing the price of Premium Motor Spirit (PMS), also known as petrol, saying that doing so weakens investor confidence in the petroleum downstream sector while dampening push for deregulation.

Professor of Energy Economics at the University of Ibadan Adeola Adenikinju told The ICIR that the federal government’s lack of firm stance in the ‘no subsidy regime’ and its influence on the pricing regime were not healthy for the nation’s economy. He noted that the oil and gas sector was at the heart of the nation’s economy, but was being hampered by the subsidy regime.

“This going back and forth by the government is not helping matters.  The government must be ready to make the necessary sacrifice to redeem this sector. There may be short-term painful consequences, but we must look at the long-term implications of ‘no subsidy regime,”  he said.

Adeola Adenikinju, Professor of Energy Economics

He said,” We spend billion of dollars yearly to import petroleum products. We need to get the confidence of Nigerians, labour, but we can’t keep postponing the doomsday which has its negative consequences on our economy.”

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He  stressed that the Petroleum Industry Bill (PIB) must be passed by the National Assembly to give better fiscal framework to the sector, expressing concern that the legislators had delayed so much on that.

On the $1.5 billion being courted for Port Harcourt Refinery rehabilitation, he said he did not support that.

“I do not buy into it. I support privatisation and full liberation of the sector. That’s only when the government can reap the benefits of a vibrant petroleum downstream sector.”

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Mele Kolo Kyari had,  last year, while fielding questions from newsmen, confirmed that the unsustainable subsidy on petrol had been removed permanently by the government, emphasising that it was gone forever.

On the contrary, Kyari admitted, during a media briefing on Thursday, that the government paid as much as N120 billion to subsidise the price of petrol monthly.

Also, the NNPC has insisted that it will continue to maintain the ex-depot price of PMS until it concludes its engagement with labour.

The government has been engaging with labour unions across the country on planned petroleum price increase, with labour citing concerns of impeding hardship on Nigerians as a key reason for refusing fuel hike.

However, energy analysts have said that deregulation of the sector was inevitable. In a deregulated petroleum sector, prices are not fixed, but are determined by the forces of demand and supply, experts say.

Oil sector governance expert Henry Ademola Adigun told The ICIR that petroleum sat at the heart of the Nigerian economy, prompting various political interests.

He noted that government was not the driving equity partner in the the Liquefied Natural Gas  (LNG) model often referred to, which was why it succeeded.  

According to Adigun, “The NNPC governance code is the problem. It puts all the power in the minister and not the board. In LNG,NNPC is holding the equity on behalf of the federal government. The only thing that is protecting the NNPC in LNG is the inability of the government to intervene and take control hold on them.”

“The refineries are not working not because of equity ownership, they are structural. What is the issue? There is no cue for diesel, aviation fuel, kerosene in the last five years. Why is petroleum different? What does that tell you? It is pricing. The government can make the price look like other commodity and not interfere in it.,” he noted.

He suggested that government should remove subsidy, get out of the business and allow the price to be market-determined.

In his remarks,, former president of the Nigerian Society of Petroleum Engineers Joe Nwakwue said the political will to enforce the ‘no subsidy regime’ was key.

“Labour continues to resist the ‘no subsidy regime’ and the government’s response to it is to keep the unsustainable subsidy regime going as they obviously do not want to expend political capital,” he said.



    He said price fixing was still common, stressing that the only sustainable solution was full deregulation.

    Joe Nwakwue, former President of Nigerian Society of Petroleum Engineers

    “That was what happened with the telecoms and Nitel and today we are better off,” he stated.

    “Note that government did not wait to amend the laws before removing subsidies on diesel and kerosene. We can still deregulate PMS and fix the laws subsequently. It is down to the will,” he explained.

    “There’s is the issue of trust deficit between the government and the people such that when the government wants to take decisions that will require sacrifice from the people, the people rightly expect to see those in government sacrificing also. Deregulation will hurt in the short run and sacrifices will have to be made, but it is the right thing for the economy. It is more like you want us to tighten our belt, but have you tightened yours? Removing subsidy and deregulation point to people tightening their belt.”


    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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