But, the Minister of
State for Petroleum Resources, Timipreye Sylva, told Business/Economy Editor,
Bassey Udo, that the government cannot abdicate the responsibility to protect
consumers and allow marketers fix fuel prices.
Mr Sylva also spoke
on his one year in office and what to do going forward.
Excerpts:
PT: Shortly, you
will reach a milestone. What do have to tell Nigerians about your one year in
office?
SYLVA: We have a lot
to tell Nigerians in one year. I can tell Nigerians we have been able to take
the FID (final investment decision) on the construction of Train 7 of the
Nigeria LNG project. That is an additional investment of over $10 billion. By
any standard, that is a major achievement.
Also, we have just
launched the marginal oil field development programme. By the time I am
actually one year in office in August, I believe we would have rounded off the
programme.
We are moving on get
the PIB (Petroleum Industry Bill) passed. Within the next few weeks, we are
going to roll out the National Gas Expansion Programme, to expand the usage of
gas in the country to include using gas to drive our cars, and to improve the
LPG (liquefied petroleum gas) usage in homes.
PT: Let’s unpack
them one after the other. The FID on the NLNG Train 7 project is a massive
milestone in Nigeria, particularly at a time Nigerians almost gave up hope it
might not materialize again after several postponements and COVID-19. How did
you swing it?
SYLVA: Let me
confess to you, it was a very tough journey. There were all kinds of issues,
part of which you have just mentioned, majorly COVID-19. If one looks at it
from the backdrop of the fact that it is the only project of that magnitude in
the whole world that took FID during this period, then one would know that a
lot of hurdles had to be surmounted to get there.
It took a lot
engagements with all our partners to get to some consensus on some of the gray
areas. Knowing that the country needed this investment, we had no option than
to put in extra effort to engage our partners and all the financial
institutions – the FIRS (Federal Inland Revenue Service), Federal Ministry of
Finance and everybody – to be able to get their concurrence. At the end, we
were able to take that FID, which I believe is one major milestone this
administration is so proud of.
PT: You said the PIB
is moving closer to its final passage. This has been long in coming. Where
exactly are we on this?
SYLVA: The PIB is
today 20 years in the making. To say it’s long in coming is an understatement.
But, at this point, I think we have got to the end. We have a working draft
that is good enough. We have escalated it to some of our partners. Once we have
some concurrence, the process will proceed.
In the end, we are
not expecting 100% agreement on all the points. There is no way industry and
government can have 100% agreement on all the issues. What we are looking at is
to narrow the gap. Once we have enough narrowing of the gap, we will escalate
it to the President, hopefully in the next one or two weeks, and from there to
the Executive Council of the Federation.
As soon as we finish
at the FEC, we would take it to the National Assembly, and it will become a
public document for everybody to discuss. Because of the consensus built around
the passage of the PIB, we hope that in the next two months, we should be able
to get it passed.
PT: What about the
recent decision to deregulate the downstream sector of the petroleum industry?
SYLVA: That’s
another major achievement I was coming to. This is something the government has
always looked for a window for. And COVID-19 pandemic provided the most
appropriate window we took advantage of.
Crude oil prices
went down so low; demand was eroded, and retail price of petrol was at the
bottom. Products, fuel prices follow crude oil price. The government felt that
was a good entry point to take advantage of. Clearly, Nigerians are today
enjoying the benefits of that decision.
Deregulation of the
downstream sector means that the government is going out of the business and
allowing the private sector to take over. This will allow the government to
face its traditional role as regulator of the industry, as governments
everywhere is doing.
The government is
not saying it is going to completely abandon the deregulation policy to the
marketers to determine prices. As a regulator, the government has the
responsibility to protect the consumers.
In U.S. and U.K.,
they recommended retail price for every commodity. So, for a very strategic
commodity as petroleum products, we must have a recommended retail price for
the marketers, so that they will be selling within that price band, and not
over-profiteer off the people. If the government makes the mistake of allowing
the marketers to fix prices and sell petrol at any price they want, they will
be profiteering at the expense of the people.
What one will find
from that will be a situation where prices will go out of control. So, the
government has no option than to continue to play that role as a regulator, to protect
the masses; to ensure the landing price of petrol and other products is not
very different from the selling price.
With that, the
marketers will be allowed some reasonable margins and avoid the exploitation of
the people through a unilateral fixing of inordinate prices.
We know the
marketers are quite responsible people. But, we also know the way an average
marketer thinks as a businessman is different from the way government thinks
about the masses.
So, as a government,
we must be there to moderate things and ensure consumers are protected at all
times.
PT: Let’s break it
down further. You spoke about the PIB earlier. But, people still say the
deregulation policy is coming in a way that suggests, as you said, government
was taking advantage of a window of opportunity offered by COVID-19 without
being prepared really for it. For instance, there is no legal framework that
will say what will happen if price of petrol increases again tomorrow. Without
an enabling law to guide and regulate the process, how do you think this
deregulation will work?
SYLVA: No, no, no.
You do not need a law for everything. Sometimes, all you need is regulation.
So, as a government, we have a traditional role recognised by everyone – to
regulate the process. They say the government is not good for business.
Everybody agrees. But, nobody says government is not good as a regulator.
The government is
traditionally a regulator. It’s like the Central Bank regulating the interest
rate in the banking sector. Banks cannot charge interest arbitrarily on loans
outside a certain band recommended by the CBN’s monetary policy. FAAN regulates
the airline industry. These are all deregulated sectors of the economy. Yet, we
still have regulators for these sectors.
So, the government
is the regulator for the petroleum products sector through the PPPRA (Petroleum
Products Pricing Regulatory Agency) to ensure the marketers and consumers are
both protected. That is the role the government will continue to play.
PT: But, if there is
no law defining the roles for the different agencies involved in the process,
how would we resolve the usual conflict between the NNPC and PPPRA on which of
the two is in charge of managing the fuel pricing mechanism?
SYLVA: No, no, no.
NNPC, in this case, is a player. They are part of the industry.
PT: But, sometimes
they are tempted to extend their area of influence to play the role of a
regulator?
SYLVA: No, no, no.
What the NNPC does sometimes, which is also good for the petroleum market, is
that when the market is going out of control, it intervenes.
For example, if the
AGO (automotive gas oil) prices are going too high, and the marketers are
beginning to take the prices to unimaginable high levels, NNPC will just import
some cargoes of products and sell at a lower price, and of course, everybody
would follow the NNPC price.
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