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YAR`ADUA
MUST NOT SEND THE WRONG SIGNALS--A
press statement
Monday March 2, 2009 |
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By Senator
Emmanuel Paulker |
The text of a Press Conference addressed by the
Chairman of the Senate Committee on Petroleum (Up
stream) Senator Emmanuel Paulker.
The Federal Government policy of full deregulation
of the downstream sector of the petroleum industry
has been a subject of much debate in both the print
and electronic media for almost a week now. The high
interest shown by the general public in the issue is
an indication of its importance. Petroleum products
occupy a vital aspect of our lives as individuals,
corporate bodies, and public institutions. They
constitute the overwhelmingly predominant source of
energy without which no modern economy can survive,
and this underscores their importance.
The central responsibility of any government is to
improve the welfare of the citizen. Therefore any
policy on regulation or deregulation should be
carefully crafted and targeted at fulfilling this
responsibility. Our opinion is that we have to go
with the global tradition and best practices in the
sourcing, distribution and sale of petroleum
products by allowing market forces to prevail in a
well-supervised and legally enriched operational
environment. It is therefore imperative that any
policy of the government affecting this sensitive
aspect of our lives should be handled with caution.
Apparently the deregulation policy is based on the
recommendation of the Presidential Steering
Committee on the Global Financial Crisis. Some of
the components of the policy include the removal of
subsidy from petroleum products and the
privatisation of the refineries. The government has
explained that the policy is geared toward improving
efficiency in the refining, sourcing and
distribution of petroleum products. Already another
committee has been set up by the Federal Government
to draw up a programme for the implementation of the
policy.
Subsidy
On the removal of subsidy, we believe that the
government would have been compelled by the
unsustainable fiscal burden involved in subsidising
petroleum products to the tune of N640 billion in a
single year. It was obvious that the government
could not bear that burden endlessly. We have always
believed that subsidy should be removed, although
not in the abrupt way in which it has been done but
through a gradual phasing-out process.
The preference for this gradual process is based on
the fact that there are elements different from the
price of crude in the international market that add
to the overall cost of petroleum products. These
elements include:
a. Freight charges
b. Port charges
c. Cost of insurance
d. Cost of bridging
If these cost elements are eliminated or reduced,
there will be a reduction in the amount required for
subsidy, if there would still be need for subsidy at
all.
We are therefore calling on the government to
implement a phased deregulation exercise. And while
that exercise is in progress, the government should
adopt intermediate measures to tackle those
foregoing elements that add to cost. For example, if
the refineries are all functioning optimally,
freight charges and port charges would be
eliminated. Also, if we fix the pipelines that make
up our distribution network and build new ones, the
enormous cost incurred through haulage by trucks
would fall, thereby contributing to reduction in the
pump price of petroleum products. All this will
simply result in a less prohibitive and more
affordable pump price when the phased deregulation
exercise is concluded.
However, our concern with the approach of the
government to the matter is that proper consultation
was not done. If government had done adequate and
proper consultation among stakeholders, the policy
direction could have been better appreciated, the
merits and demerits of the deregulation having been
exhaustively discussed in a free atmosphere. There
has been belated effort at consultation, but even
this could be hampered by statements emanating from
the government indicating that its position is
non-negotiable. There is need for caution and
consistency in order not to send wrong signals to
the public.
We therefore call on all stakeholders to thread with
caution and avoid taking rigid positions in this
obviously sensitive matter, as dialogue remains the
only option for arriving at a resolution.
It is pertinent to say that, at this moment when the
Petroleum Industry Bill is before the National
Assembly, certain actions on the part of government
relating to the petroleum industry is capable of
causing a mix-up in the appreciation of the
direction the government is taking. Some government
measures would seem to be pre-empting the Bill, and
that should be avoided.
Privatisation
The intention of the government to privatise the
refineries does not come as a surprise. These
refineries are national assets that have high
capacity to address our need for refined petroleum
products, but they hardly produce anything in spite
of huge government investment. Instead of
contributing to the growth of the economy, they have
become a setback. If we have to take advantage of
their capacity, a new management system has to be
adopted. And this could mean divesting the
government of its ownership and allowing competent
private organisations to take over. So we are not
against the privatisation of the refineries. What we
need is that those refineries should start producing
at optimal level.
However, government should avoid any action that
would amount to a repeat of the mistake of the last
administration, which caused this administration to
reverse the previous privatisation. The
privatisation should be done through an open,
competitive and transparent process.
Government should also create an environment that is
more conducive and more attractive for the
establishment of private refineries, so we can
increase our refining capacity and rely less on
importation.
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