By Kingsley Ndubueze Ayozie
Over the last three weeks or so, the Nigerian community suddenly woke up to behold the perennial scarcity of PMS, popularly known as fuel or petrol. This present fuel scarcity, as usual, was occasioned by long queues of vehicles and gericans that were anxiously and desirously waiting to buy fuel from our filling stations across the major metropolis, thus leading to panic buying wherever such a product was being dispensed. No doubt the general populace greeted this recent development with utmost dismay as they saw the return of long queues of vehicles on our major roads and highways, a scene we felt we had totally overcome recently. The negative implications of such persistence fuel scarcity, both for us as individuals and for the government at large, are highly regrettable.
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Invariably, it is barely 12 months already that the President and Commander in Chief of the Nigerian Armed Forces of the Federal Republic of Nigeria, His Excellency President Ahmed Bola Tinubu GCFR, upon assumption of office on May 29th, 2023, during his inauguration cum swearing in ceremony, announced the total removal of subsidies on petroleum products. Though the general public greeted such an announcement with mixed feelings, we had all believed and hoped that this singular pronouncement would have marked an end to the issue of fuel scarcity within the country.
It is in view of this resurfaced fuel scarcity or shortage that is prompting the issue of total deregulation of the oil sector as a possible option for contending with this occasioned problem.
Have you ever wondered what deregulation in the oil sector means? In simpler terms, it’s about the government stepping back and letting the market take the wheel when it comes to pricing petroleum products. This opens the door wide for investors to jump in, bringing their resources and expertise. Imagine a marketplace where NNPC is just one player among many competing to buy our crude oil. These companies would then refine the oil and make it readily available, all at the current global price. This shift from government control to market forces promises a dynamic and efficient oil sector.
It may also be viewed as a means by which the government will convert pipelines and depots into common carrier firms for anyone who can afford to use their services.
Deregulation could also refer to a situation where any person who is willing and interested can bring petroleum products into the country, subject to meeting specific benchmarks and paying the required tariffs to the government.
Possible benefits:
This opinion piece focuses on the impact of deregulation on stemming the persistent fuel shortage within an economy.
Deregulation offers several attendant benefits. It ensures a readily available supply of petroleum products and eliminates the monopolistic power of the NNPC. By allowing more firms to enter the oil market and compete favourably, deregulation lowers operational costs within the oil sector. This stimulates widespread economic activity by removing bottlenecks for new businesses entering the market, promoting healthy competition among players, and fostering innovation and creativity within the market.
As a result, market growth and product stability increase, and unnecessary business restrictions and bottlenecks are eliminated. Additionally, deregulation stabilises the domestic price of petroleum products, creates investment opportunities for private investors, and generates employment in the refining, haulage, and distribution of petroleum products. Furthermore, it prevents the losses associated with subsidising oil or importing oil to compensate for shortfalls in internal consumption, ultimately leading to potentially lower prices for consumers in the long run.
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To tell the truth, deregulation is a current global phenomenon that any developing economy cannot overlook.
Therefore, there is a clarion call on the part of the government to ensure that all our national refineries are back on track with maximum production capacity, as all these measures will put to a permanent end the perennial scarcity being witnessed occasionally. We must also not place emphasis on the full privatisation of NNPC in order to position it vigorously for the task ahead.
While we sincerely command and also applaud the government for all the measures being put in place in order to mitigate the issue of fuel scarcity going forward, we want to charge them to take such bold and decisive steps that will make our age-long refineries come back to life and become fully operational.
Lastly, I wish to reiterate the need for the government to continue to provide an enabling environment conducive to business that will allow for other players and investors within the industry to come on board and assist us in bringing to an end the issue of fuel shortages in the country.
Written by Kingsley Ndubueze Ayozie FCTI, FCA – a Public Affairs Analyst cum Chartered Accountant by profession