March 1, 2009
PRESS STATEMENT: THE OIL SECTOR DEREGULATION-POWER AND ENERGY TEAM OF THE SHADOW CABINET
Following Federal Government’s announcement of plans to totally deregulate downstream operations of the Oil Sector; 2007 elections presidential candidate, Prof Pat Utomi and other experts comprising the Power and Energy Team of the Shadow Cabinet here react to the development. Spokesperson, Mr. Akintunde Akinleye after the weekend meeting of the team in Lagos disclosed their deliberations and recommendations.
“We commend the Federal Government for this albeit belated step which we feel is in the right direction to break the cartel which has had effective control of the importation of petroleum products over the last few years and has worked hard to maintain this as an avenue for patronage and corruption for successive governments over the years.”
“We would however like to point out the following important caveats with regards to this move:
·Availability of open general licenses will improve competition and should result in a reduction in the cost of petroleum products provided there is sincerity and transparency in the issue of these licenses. However, continued importation of refined petroleum products whilst exporting crude petroleum is detrimental to the Nigerian economy and importation must be viewed as a VERY SHORT-TERM measure aimed at ameliorating the cost of living for Nigerians immediately.
·Local refining of petroleum products remains the optimum policy for providing petroleum products for local consumption. We however note that past efforts to sell the refineries have not been very successful because of the age and poor state of the refineries. We therefore believe that the Federal Government must keep an open mind about the feasibility of selling these refineries and ensure that the option of greenfield refineries are actively promoted alongside efforts to sell the existing refineries.
·The primary constraint against investment in greenfield refineries has always been the challenge of security of investments and income. The full deregulation of the downstream sector will address this constraint but there might be a need to supplement it with a sovereign guarantee in light of the constant policy reversals by this government. If there is sincerity of intentions, this should not pose a problem and it will further ensure that policies are not reversed arbitrarily as there will be a cost to pay immediately.
.Finally, we note that in spite of the various arguments about the true cost of refined products and the extent of subsidy, there is no doubt that there will be substantial reductions in the expenditure by the Federal Government in this area. On the other hand, it is fair to assume that in the short term, there will be an increase in the cost of petroleum products to the consumers pending when all the bottlenecks associated with the change in operating regime are straightened out and the expected efficiencies of the private sector operations kick in.”
“We therefore STRONGLY recommend that the ‘savings’ in expenditure by the Federal Government must be channeled into ameliorating the impact of the deregulation on the general populace. We expect these savings to be applied to developing and upgrading infrastructure such as roads, waterways, rail and mass transit systems thus providing cheaper alternative transportation methods as well as ensuring increased availability of domestic cooking gas. This will in the long run moderate the demand for refined products and contribute to ensuring that the products are available at reasonable costs to the consumer.”
“We wish the Federal Government all the very best in this initiative and sincerely hope it will be implemented properly and with honesty of intentions for the good of Nigerians.”
Kila Odunayo – 08023196602
Press/Media Aide – Prof Pat Utomi
Following Federal Government’s announcement of plans to totally deregulate downstream operations of the Oil Sector; 2007 elections presidential candidate, Prof Pat Utomi and other experts comprising the Power and Energy Team of the Shadow Cabinet here react to the development. Spokesperson, Mr. Akintunde Akinleye after the weekend meeting of the team in Lagos disclosed their deliberations and recommendations.
“We commend the Federal Government for this albeit belated step which we feel is in the right direction to break the cartel which has had effective control of the importation of petroleum products over the last few years and has worked hard to maintain this as an avenue for patronage and corruption for successive governments over the years.”
“We would however like to point out the following important caveats with regards to this move:
·Availability of open general licenses will improve competition and should result in a reduction in the cost of petroleum products provided there is sincerity and transparency in the issue of these licenses. However, continued importation of refined petroleum products whilst exporting crude petroleum is detrimental to the Nigerian economy and importation must be viewed as a VERY SHORT-TERM measure aimed at ameliorating the cost of living for Nigerians immediately.
·Local refining of petroleum products remains the optimum policy for providing petroleum products for local consumption. We however note that past efforts to sell the refineries have not been very successful because of the age and poor state of the refineries. We therefore believe that the Federal Government must keep an open mind about the feasibility of selling these refineries and ensure that the option of greenfield refineries are actively promoted alongside efforts to sell the existing refineries.
·The primary constraint against investment in greenfield refineries has always been the challenge of security of investments and income. The full deregulation of the downstream sector will address this constraint but there might be a need to supplement it with a sovereign guarantee in light of the constant policy reversals by this government. If there is sincerity of intentions, this should not pose a problem and it will further ensure that policies are not reversed arbitrarily as there will be a cost to pay immediately.
.Finally, we note that in spite of the various arguments about the true cost of refined products and the extent of subsidy, there is no doubt that there will be substantial reductions in the expenditure by the Federal Government in this area. On the other hand, it is fair to assume that in the short term, there will be an increase in the cost of petroleum products to the consumers pending when all the bottlenecks associated with the change in operating regime are straightened out and the expected efficiencies of the private sector operations kick in.”
“We therefore STRONGLY recommend that the ‘savings’ in expenditure by the Federal Government must be channeled into ameliorating the impact of the deregulation on the general populace. We expect these savings to be applied to developing and upgrading infrastructure such as roads, waterways, rail and mass transit systems thus providing cheaper alternative transportation methods as well as ensuring increased availability of domestic cooking gas. This will in the long run moderate the demand for refined products and contribute to ensuring that the products are available at reasonable costs to the consumer.”
“We wish the Federal Government all the very best in this initiative and sincerely hope it will be implemented properly and with honesty of intentions for the good of Nigerians.”
Kila Odunayo – 08023196602
Press/Media Aide – Prof Pat Utomi
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