Fuel price upward review looms as PIGB’ll eliminate sudsidy — NAEE

Price of petrol will be reviewed as soon as Petroleum Industry Governance Bill is passed to law. This is the view of Nigerian Association of Energy Economists. Nigerians should expect an upward review in the price of Premium Motor The body said “with the new law, the Nigerian National Petroleum Corporation, NNPC would be compelled to discard unprofitable business practices”.

Addressing newsmen on its forthcoming annual conference, in Abuja, President of the NAEE, Professor Wumi Iledare, said in the PIGB, the NNPC is expected to transform into a profit-making entity, forcing it to discard unprofitable practices such as bearing the burden of fuel subsidy, which it currently calls under recovery. He said, “We are not going to continue this under recovery for a long time, because when the PIGB is assented to, the NNPC that we have today becomes a commercial entity, with shareholders that would receive dividends. They would be key performance indicators that whoever is heading NNPC would deliver to shareholders.”

He, however, noted that the PIGB stipulates a transition period of 12 to 24 months, after the Bill becomes law for most things stated therein to come into effect. He further exonerated the NNPC from any wrongdoing in the under recovery issue, stating that the Act establishing the corporation empowers it to undertake certain business practices to achieve some of its goals.

“The right word to use is under recovery, not subsidy; because the government can only spend money that is approved by the National Assembly.  But the NNPC Act allows the NNPC to do its businesses as part of the strategic goal of a national oil company. What NNPC is saying that it is the one bringing all the petroleum products, but it is not recovering all the money.” Iledare disclosed that efforts directed at ensuring that the country moves away from rentier mentality and rent-sharing would contribute much more to the country’s Gross Domestic Product, GDP. He further made a case for increased gas consumption in the country, stating that the multiplier effects for domestic gas consumption far outweigh that of gas export.

Also speaking, the immediate past president of the NAEE, Professor Adeola Adenikinju, expressed serious concern over the lingering issue of petrol subsidy, which had transformed to under recovery, stating that it was depriving the economy of a number of benefits. He said, “The issue of under recovery or whatever name it is called is something we need to address. I am worried personally, if you look at the structure of subsidy in Nigeria, one would not be comfortable with it. The poor people buy kerosene at almost market price. The companies buy diesel at almost market price; while petrol, which is widely used by the elites is one that is affected by this issue.

“I am particularly worried because the price is not playing the signaling role to investors. It is very difficult to attract investments in the downstream sector. We need to strategically move towards when we would get to a point of some liberalization in the downstream sector in particular, that would allow foreign investors to come in.”