Nigeria: What Deregulation of Downstream Petroleum Sub-Sector Will Do for Nigeria – Sylva


Timipre Sylva is a former governor of Bayelsa State and current Minister of Petroleum Resources.

In this interview with newsmen in Abuja, he bares his mind on why the federal government removed fuel subsidy and what deregulation of the downstream petroleum sub-sector would do for Nigeria. Excerpts:

What informed the Federal Government’s decision to remove fuel subsidy?

I believe that this discussion around subsidy has been a vexed issue that has captured the imagination of this country for a long time now. Successive administrations have attempted to deregulate. But sometimes, some administration lacked the political will and at other time, the time was not good for it. And why did I say the time was not good for it? Does that imply the time is good for it now? The problem around deregulation is that people must understand first and foremost, that the product we are talking about is a derivative of crude oil. Therefore, it has a direct relationship with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative. So, the best time to achieve this is when crude oil prices are low so that Nigerians will get the benefit of those low prices.

In March, when we announced the deregulation, the prices were low and that advantage was transferred to the consumer. So, we brought down the price of petrol. The unfortunate thing is that when we brought down the price of petrol, nobody reacted in the market place. The prices were the same. Nobody reduced their prices because price of petrol had reduced. Even bus fares, taxi fares were the same. It did not go down when we reduced the pump price of petrol. We thought that those people in the market; the transport operators and owners would reduce their price. But nobody reduced their prices. But anytime there is even a kobo increase in the pump price of product, you see that people will increase their prices triple fold and four-fold. At this moment, let Nigerians not be fooled; there are people who are ready to take advantage of every situation to create anarchy and chaos.

And it is this people that are at work now. Is anybody saying that this policy direction is a wrong policy direction? That is the discussion we should be having. If it is a wrong policy direction why has every successive government attempted to do the same thing? Subsidy is unsustainable. Subsidy means that you buy the product at a certain price and then you reduce the price and sell it at a loss to the people. It is something that is good to do. It is something that our president would like to do so much because of his love for the common man. But is it something that can be sustained in perpetuity? You get the product and sell it at less at the pump. And that is not the only subsidy. You also subsidise the effects that is used to import the product. So, at the end, the subsidy is going on two ways. It is like burning your candle from both ends. How long can that candle last?

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In the wisdom of the president and all of us, we felt it was time for Nigerians to face reality and do the right thing. What is deregulation going to do? It is going to free up a lot more money. At least from the very beginning, it will save us up to a trillion and more every year. Already, we have taken off the budgetary provision for subsidy which is about N500bn in the budget. Also, we have taken off the excess forex price given to NNPC which also came at a cost. So, all the money that we used to defend the naira at that time to subsidise the dollar will now be freed up for development. And, I believe that going forward, we will begin to see a lot more development, a lot more money available to the government that will be put into critical infrastructure. And, let us look at subsidy critically: Who are the beneficiaries?

With deregulation, refineries can operate commercially. And then you can see a lot more investment in that sector, which will create a lot of opportunities and jobs for our people. With deregulation, marketers can import product by themselves and sell at market rates to Nigerians.

It is going to create a lot more activities and opportunities. You know what happened in the banking sector with deregulation. We had a few banks, but today I cannot count the banks because that sector was deregulated. You see what deregulation did for the airline sector; we had only Nigeria Airways in those days. When the sector was deregulated, it become a major employer of Nigerians. Deregulation has always been good for sectors. Look at the deregulation of the telecom sector, look at the revolution that it has created for Nigeria and for Nigerians. So, why are we shying away from deregulating this sector that is going to provide a lot of opportunities? If we deregulate, there would be lots of investment in refineries because at that point it will become commercially viable for them to build refineries.

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Even the NNPC can easily find the funds to fix their refineries because it will then be commercially viable because they are going to operate refineries commercially.

What would be the fate of Petroleum Equalisation Fund (PEF) in a deregulated oil sector regime and how soon will the nation’s four refineries be resuscitated?

PEF will no longer exist after the Petroleum Industry Bill (PIB). Even Petroleum Products Pricing Regulatory Agency (PPPRA) will no longer exist. They will be subsumed under what is going to be the authority. But, I do not want to go into discussing the PIB now. They will reincarnate in a different form but of course, I do not want to pre-empt the passage of the PIB.

Talking about refineries; what we have done is to sequence the rehabilitation of the refineries. We are going to start with Port Harcourt refinery. In Port Harcourt, we have two refineries – the old refinery of 60,000 barrels and the new refinery with a total capacity of 250,000 barrels. Now, there is going to be a third refinery within Port Harcourt refinery which is going to collocate, it is going to be a private refinery. That project will be signed in the fourth quarter of 2020. And by the first quarter of 2021, work will start in earnest. Discussions are ongoing with rehabilitations of Warri and Kaduna as well. And I want to assure you that with deregulation it would not be difficult for us to fix these refineries because this will be commercially viable ventures now and properly managed. Government is not going to continuously manage them. We want to put the Operate and Manage contract so that the professional managers of refineries will take over the management of these refineries.

We believe that the four refineries in Nigeria will soon be rehabilitated and be brought back to production because of deregulation.

What do you make of the timing of the removal of fuel subsidy, especially in the face of the Covid-19 pandemic?

This government is a pro-people government and it is in the interest of Nigerians for us to do this. Nobody saw COVID-19 coming. This is happening today because the government is being proactive and realistic on the basis of COVID-19 which was not anticipated. To give it a human face, we are introducing an alternative fuel. We are giving auto gas. This programme will be rolled out within the next one month. You can go to a filling station and convert your car to dual capability or dual fuel, then if you drive into a typical filling station and you look at the price of PMS versus the price of gas and you think that gas is cheaper, you can buy that. So, you see that we are also giving ordinary Nigerians an alternative. You now have a situation where tricycles, I pass my neighbour generators etc will convert to gas. You can connect the gas cylinder in your house to your generator and it becomes easier for you, cheaper and cleaner. We are not just deregulating; we are also giving you an alternative.