The Nigeria Natural Resource Charter (NNRC) has said that the recent decision by the Federal Government to take off subsidy on petrol was unclear.
It explained that with the announcement, it could not ascertain if the government was ready to or already pursuing liberalisation or deregulation of the downstream petroleum sector. Therefore, the group called for clarity on the situation.
Despite the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari reportedly stating that the practice of subsidising petrol consumption in Nigeria was over and that government would no longer fund such, the NNRC said that the government’s position remained ambiguous.
The group explained that no clear policy statement on the situation has been made so far by the government, adding that such declaration did not indicate if the government was in it for a long-term or momentarily on the back of the impacts of Covid-19 on global oil prices.
Speaking during a virtual workshop with journalists, a member of NNRC’s Expert Advisory Panel (EAP), Ms. Ronke Onadeko, stated that it was important to consider the likely scenarios that could play out after the world and global oil industry is over with the impacts of Covid-19 and oil prices begin to go up.
Onadeko explained that other aspects of the supposed removal of petrol subsidy that the government has not clarified included the potential impacts of the devaluation of the naira on pump price of petrol; that is if the global economic recession forces the country to devalue the naira.
She also noted that oil marketing firms would likely consider the risk of resuming petrol importation if they have no sufficient assurance that, “the government is serious this time and will not go back,” to subsidising petrol when oil prices go up again.
“What regulations and roadmap would make a successful liberalisation and eventual deregulation?” Onadeko asked, while insisting that clarity on the roles of the NNPC, Petroleum Products Pricing Regulatory Agency (PPPRA), marketers and consumers would need to be made in the process.
She also stated that the cost of foreign exchange (forex) which oil marketers often require to import petrol, cost of funds, and bridging claims often administered by the Petroleum Equalisation Fund (PEF) would also need to be addressed to ascertain the true intentions of the government in this regards, in addition to potential traditional opposition to the policy.
“If prices rise back because the naira is further devalued and there is civil unrest, what could be the government’s reaction or response?”, Onadeko asked, while stating that these are some of the challenges and open questions about the subsidy removal that the government needed to clarify.