This is a statement by a consortium of civil society organizations seeking the reform of the downstream sub-sector of the oil and gas industry.
Following the recent outbreak of the novel Coronavirus pandemic and the resultant twin shocks on the global economy and the impact on crude oil prices at the international market, a virtual meeting was convened and held on April 22, 2020 to enable civil society groups appraise the situation, particularly the implications on the Nigerian petroleum industry.
After exhaustive deliberations on the evolving issues in the sector, we wish to make the following observations, suggestions and recommendations.
- Theoutbreak of the Coronavirus, also known as COVID-19, pandemic and the resultant global economic downturn has led to low crude oil prices, putting Nigeria under immense fiscal pressure.
- To reduce the pressure, we commendthe few policy measures by the government to optimize available revenues, including the review of the Federal Government 2020 budget Benchmarks and cut of the overall approved appropriation Act by N1.5 trillion and the proposal to remove subsidy.
- We equally note the disclosure by the Minister of State for Petroleum Resources, the decision by the Federal Governmentto adopt a modulation mechanism to regulate petroleum products prices, dictated and moderated by the interplay market forces. We commend the step taken to reduce the pump price of Premium Motor Spirit (PMS), also known as petrol, from N145 per litre to N125 per litre is a positive step in that direction.
- We note further that since the announcement by the Minister, the Petroleum Products Pricing Regulatory Agency(PPPRA) released a price band for petrol put at between N125 (Upper Limit) and N123.50 (Lower Limit), effective April 1, 2020.
- We note the recent subsequent pronouncement by the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, that subsidy payment by the government on petroleum products has been removed with immediate effect from the pricing templateby the PPPRA, in essence the end to fuel subsidy in the country.
- While we note that these difficult policy decisions align completely with our vision and advocacy for the reform of the downstream sector of the petroleum industry, we commend the Federal Government for the courage to tread this path at this time in our national history.
- We wish to draw the attention of the government to the important point that more still needs to be done to effectively lead the industry on a path of sustainable regulation based on globally accepted standards and practices. Consequently, we believe there are yet more issues that would require the kind clarification by the government to bring every stakeholder on the same page and ensure all Nigerians are carried along on these important issues.
RESOLUTIONS AND RECOMMENDATIONS
Having exhaustively deliberated on all the issues on concern tabled at the meeting, we the undersigned participants therefore wish make the following recommendations to the Federal Government under the leadership of the Federal Minister for Petroleum Resources and President Muhammadu Buhari:
- As a matter of urgent national importance, we strongly support the call for the privatization of the country’s four refineries in their present condition to avoid further revenue losses. We encourage the government to adopt favorable fiscal terms that bring about a renewed investors’ confidence and also help fast track the 29+ refineries, which still have valid operating licenses.
- We enjoin the Presidency and the Minister of State of Petroleum Resources, Department of Petroleum Resources, and PPPRA to publicly support the declarations made by the GMD of NNPC on the removal of fuel subsidy through an official public statement on April 8, 2020 signed by the signed by the GMD-NNPC in various media appearances in recent times.
- We entreat the government to lay out defined processes and regulatory guidelines to support the announced removal of fuel subsidy. These should be pushed forward and announced by the Presidency and the Minister of Petroleum Resources to give the policy an official seal of affirmation to all Nigerians that we are not in another false expedition.
- We call for the Federal Government to commit to the sustainability of the no-subsidy regime by entreating it in law, either through a stand-alone legislation, or through appropriate clauses integrated into the Petroleum Industry Bill (PIB) will allow for the sustainability of the no-subsidy regime.
- We require the government to clarify the role of the Petroleum Support Fund in the new no-subsidy regime. Clarity is required about how that fund is being managed, whether the over-recovery sums were deposited there and how they are expected to be spent.
- We encourage the government to implement the Orosanye Report and/or transition the PPPRA and PEF into new roles to ensure the sustainability of the proposed ‘non-subsidy policy’. Repeal of the PPPRA and PEF(M)B Act and transition them into efficient and competent institutions to support the reforms encapsulated in the proposed PIB are possible options to consider.
- We urge government to prepare for a post-price regulation era by prioritizing consumer protection to ensure that when the downstream sector of the petroleum industry is liberalized, the interests of the people would not suffer exploitation in the hands of profiteering marketers. We suggest anti-trust or competition propositions using the Federal Competition and Consumer Protection Act 2019.
- We encourage the government to consider providing varied options for Nigerians in terms of transportation systems in the country when inevitably, increases in price of crude oil increases result in the rise of the price of refined petroleum products.
- We suggest that the NNPC as the National Oil Company should not be given any advantage, whether comparative or competitive, over other petroleum products marketers in terms of access to foreign exchange to handle their importation of products activities to create a level playing field for all players. If the NNPC must remain a player in the market, it must strive to operate under the same conditions and rules as other players in the sector regulated only by the prevailing market forces and competition.
- While we await the conclusion of work on the PIB, we urge the government to take steps to delineate the roles of policy formulation, regulation and enforcement as well as operation in the industry. We suggest policy directions should be leftunder the purview of the Minister of Petroleum Resources, with the Presidency and Minister of Petroleum Resources and Minister of State for Petroleum Resources lending their support to the declarations by the GMD of NNPC, to give weight and establish trust between the government and the people.
CISLAC, BUDGIT, SPACES FOR CHANGE, NNF, YOUTH FORUM OF EITI, CSEA, Centre LSD, NNRC, CSSC, MEDIA INITIATIVE FOR TRANSPARENCY IN EXTRACTIVE INDUSTRIES, ORDER PAPER, WiE, PWYP, CODE, ANEEJ