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Fuel scarcity: LCCI seeks liberalisation of oil sector

By on March 29, 2016

As a way out of the recurring fuel scarcity in the country, the Lagos Chamber of Commerce and Industry has called for the urgent liberalisation of the downstream petroleum sector for unfettered private sector participation and investment, subject to an appropriate regulatory framework.

The chamber, while reacting to the unending fuel scarcity through a statement on Sunday, also called for a clear definition of the role of the Nigerian National Petroleum Corporation, saying it should not be an operator and still have regulatory powers.

According to the LCCI, a model that will allow for a level playing field for all operators, including the NNPC, should be adopted.

The chamber said in the statement signed by its Director-General, Mr. Muda Yusuf, “There should be a level playing field for all operators, including the NNPC. This would put an end to the perennial problem of fuel scarcity in the country and the hardships suffered by citizens.  This would also attract more investment, generate more jobs and reduce the pressure on the country’s foreign reserves.

“The roles of the Department of Petroleum Resources and the Petroleum Products Pricing and Regulatory Agency need to be better defined. There are currently several instances of overlapping and duplication of activities and responsibilities. This poses a problem for investors in the sector.”

The chamber also advised that the refineries should be operated as commercial business entities, adding that the Nigeria Liquefied Natural Gas Company Limited model, which allowed for private sector management, should be adopted for the refineries to improve efficiency and reduce the burden of the refineries on the nations’ treasury.

It also suggested that the pipelines should be given out on concession to private investors for more efficient management and reduction of road haulage of fuel.

According to the LCCI, the Central Bank of Nigeria needs to ensure a more transparent process in the allocation of foreign exchange to petroleum product marketers and should ensure the payment of matured Letters of Credit to their offshore fuel suppliers.

It stated, “We have concerns over lack of clarity on the deregulation and liberalisation of the sector. This policy lacuna has put many investments in the sector at risk, while many other investment decisions have been put on hold. The concentration of petroleum products supply in the NNPC remains a major cause for concern. The arrangement is an inherent entrenchment of the dominance of the NNPC to the detriment of private investors in the sector.

“The downstream petroleum sector currently suffers from overregulation, which has profound negative consequences for growth, investment and job creation in the sector.

“Evidently, the current model of managing the downstream petroleum sector is not sustainable. It is at variance with the present administration’s vision to diversify the economy and create jobs. It perpetuates the phenomenal of rent economy and is detrimental to economic competition. It is important to stress that the citizens are the ultimate beneficiaries of a competitive market environment.

“The weak compliance with the regulated price of the PMS in parts of the country is largely a symptom of much deeper problems and distortions in the petroleum products supply chain. The Department of Petroleum Resources has been spending valuable time and energy fighting the symptoms of a problem, rather than addressing the fundamentals. We need to situate the issues in a causative context.”

 

[Punch]