Tuesday, March 15, 2021 / 1:22PM / Bukola
Akinyele-Yisau for WebTV / Header Image Credit: WebTV
The passage and signing of the Petroleum Industry Bill, PIB into law will sanitize and standardize the processes in the Oil and Gas Sector, which will make it investor-friendly and attract more investments into the economy.
Mr. Teslim Shitta-Bey the Chief Economist/Managing Editor of Proshare made this point at the special edition of the #theAnalystSpeaks session which discussed "What Nigerians should know About the Cost of Petroleum Products".
He was of the view that the PIB would ensure product quality, processes, and operations are effectively regulated and standardized, while the price should be left to market forces to depict a deregulated market in principle.
The analyst stressed the need for Nigeria to adopt global best practices in its Oil and Gas standards, which is feasible through the PIB and will address the anomalies in the industry and the entire ecosystem.
According to him, there was a need for a proper pricing framework underscored by the concept "willing buyer and willing seller" which would create price discovery opportunities within an open gas market unfettered by government price distortion.
He identified "price determination" as a major challenge in the industry that has to be addressed and managed in a way that does not disincentivize investments into the Oil and Gas (O&G) industry.
"Nigeria presently has only one monopoly supplier of white oil products which is the state-owned oil company (SOE), NNPC. A small tribe of large independent marketers in the country depend heavily on the SOE for sustaining their operations. Besides, the Petroleum Product Pricing Regulatory Authority (PPPRA) has had a transparent but irritating habit of adjusting prices based on a template peppered with inefficiency premiums such as the N7.51 for national price equalisation or what has been called a bridging fund. The way forward is to adopt a market-based approach that would make the sector competitive with appropriate differential pricing," he said.
Speaking on the implications of another price adjustment in the oil and gas industry, he said the cost of living would increase resulting from a stiff rise in the cost of foodstuff, transportation, and services. He noted that the nation's inflation rate currently stood at 16.47% as of January 2021 (February 2021 figures have been confirmed by the National Bureau of Statistics (NBS) to be at 17.33%), posed macroeconomic stability challenges for Nigeria's economy.
He also added that there is a need for transparency and accountability in the system, stating that there has been a trust deficit in the country between the government and citizens.
According to the Analyst, the objective should be for Nigeria to create a sustainable economy by making a conscious commitment to allowing greater private sector involvement in commercial transactions such as determining the retail prices of fuel and gas. However, speaking on the challenges facing the subsidy of the petroleum sector he said the proposed PIB would remove market-distorting price oversight and restrict regulation to operational issues in the upstream, downstream, and midstream parts of the business, with each part having a separate regulator.
On the major gridlocks that need to be addressed in achieving the 10-year goals for repositioning Nigeria's gas economy, he said Nigeria should take advantage of the pricing template of the market for Liquified Petroleum Gas (LPG) devoid of the price distorting influence of PPPRA's N1.23 administrative charge.
He said a deregulated gas market would unlock vast and growing investment opportunities and create many new and skilled and unskilled jobs along the market value chain.
He tasked policymakers, regulators, and stakeholders to chart a clear vision and re-strategize, rethink and re-imagine Nigeria's oil and gas sector.