An expert said the subsidy shielded companies from the reality of their profits, and companies will now confront the true market dynamics.
Leading professional services firm, PwC Nigeria, has underscored the transformative opportunity for Nigeria's oil and gas downstream sector following the removal of fuel subsidy.
It made this assertion at a press conference held Wednesday in Lagos to discuss the outlook for the downstream sector post-subsidy era.
Commenting, Pedro Omontuemhen, Partner & Africa Oil and Gas Leader, PwC Nigeria, who was represented by Cyril Azobu, Partner & Mining Leader, noted that the policy allows companies to confront market dynamics.
"As the subsidy era comes to an end, Nigeria's oil and gas downstream sector faces a transformative opportunity," the official said.
"The subsidy shielded companies from the reality of their profits. Now, companies will confront the true market dynamics.
"In addition to navigating risks from global economic shifts, fluctuating energy prices, Nigeria's macroeconomic conditions and forex regime, companies must embrace operational excellence to stay competitive."
President Bola Tinubu had, in May, announced the end of the subsidy regime amid fiscal constraints and poor revenues. He added that the subsidy payments were unsustainable and had to be scrapped.
While discussing the opportunities the policy presented, the firm also made several recommendations which players in the sector should consider, especially around reviewing their strategies.
Akinyemi Akingbade, Partner, Energy, Utilities & Resources, PwC Nigeria, who gave the lead presentation at the session, said the downstream sector would evolve rapidly post-subsidy removal.
"We anticipate a consolidation of players in the sector as size and economies of scale will play a major role in shaping competition in the market," he noted.
"As the sector becomes more competitive, companies would need to review their supply chain management, leverage digital technology and have a sound risk management system to manage cost and deliver value to their stakeholders.
"For growth and sustainability, they should invest in other energy options, e.g. Compressed Natural Gas (CNG) and auto Liquefied Petroleum Gas (LPG) as the world embraces low carbon energy."
