PDP Lawmaker makes case for National economy; tasks FG to deregulate downstream sector
Argues that it will midwife numerous good for the Nigerian market
By: Obi Bright Chinweuba
Deregulation in plain terms implies the absence of control or regulation of the prices of petroleum products of government leaving the determination of prices to the interaction of forces of demand and supply which also rule out subsidy and encourage competition, efficiency and increase output in the petroleum industries. It pre-supposes market forces as the determinant of prices rather than a decision to fix price by administrative fiat. It is therefore the process of freeing federal government of its concurrent control and involvement in the business of refining, importation, and distribution of refined petroleum products.
Deregulation in the downstream sector will therefore involve the removal of governmental controls in the business of refining, importation, sales, marketing and distribution of petroleum products. In a similar vein, deregulation in the downstream sector of the petroleum industry in Nigeria presupposes deliberate government processes, actions and inactions of removing or reducing state regulations in the refining, importation, sales, marketing, and distribution of petroleum products in Nigeria.
In line with the above, a clarion call has been made by the federal House of Representatives member representing Isiala Mbano/Onuimo/Okigwe federal constituency, Hon Engr. Obinna Kingsley Onwubuariri. Hon Obinna’s call was necessitated to save our economy from the wanton abuses the downstream sector has created in it, wherein huge amount of monies are either misappropriated in maintaining subsidy or otherwise.
The lawmaker in an event recently at Abuja argued that deregulation and privatization are elements of economic reform programmes charged with the ultimate goal of improving the overall economy through properly spelt out ways. For example, freeing government from the bondage of continuous financing of extensive projects which are best suited for private investment by the sale of such enterprises; encouraging efficiency and effectiveness in resources utilization; reducing government borrowing while raising revenue; promoting healthy market competition in a free market environment; improving returns from investment and broadening enterprises share ownership thus engendering capital market development.
“The palpable fear that has existed in the past is about us been able to refine our own crude, since most of our refineries are not even functioning optimally. We as a nation has room for improvements, and to succeed with this, we need to embrace the solutions others have succeeded at, look at China for example, so many modular refineries has helped solved their oil woes, and we can learn from that and have a private investor have one modular refinery in every state”.
With modular refineries, we can achieve self-sufficiency in the refining and management of our own crude, said the Lawmaker. “Nigeria needs a minimum refining capacity of 750,000 barrels per day. To produce surplus fuels for export, Nigeria will require at least one million barrels per day refining capacity. This will enable us to produce about 56 ml/ day of petrol, 19 ml/ day of kerosene, and 41 ml/ day of diesel. This is achievable!
“Achieving these refining capacity targets would involve the construction of small-scale (1,000 to 39,000 bpd). Smaller refineries could be in a modular format. Government will not have to be involved in the construction of the small-scale refineries. This is because of the small capital intensity of such plants and the need for ensuring investors’ confidence; For instance, the capital outlay for a 24,000 bpd modular refinery is about $250m, and can be acquired by a private firm or individual”.
Hon Obinna also noted that the modularization of our refineries to foster economic growth will also come with a heavy cost. He stated this that the major short coming with the modular refinery format is that the plants are semi-automated or fully automated and therefore less labour-intensive, i.e. not many jobs can be created directly. For instance, 20 to 30 personnel can operate a 24,000 bpd modular refinery. Most of the spin-off jobs created are of a secondary nature, and are based around the location of the refinery, e.g. transportation, schools, hospitals, shops, restaurants, etc.