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Mr Muda Yusuf, the Director General, Lagos Chamber of Commerce and Industry (LCCI), has called for total deregulation of the downstream sector to boost effective service delivery in the oil and gas industry.
Yusuf made the call at the News Agency of Nigeria Forum in Lagos on Sunday while assessing President Muhammadu Buhari’s two-year administration.
Yusuf said that many problems confronting the industry were policy related and this had made the potential in the industry unlocked.
He said that policy issues, as far as the oil and gas industry was concerned, had to be addressed quickly in the bid to diversify the economic base.
According to him, it is important to address the problem immediately so that “we do not go back to another subsidy crisis”.
“We have a lot of potential in that sector, but have not been able to unlock it because of issues surrounding oil and gas policies.
“So, while we talk about diversifying the economy, we need to sort out the challenges within the sector.
“This will help the country get the best in terms of investment, jobs and foreign exchange.
“We are losing a lot because of the way the sector is being managed,” Yusuf said.
The LCCI boss said that the country ought to have been exporting refined petroleum products to neighbouring countries, not importing.
According to him, the government talks about diversifying the economy, yet the opportunities in the oil and gas have not been fully tapped.
“The downstream sector of the oil and gas industry is in pains. As I speak with you now, subsidy claims is about N500 billion which has not been paid.
“Private investment is not coming to that sector due to excessive regulations.
“Deregulation may not be politically popular, but the government cannot continue to fix a price for a product it has no control.
“Right now, many of those who have invested in tank farms are facing challenges because their huge investment in that sector is trapped.
“This is because many of the tank farms do not have petroleum products and yet they cannot import petroleum products and sell at their own cost because the law pegged the price of petrol at N145 per litre,’’ Yusuf said.
He said the current monopoly enjoyed by the NNPC on importation of petroleum products had made the market uncompetitive.
Yusuf said that some of the revenues which ought to have gone into the federation account were being used to subsidise petroleum products.
“Total deregulation of the downstream sector remains the best option and the only way to address product importation challenges.
“It may not be politically popular, but unless the government does that a lot of our resources may be going back to subsidy payment.
“We have been in the oil business for over 50 years, yet no private sector refinery.
“That is why up to date, we are still importing 80 per cent of our petroleum products.
“About 30 to 40 per cent of our foreign exchange goes into the importation of petroleum products. With due respect, the normal bureaucracy process is not cut-out to manage such enterprise,” he said.
Yusuf said that private sector driven policies would bring in many refineries which would reduce the stress on importation and create more jobs for Nigerians.
He said that government should encourage competition among importers, stressing that “where there is no competition, there will be challenges of either private or public monopoly”.
He advised government to expedite action on full deregulation of the downstream sector to attract competition.
Yusuf also advised the government to address delays in contract procedure in the sector because most times it took up to three years to take decision on an investment in the upstream.
“There are the lamentations about those in the government agencies to deal with.
“If it is purely a private investment, not a Joint Venture (JV), of course, you do your business model, take a decision on your investment and within a year, you are through.
”However, the expectation is that the PIB will be able to sort all that, but we need to move fast because the situation on ground is not helping the economy at all,” he said.