Abuja — Supply of petroleum products in Nigeria is "threatened to atrophy," and only a comprehensive programme leading to deregulation of the industry can save it, says a Special Committee that reviewed the supply and distribution of the products, in a report released here by the government Friday.
The report blamed the woes of the industry on a number of factors, including "years of denial of renewal of investment" as well as the "monopolistic position of a single player, NNPC (Nigerian National Petroleum Corporation)."
It recommended a three-phased deregulation process, beginning with the establishment of a Petroleum Products Pricing Regulatory Committee, which it said "will superintend the various phases" of the deregulation process.
The second phase of the programme, says the report, will involve the removal of 50 percent of the price support of white petroleum products. The government has said it wants to do away with a subsidy on the consumption of petroleum products by raising to the international rate, the price of crude oil meant for local use.
By the final phase of the programme, says the report, the downstream sector of the local oil industry would have attained full liberalisation.
Government established the review committee in the wake of an industrial action by the Nigerian Labour Congress, in protest over government's decision to raise the prices of petroleum products by 50 percent last June.
Adams Oshiomhole, NLC President, said Friday at the presentation of the report that the solution to the pricing crisis lay in opening up the downstream and allowing other entrants to compete with the NNPC. "We do not think that deregulation is ever going to be feasible if you think of increasing prices," he said.
Jerry Gana, Minister of Information and National Orientation, said the presentation of the report that government wanted a solution to these "cyclical crises" that attend any attempts to adjust the price of these products.
He explained that the report did not represent government's position on the issue, adding that government would issue a White Paper, stating its stand on the issue. He explained that government would also follow due processes in addressing the issues raised by the report, such as the establishment of the regulatory committee, for which he said government would send a bill to the National Assembly.
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The committee explained that setting up of the regulatory committee should be done in the period from the fourth quarter of 2000 and the second quarter of 2001. The process of transition towards a liberalised market which will involve the removal of 50 percent of subsidy, it said, should be achieved between the third quarter of this year and first quarter of this year.
The regulator, said the committee, is expected to ensure a level playing field for all operators in the downstream petroleum sector, and also to discourage monopolistic practices and enhance competition in the sector. It will also moderate volatility in petroleum products prices, while ensuring reasonable returns to operators, after a full deregulation of the sector would have been achieved.
The report advised the government to privatise two of the four Refineries - those in Kaduna and Warri - while holing on to the two located in Port Harcourt. It blamed the threat to domestic supply of petroleum products on the fact that "supply through the refineries have been eroded over time," noting that "it would require massive investment in existing refineries to restore capacity."
Nigeria's four refineries have a total capacity to refine 445,000 barrels of crude oil per day, but currently they are unable to meet domestic demand of 300,000 barrels per day. As a result Nigeria now relies on importation of refined products to meet domestic needs.
The reported noted that "reliance on imported products will persist as long as it takes to restore local refining capacity."
