The Nigerian National Petroleum Corporation (NNPC) has strengthened partnership with the Major Oil Marketers Association of Nigeria (MOMAN), to ensure seamless supply of petroleum products across the country. The Group Managing Director of NNPC, Dr. Maikanti Baru, who disclosed this during MOMAN’s Chief Executive Officers’ Strategy Retreat Dinner in Abuja, said the Corporation, as the supplier of last resort, would continue to strengthen its relationship with MOMAN to avoid any supply gap in the downstream sector.

No doubt, marketers are a force to reckon with in petroleum industry. They ensure that there is products availability nationwide. However, Petroleum subsidy in Nigeria has tripled the problems of supply of petroleum products, considering the current economic quagmire in the country.

With dwindling foreign reserves, depressing exchange rate, saddled with a public debt of over sixty billion dollars and estimated petroleum subsidy in excess of thirty billion naira per month, it may be unsustainable to have a seamless supply of petroleum products.

In fact, if fifty percent of the actual subsidy outlay from 2006 to 2014, which amounts to about four trillion naira, was utilized towards building new refineries, Nigeria would have been a net exporter of refined products by now. This could have increased domestic refining capacity by at least one million barrels per day and secured additional Premium Motor Spirit, otherwise called petrol, yield of fifty-four million litres per day.

Actually, attempts have been made in the past to fully deregulate the downstream sector to allow market forces to determine petroleum product prices, while creating savings for the Federal Government for funding of key capital projects. However, these have been unsuccessful due to resistance from the public as experienced in early 2013. Nevertheless, the Petroleum Industry Bill (PIB) intends to address the challenge of deregulation of the downstream for improved national revenue.

Many countries have attempted to reform their petroleum subsidies with varying degrees of success. Whatever motivations behind these reforms, experts say, if poorly planned and executed, the removal of subsidies can cause adverse economic, social or environmental repercussions as a result of higher energy prices.

Successful subsidy reform requires the permanent removal of subsidies while reducing the short-term impacts of de-subsidization. So, to reduce subsidy, there should be public enlightenment and aggressive social programmes to help the economy to cope with higher prices such as increase in tax-free threshold for income tax, exemption of VAT on agricultural commodities, reduction in interest rates, removal of certain road and transportation charges, basic healthcare packages, educational assistance and food aid for the poor.      

To curb fuel scarcity, government should encourage private sector participation in crude oil refining to increase the refining capacity of the nation in the long run and free up funds used for subsidy payments by the Government. Other measures include the full deregulation of the downstream sector and the passage of the Petroleum Industry Bill to give deregulation the force of law.

There should also be partial privatization of the NNPC refineries for optimum utilization of the domestic crude allocation where the government owns not beyond thirty percent equity and the rest owned by private investors. On the other hand, the Jetty’s reception facilities should be expanded to allow long range vessels and dredging of ports by the Nigeria Ports Authority to improve Draft limitation across Nigerian coast and eliminate transshipment and demurrage costs.

There is also the dire need to encourage the private sector in the establishment of modular refineries. It is of utmost importance to merge the commercial arm of the Department of Petroleum Resources (DPR) with the Petroleum Products Pricing Regulatory Agency (PPPRA), with a view to empower the agency to enforce pricing policy. 

Moreover, priority should be given to the rehabilitation of aging and dilapidated NNPC oil pipelines and depot facilities. Also, program that encourage the use of cleaner and cheaper sources of energy like the Liquefied Natural Gas should be adopted as an alternative to kerosene, solar energy for power and the use of hybrid vehicles as done in India.

These notwithstanding, the national power supply should be improved in order to reduce the consumption of fuel by generators. This would have a ripple effect on cost of goods and services, investment and empowerment.

Again, the use of railway to transport and distribute petroleum products would go a long way to ensure seamless supply of petroleum products.

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