Dr Emmanuel Kachikwu, Group Managing Director, Nigerian National Petroleum Corporation (NNPC), other stakeholders have argued that fuel subsidy was an unsustainable drain on the economy and called for speedy deregulation of the nation’s oil and gas sector.
The NNPC boss said: “Subsidy creates distortions in government revenue distribution as a result of round-tripping and unnecessary carryover of expenditures every year in a way that is difficult for government to control or sustain.”
He made the disclosure in a keynote address titled, “Energy Crisis and Sustainable Development in Nigeria: The Way Forward”, at the National Association of Energy Correspondents (NAEC) Conference at Eko Hotel & Suites, Victoria Island, Lagos.
Kachikwu, who was represented by Mrs Bolanle Ashafa, Acting Managing Director of Nigeria Engineering and Technical Company (NETCO), said deregulation would encourage domestic private sector participation and inflow of foreign investments.
He contended that deregulation will also provide a fair deal for Nigerians from the abundant petroleum resources through fair product prices for consumers, full cost recovery and reasonable margins for operators.
“Subsidy accounted for 20 percent of the federal government’s budget in 2013. Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors, hence ending products shortage.
“However, critical enablers such as security of supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices.”
Kachikwu said NNPC is fully committed to reforming existing refineries to boost domestic petroleum products supply, adding that they have been re-streamed, but are yet to attain optimal capacity in production.
“Removal of price control mechanisms is deemed imperative to ensure full growth of the sub-sector, by allowing private stakeholders to complement the efforts of government in developing the industry,” he said.
On fuel supply
He reassured Nigerians that NNPC would continue to maintain stability in the supply and distribution of petroleum products nationwide.
Moreover, the Nigerian oil and gas industry would be transformed for greater efficiency and sustainable growth through market reforms, diversification of the revenue base and monetisation of the natural gas resources.
“We will focus on the need to address infrastructure constraints, to ensure sustainability of gas and petroleum products supply and distribution nationwide. We will be tackling infrastructure gaps and promoting inclusive growth, as well as capacity building,” he said.
Mr Deji Haastrup, General Manager, Policy, Government and Public Affairs, Chevron Nigeria Ltd., said that the cost of executing projects and services in the industry remained high in spite of the dwindling price of crude oil.
Haastrup also identified oil theft and illegal refineries as other challenges facing the industry in Nigeria.
On his part, Comrade Francis Johnson, National President, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) said that for deregulation to be sustainable in the oil and gas industry, there must be entrenchment of consistent, stable and globally comparable policy and institutional framework.
Meanwhile, Mr. Tunji Oyebanji, Chairman, Managing Director, Mobil oil Nigeria Plc, stated that the regulated prices of petroleum products can’t sustain the country’s economy.
According to him, “A sustainable downstream sector would liberalize pricing, produce large scale investments, competitive landscape, create technology tools (that involves pricing, control systems), support services, making NNPC an effective competitor and not a regulator, ensuring safer trucking and operations, encourages anti-monopoly legislation, consumer protection and product quality.
Moreover, the implications of subsidy removal will bring about: possible increase in the pump prices, significant reduction in government expenditure, increased confidence from the international community in the Nigerian economy, improved transparency and accountability in the downstream sector for all stakeholders and increased competition and investment in the sector by players.
US supports Nigeria in reforming NNPC
In a related development, the United States Government has promised to support the Nigerian National Petroleum Corporation (NNPC) in achieving its set goals and objectives, especially in its resolve to institute the reforms agenda of the Federal Government.
The US envoy to Nigeria, Ambassador James Entwistle, who disclosed this in Abuja during a courtesy call on NNPC Group Managing Director Kachikwu, noted that the US will provide all the support required to turn around the fortunes of the NNPC.
According to him, though the job of the GMD of NNPC is about the most challenging job in Nigeria, US is convinced that Kachikwu has the skills, training and requisite experience to lead the oil and gas industry in Nigeria towards the path of growth and sustainable development.
Entwistle pledged the readiness of the US to work with the new management of NNPC in achieving the Federal Government’s reform agenda in the oil and gas industry.
My mission — Kachikwu
Commending US for the pledge of support, Kachikwu reiterated the determination of the new NNPC management to implement the spirit and letter of President Muhammadu Buhari’s reform agenda in the petroleum industry.
According to him, the new NNPC would be driven by a deep sense of commitment to service delivery anchored on the principle of transparency, efficiency, people, purpose and profit.
“My mission is to redirect and re-energize the work force for greater value addition and I believe that the NNPC, given the right leadership, has what it takes to achieve this objective,” he said.
Kachikwu, a few days ago, promised to usher in a new dawn of transparency through the periodic publications of the NNPC’s financial transactions, insisting that transparency must be the watchword of every staff in the new NNPC.
He maintained that the NNPC of his dream is a corporation anchored on the foundations of transparency.
Kachikwu had further stated that the change in the NNPC would be anchored on three key issues of people, processes and profit, adding that the people element was key to the success of the other two elements which was the reason personnel motivation was dear to his heart.
He charged the staff to break away from the old culture and bring creative solutions to the numerous challenges facing the corporation, stating that with the kind of change he has in mind, the staff could not afford to continue with business as usual.
He challenged staff not to obey any directive from him or any superior officer that runs contrary to the rules, adding that President Muhammadu Buhari will not ask him to do anything shady just as he himself would not ask any staff to carry out any unlawful duties.
He further advised the staff of the corporation to see themselves as the drivers of the changes required to bring about the new NNPC.