For a proper and effective transition to a non-subsidy regime, Petroleum Industry governance experts say the Federal Government of Nigeria must hasten the procedural steps in giving legal backing to the initiative while ensuring it hastens the passage of the Petroleum Industry Bill (PIB) to achieve a long term benefit for the sector.
Mele Kyari, the group general manager of the Nigerian National Petroleum Corporation (NNPC), has signalled the intention of the corporation to do away with the unsustainable ‘wasteful subsidy’ regime he admitted has put intense pressure on the scarce nation’s resources amid dwindling oil revenue resources.
On the back of this development, some experts that spoke with BusinessDay say the GMD’s statement on ‘no more subsidy’ payment is more of restoration of price modulation template, which has seen the Petroleum Product Price Regulatory Agency (PPPRA) effect a monthly price modulation determined by global oil price. Although it did not affect that of April as it sites concern of multiple exchange rate, which it is presently sorting with Nigeria’s apex bank.
Joe Nwakwue, chairman, Society of Petroleum Engineers, tells BusinessDay that for a long-term subsidy regime to be effective there needs to be overall reform in the sector, which would see to the amendment of the Petroleum Act and the PIB.
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He notes that a long-term institutional and legal framework needs to be fixed for the sector to fast-track a holistic reform for the Nigerian oil sector.
“Issues around host community, the fiscal and how money is made and shared in the sector are issues that must dominate discussions now and passage beyond the no subsidy regime, which is just an aspect of the holistic reform in the oil sector,” Nwakwue says.
Henry Adigun, an oil sector governance expert, also says Nigeria must explore this time to reconfigure the economy, insisting that the government must embrace reforms and reconfigure the economy to harvest benefits in its largely oil-driven economy.
“Our best bet now is to reconfigure the economy, oil and power sector subsidy must go. They are not sustainable any longer. We must not be spending our huge revenue resources on recurrent expenditure. Reforms in oil and power sectors so that we could free up funds for more critical and perimeter things,” he states.
The Federal Government had struggled amid dwindling oil revenue resources and has already reviewed the 2020 budget benchmark and cut overall approved appropriating Act by N1.5 trillion and proposal to remove subsidy.
Also, the International Monetary Fund (IMF) has issued a checklist to the Federal Government as part of conditions to get its $3.4 billion budget support fund, part of which is the re-setting of Nigeria’s electricity market, which is also thriving on unsustainable subsidy.
Timipre Sylva, minister of state for petroleum resources, it would be recalled, had informed earlier in the year of the Ministry’s plan to push for enabling reforms to regulate the oil sector while assuring that the PIB would be passed before May 29.
Already, BusinessDay learns that discussions had commenced in the Senate about the bill, even as the executive version of the bill is being waited for from the executive before the outbreak of the coronavirus pandemic.
It would be noted that the global oil market is witnessing tremendous volatile shocks following the coronavirus pandemic scare and the recent OPEC+ meetings, which has put Nigeria on the pole position of embracing reforms and value addition in the less impactful oil-driven economy.
Regrettably, oil sector governance experts insist this is time for the sector to embrace a result-driven oriented reform to correct bad governance structure in the sector.
“Some global oil firms like the Saudi Aramco are selling shares now to avert concerns of global oil shocks because they positioned the sector as a commercial entity. NNPC rather had been posting consecutive losses in billions over time. This is the time to act. Reform the sector and enlist NNPC in stock market,” Austin Onuoha, an oil sector governance expert, says.
