Subsidy unsustainable, Kachikwu says

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Dr Emmanuel Kachikwu has said that subsidy on petroleum products by government creates distortion in government revenue distribution as a result of round-tripping and unnecessary carryover of expenditures every year, in a way that makes it difficult for government to control or sustain.
Kachikuwu while speaking at the National Association of Energy Correspondents (NAEC) Conference held in Lagos, yesterday, also argued, that fuel subsidy was an unsustainable drain on the economy and called for speedy deregulation of the nation’s oil and gas sector.
He spoke on the title “Energy Crisis and Sustainable Development in Nigeria: The Way Forward”.
The NNPC boss, who was represented by Mrs Bolanle Ashafa, Acting Managing Director of Nigeria Engineering and Technical Company (NETCO), said deregulation would encourage domestic private sector participation and inflow of foreign investments.
He contended that deregulation will also provide a fair deal for Nigerians from the abundant petroleum resources, through fair product prices for consumers, full cost recovery, and reasonable margins for operators.
He said: “Subsidy accounted for 20 per cent of the federal government budget in 2013. Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors, hence ending products shortage.
“However, critical enablers such as security of supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices.”
According to him, “Removal of price control mechanisms is deemed imperative to ensure full growth of the sub-sector, by allowing private stakeholders to complement the effort of government in developing the industry,” he said.
He reassured Nigerians that NNPC would continue to maintain stability in the supply and distribution of petroleum products nationwide, adding, that the Nigerian oil and gas industry would be transformed for greater efficiency and sustainable growth, through market reforms, diversification of the revenue base and monetisation of the natural gas resources.

Read also: NNPC to run as business, not civil service, Kachikwu says

Also speaking, Mr Deji Haastrup, the General Manager, Policy, Government and Public Affairs, Chevron Nigeria Ltd., said that the cost of executing projects and services in the industry, remained high in spite the dwindling price of crude oil.
Haastrup also identified oil theft and illegal refineries as other challenges facing the industry in Nigeria.
On his part, Comrade Francis Johnson, National President, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) stated that for deregulation to be sustainable in the oil and gas industry, there must be entrenchment of consistent, stable and globally comparable policy and institutional framework.
Meanwhile, Chairman, Managing Director, Mobil oil Nigeria plc, Mr. Tunji Oyebanji, stated that the regulated prices of petroleum products can’t sustain the country’s economy.
According to him, “a sustainable downstream sector would liberalize pricing, produce large scale investments, competitive landscape, create technology tools (that involves pricing, control systems), support services, making NNPC an effective competitor and not a regulator, ensuring safer trucking and operations, encourages anti-monopoly legislation, consumer protection and product quality.

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