Hector Igbikiowubo
16 December 2008
analysis
AS the country teethers on the brink of economic uncertainty occasioned by recession in Europe, the United States of America, parts of Asia and dwindling oil prices, the Nigerian oil and gas industry appears set to implode owing to government's inability to effectively manage the sector especially against the backdrop of panic among fuel importers and bankers whom the Nigerian National Petroleum Corporation owes in excess of $2 billion (about N272.2 billion, given the current Central Bank of Nigeria exchange rate put at N136.1).
Worse, major marketers of petroleum products are now threatening to stop fuel importation until an outstanding debt of N62 billion is paid by the Petroleum Products Pricing and Regulatory Agency (PPPRA), a government price modulation agency superintended by the presidency.
Checks revealed that owing to the outstanding $2 billion debt, the Nigerian National Petroleum Corporation (NNPC) is unable to continue business as usual, that is, dependence on the credit line of its suppliers who now insist on up-front payment before they could effect supplies.
Perhaps Mr. Odein Ajumogobia, the Minister of State for Energy Petroleum) captured this situation aptly when he said: "NNPC has been robbing Peter to pay Paul and now both Peter and Paul want their money. For a Corporation as big as the NNPC, I wonder why importation of petroleum products was not being done by Letters of Credit".
With NNPC's capacity to import under threat owing to its faulty business model, the expectation was that succour would come from the growing number of petroleum products marketers, especially the majors. However, given their current stance over the outstanding N62 billion debt accumulated over time, it becomes all too obvious that petroleum products consumers are faced with a grim outlook in the new year - fuel scarcity and its attendant vices.
Although the probe instituted by government into the finances of the NNPC and the PPPRA may be well intentioned in view of the need for probity and accountability in public service, this action can't afford to be inimical to the common good - the welfare of a greater majority of the people.
While awaiting the implementation of the Oil and Gas Industry Committee report, government needs to ensure that the NNPC conducts its business along the lines of sustainable and internationally acceptable principles that adds the best possible value to Nigeria - this much can be achieved by first engaging the right people and giving them easily discernible targets.
Similarly, the PPPRA cannot offer to pay differentials at uneconomic and unviable terms if it expects to encourage continued participation in government's jaundiced deregulation scheme. The Agency must pay outstanding debts to marketers such that they are not short changed or discouraged from importation.
However, as a matter of urgency, government needs to realise that the time for half measures are long gone. The time has come to go the full hog by deregulating the down stream sector of the petroleum industry.
This will encourage domestic refining of petroleum products, create jobs, expand the domestic industrial base and check perennial problems associated with fuel supply and distribution in the country.
Although Mr. Ajumogobia had assured that from January all importation of petroleum products by the NNPC will be done by Letter of Credit 'and not this idea of using suppliers' credit to run NNPC's business', the point needs to be made that this is a short term measure which may not endure in the long run.
The time has come to go the full hog by doing everything possible now to grow the domestic refining market and protect the Nigerian consumers from the volatility associated with international petroleum products pricing.
Be the first to Write a Comment!
Copyright © 2008 Vanguard. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
