Nigeria’s downstream sector diminishing operational operations have sparked concerns as stakeholders, notably the Major Oil Marketers Association of Nigeria (MOMAN), urge the Nigerian government to promulgate and converse with the people on the need for deregulation to minimize unsustainable subsidies. MOMAN stressed the importance of deregulation in preventing subsequent worldwide economic catastrophes from having an even more significant impact on the country in 2019. Any hiccup in the supply chain is said to have knock-on consequences that lead to more extended queue occasions at filling stations.
During a webinar program, MOMAN Chairman Olumide Adeosun said that the government must commence implementation to rebuild the downstream sector, which has been in deterioration freefall owing to a lack of investment in maintaining, renewing, and developing assets and infrastructure, including refineries, pipelines, depots, trucks, and modern filling stations. He added that particular sectors, such as agriculture and transportation, must be focused on throughout the implementation phase. This should have a beneficial knock-on effect by lowering food price inflation and generating new employment opportunities across the nation.
Underinvestment impacts fuel delivery and causes price increases.
Consequently, Adeosun argues that the government should prioritize transparency and competition in the supply channel to guarantee a more reliable supply at best possible costs. There has to be a balance between the requirement for local refining and competitively cheap but cost-recovered pricing for Nigerians if sustainability is to be ensured. In addition, he emphasized the consequences of underinvestment, saying that it impacts fuel delivery and causes price increases. Refining profits at current pump prices will not support new or rebuilt refineries.
Argus Media’s Vice President of Crude and African Markets, James Gooder, noted that although freight and other constraints remain essential to address mainly because prices are not static, low oil prices have made deregulation more attainable. He reaffirmed MOMAN’s stance on the need to prep the public for the impact of deregulation and said that, despite current low prices, the oil market’s unpredictability cannot be predicted. All probable emphasis should also be put towards bolstering the market’s inherent self-correcting mechanism.
Deregulated market diminishes the motivation to smuggle items.
Gooder cautioned that freight volatility might begin in January ahead of the February ban on Russian long-term diesel as diesel contracts expire in December owing to the EU’s embargoes on Russian sea-borne crude oil (which comes into force on December 5) and refined oil products (which go into effect in February). He said that European demand for diesel will reduce fuel into West Africa and that high freight, especially on long- and medium-range tankers, will probably continue through the first half of 2023. Freight market volatility has raised gasoline and diesel costs as the cost of transporting a ton increases from $10 to $80.
Considering oil prices are not the sole factor in retail product pricing, freight costs must be considered as Nigeria advances toward a deregulated market while retaining transparency. Gooder said a deregulated market diminishes the motivation to smuggle items out of the nation and improves product influx. Bello Rabiu, former Chief Operating Officer (Upstream) of the Nigerian National Petroleum Corporation and Chairman of Dankiri Farms & Commodities explained that complete deregulation would discard government subsidies and create a fair, competitive market that allows product supply and pricing transparency.
Delivery of petroleum by trucks is no longer feasible.
Yusuf Lawal, the National President of the Nigerian Association of Road Transport Owners (NARTO), observed that the delivery of petroleum by trucks was no longer a feasible or practical option owing to the poor investment in trucking vehicles and the depletion of trucks. He claims that after investing N70 million in a vehicle, the operating expenditures of the firm are at a point where it is unsustainable to keep it running. Due to the poor return on investment, truck sales have been going down.
Related Link
MOMAN: Website
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Stakeholders urge deregulation awareness – The need for deregulation is to minimize unsustainable subsidies. – Express your point of view.
During the regime of Former president Goodluck Jonathan, he try to remove the subsidy and deregulate the sector but people troup to the road on mass protest but now this present administration is thinking and talking about removal. There is no time it will be convinent to remove and deregulate. I think it is better now. We will only suffer for a while and it will be over.
I am in full support of deregulation since that is what will stop all forms fraudulent activities perpetuated by some unscrupulous element who are regarded as the cabals and every other persons using this opportunity to indirectly steal from the masses.
Deregulation is actually a good way to help salvage the economy. It will deter smuggling as the article has said. There is also need for extant laws to be in place and also the political will to implement them concerning the growth of the economy.
The total deregulation of the oil sector will really solve a lot of problems facing the sector from mining of the crude,refining of the product,distribution of the final products and the price.The government will gain lots from it which will boost the economy and provide more jobs to the people.
Deregulation is a good thing but why against it during Jonathan’s regime,our so called leaders are funny now they are crying foul for same deregulation they never supported I just hope it works out.
Deregulation of the downstream oils is the best so far but this same government were never in support during Jonathan’s regime in 2012 but now they are crying foul that it is the best to do now,ok deregulation we all support let’s go ahead and get something done for once.
Stakeholders urge deregulation awareness. I keep on saying it, that this present government nothing to offer. No vision and plan
the need for deregulation to reduce unsustainable subsidies, and for the government of Nigeria to publicize this need and engage the populace in discussion about it.
the critical role that deregulatory efforts play in reducing the likelihood of future global financial crises having an even more severe effect on the nation
Any disruption in the supply chain is claimed to have knock-on repercussions, one of which being increased instances of waiting in line at gas stations for longer periods of time.
Deregulation is a nice way to minimize subsidiaries it what other government try to do but was reject I think is a right time we implement it to help us and solve issues we should all follow it
Due to lack of investment in trucking vehicles and the exhaustion of available trucks, petroleum transportation by truck is no longer a viable or workable option. This is because there are fewer trucks available.
Deregulation is actually a good way to help salvage the economy. It will deter smuggling as the article has said. Really needed!
As Nigeria moves toward a deregulated market while maintaining openness, it will be necessary to take freight costs into account when setting prices for retail products.
It is no longer possible for the company to continue functioning at its current level of profitability due to the high level of its operational expenses.
Economic recovery can be aided by deregulation. The article’s claim that it will prevent smuggling is correct. For the economy to expand, there must be both the will of the political leadership and the ability to put into effect the laws that already exist.
Deregulation has my complete support since it is the only thing that can put a stop to the fraud being committed by the cabals and anyone else who would use this to steal money from the general public.
Trucking petroleum is no longer an option due to a lack of investment in trucking vehicles and an exhaustion of existing trucks. Since fewer trucks are available, this is the result.
The mining of crude, the refining of the product, the distribution of the end goods, and the pricing are only a few of the issues that would be resolved by complete deregulation of the oil business. The benefits to the government are substantial, and these benefits in turn help to grow the economy and provide additional employment opportunities for the general populace.
Deregulation is the only way to stop cabals and others from stealing money from the public, hence I support it.
As Nigeria moves toward a deregulated market while maintaining openness, freight costs must be taken into account because oil prices are not the only influence in retail product pricing.
If sustainability is to be assured, a balance must be struck between the need for local refining and competitively low prices for Nigerians that pay costs.