ABUJA — The Federal Government, yesterday, ruled out total deregulation of the downstream sector of the petroleum industry.
The government added that it was aware that any attempt to deregulate and effect an increase in the prices of petroleum products, especially Premium Motor Spirit, PMS, would have serious negative consequences for the country.
Acting President Yemi Osinbajo stated this at the 2017 African Modular Refinery Discussion, organised by the Modular Refiners Association of Nigeria, MRAN, in Abuja.
Osinbajo also blamed government’s involvement for the failure and near collapse of Kaduna, Warri and Port Harcourt refineries, adding that in the new modular refineries’ initiative, oil producing communities would be made to acquire stakes in refineries set up in their locality, while the federal and state governments would have some stakes in it as well as private investors.
Osinbajo said the Federal Government was committed to creating an enabling environment for private sector participation and investments in modular refineries, noting, however, that it is aware of the challenges and complications posed by the non-deregulation of the sector.
In spite of the challenges, he stated that the Federal Government cannot afford to undertake a complete deregulation of the sector, as it would bring untold hardship on a vast majority of Nigerians.
He said the government had reached a conclusion that it would focus on moderating the sector and would continue to intervene to ensure it creates a balance.
He said: “There are those who are saying we need to deregulate fully. Why are they saying that? It is because if we do not deregulate, it is not cost effective for those who are producing PMS to sell. At the same time, if you deregulate completely, prices of everything else is going to go up.”
Gives reasons for refineries’ failure
On the failures of the country’s existing refineries in Kaduna, Warri and Port Harcourt, Osinbajo said the Federal Government had also ruled out building and managing refineries, declaring that it would only create the atmosphere for private players.
He said: “Government cannot just go and be setting up refineries. If government sets up refineries and uses its people to run it, it won’t work. We have good examples in all the refineries that we have seen. If you look at the refineries we have today, Warri, Port Harcourt and Kaduna, the primary reason they are not working today is that they are government-run.
“Government cannot do business. Government business is to create the enabling environment for business. And then government would put some investment into it. Government should not be in the business of setting up refineries all over the place; that is just a waste of time and resources.”
Also speaking, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, stated that at present, the country had a refining gap of about 900,000 barrels per day to meet the daily national consumption.
Kachikwu, who was represented by Mr. Olumide Adeleke, Deputy Director, Engineering and Standards, Department of Petroleum Resources, said to close the identified gaps, the Federal Government had set out some incentives to encourage investment in private refineries, while more was being done to actualize modular refineries in Nigeria.