UNDERSTANDING DE-REGULATION OF THE PETROLEUM DOWNSTREAM SECTOR
UNDERSTANDING DE-REGULATION OF THE PETROLEUM DOWNSTREAM SECTOR
By:
Nurudeen Dauda
May 12, 2016. nurudeendauda24@yahoo.com
nurudeendauda24@gmail.com
nurudeendauda.blogspot.com
No doubt there will be temporary shocks and hikes in the price of goods and services. For Nigeria to develop a generation of Nigerians “must” I say “MUST” make “sacrifice”. I repeat “sacrifice”! Unfortunately, most Nigerians are not willing to make sacrifice for their children talk less of their grand children or great grand children. This sacrifice if made now is only for the “short run” and the benefit could come in the “long run” although some people who do not know what a “long run” means in economics will always tell you that before “long run” all of us are “DEATH”. Long run in economics does not mean 50 or 100 years. In simple terms, long run means a period whereby the market gets stable which could be in the next 2 or 3 months.
Before now, we have only some selected “few” Nigerians as oil marketers who were given licenses to import petroleum product and in return they were being paid subsidy. With this decision it means every Nigerian that has money can become an oil importer now; every Nigerian now has the right to import petroleum product and sale it between N100 to N145. Before this decision the government had “FIXED” the price at N86, but we bought it between N150 or N200 or N250. However, the present decision called “PRICE CEILLING”as against “PRICE FIXING”. Price fixing means you are not allowed to sale below or above certain price while price ceiling means you cannot sale above certain price but can sale below it. More so, deregulation of the petroleum downstream sector means you cannot sell above N145 but petrol sellers A, B, C and D could sale between N100 to N145 depending on how they get their petrol.
Furthermore, now even an American or British or French company etc., can come to Nigeria and do oil business. Oil business will longer be monopolized by the government; more people will now be involved in the oil business thereby bring competition among producers “A”,”B”,”C “and “D” etc., Producer “A” might sale his own at N145, Producer” B” might sale his own at N140, producer “C” might sale his own at N130 and “D” might sale his own at N130 depending own how he or she imports the fuel.
This decision will stop fuel “diversion” to Niger Republic, Chad Republic, Cameroon and Ghana etc., where appropriate price is paid for the product; Petroleum products is more expensive in all our neighboring countries. For this reason it is more profitable for a Nigerian “Oil market” who has been given fuel at N86 to sale in “Kastina” state, for instance, to go to “Niger Republic” and sale it at N140 or 150 despite the fact that he or she has collected subsidy from the Nigerian government in order to sale the product to the people of “Kastina” at N86. More so, it is also more profitable to an oil market that has been given the product to sale in “Maiduguri” to “DIVERT” it to “Chad Republic” where the product is sold at about N140.
Most oil marketers in Adamawa state will prepare to take the product to “Republic of Cameroon” where the product is sold higher despite collecting subsidy from the government in order to sale the product in Adamawa state.
Many companies from Europe and America due to the size of our market in view of our over 40million litres daily consumption want to do oil business in Nigeria whereby they could create a lot employment to our people, but because of government’s regulation of the “Downstream” sector by the government they could not come. Making the oil industry competitive will bring in more individuals and companies into the business thereby making the product available.
What is very import to every fuel consumer, in my humble opinion, is making the product available. We have been having the price being FIXED at N86 but we always have supply shortages or fuel scarcities whereby we end up buying the product at N150 or N200 or N250.
The previous government tried to remove subsidy but could not succeed; many people believed with subsidy removal even at that time, but ultimately did not believe in the sincerity or integrity of the then government.
President Jonathan’s government increased the “PUMP PRICE” from N65 to N97 per litre which saved N32 per litre of which the N32 went to SURE-P account. Unfortunately, the SURE-P did not make any impact on Nigerians. The “pioneer” chairman resigned to due what he described as lack of transparency in then administration. The second chairman was sack ahead of the 2015 general elections after stating his views freely on the then upcoming election.
However, the good news about this one is that President Buhari managed N2 increase successfully and efficiently during the late General Sani Abacha’s administration as PTF chairman. General Sani Abacha increased the “PUMP PRICE” with N2 and the money was channeled to Petroleum Trust Fund (PTF). Everybody knows what the PTF did in Nigeria at that time in terms of provisions of “drugs” and “equipment” to hospitals, provision of equipment to higher institutions of learning and roads rehabilitation across the country. Among the few good roads that we have in Nigeria today were done or rehabilitated by PTF.
May God bless Nigeria!