"We can confidently conclude that government makes a profit of N33.5 or 106 per cent per litre on petrol at the current price of N65 per litre. In addition, government benefits from royalties, taxes and fees, which were not factored in the analysis. When factored, the actual crude cost per barrel to government is significantly less and its profit correspondingly higher. The claim of subsidies on petroleum products is clearly incorrect."
The group said: "Deregulation undermines the utility of national assets and investments in refineries, abandoning colossal national investments in the four existing refineries.
It will lead to increase in unemployment from domestic refining and support industries by the lack of local refining and support activities as well as subversion of our national gross domestic product (GDP) by lack of domestic productivity in the strategic refining sector. This directly undermines Vision 20: 2020.
"Deregulation will lead to increase of hyper-inflation in the economy. The Federal Government’s monetary policy committee has also confirmed this. Prices of petroleum products, energy, transportation, materials and manufacturing, among others, will increase sharply.
"It will lead to further devaluation of the naira due to foreign exchange (forex) demand for product importation and also undermine our national energy security. Energy insecurity is from increased neo-colonial dependence on other countries for energyu supply.
"Deregulation also undermines the real income of workers due to hyper-inflation resulting from devaluation of naira and creates political and socio-economic problems due to increased poverty, industrial crisis, increased crime and desperation, hopelessness, among others. This will increase socio-political tension due to increased poverty.
Government cannot benefit from it as its own costs too will rise dramatically particularly in energy, transportation, materials and project costs. Deregulation will also hinder budget implementation and infrastructural development due to project cost escalation and rework. Projects costs will have to be reviewed and revised due to cost escalation. This will slow infrastructural development as in the seven point agenda as well as undermine technological development since refining experts will have less opportunity to practice, improve and train successors.
Previous increases in petroleum products prices did not result in any improvement in infrastructure except the Abacha and Buahari PTF case. Deregulation can be effected after domestic capacity becomes adequate."
Press Room >> Group kicks against downstream deregulation (The Nation, February 9, 2010)
Group kicks against downstream deregulation (The Nation, February 9, 2010)
A group of professionals un-der the aegis of Strategic Union of Professionals for the Advancement of Nigeria (SUPA) have expressed its displeasure and opposition to government’s plan to deregulate the downstream sector of the petroleum industry.
It also dismissed the government’s claim of subsidising petroleum products heavily as incorrect following a research it carried out.
The group, in a 12-point document made available to The Nation, identified reasons government should not continue with the planned deregulation.
The professionals faulted the advantages government said were associated with deregulation noting that it would cause undue, high cost of petroleum products, unemployment as well as inflation, among others.
They urged the government to rehabilitate the refineries to be able to refine crude locally. According to the group, if crude is refined in-country, the cost of producing a litre of petrol would be very low. It cited a cost analysis that showed production at N31.5 per litre.
Besides, they diagrammatically showed how deregulation will lead to increase in prices of petroleum products, which will cause hyper-inflation in the economy and lead to devaluation of the naira, defeating the entire objectives of deregulation.
The group noted that currently, petrol sells for 12 cents per gallon in Venezuela an equivalent of N4.5 per litre; adding that at N65 per litre, Nigeria has the highest price among all key members of the Organisation of Petroleum Exporting Countries (OPEC). "Even South Africa that imports crude and refines, sells at about N27 per litre," they said.
In the document titled ‘No to the deregulation of petroleum production,’ and signed by the National Leader Chief Martin Onovo, the group said: "Deregulation will cause increased cost of petroleum products due to corruption, wastefulness and inefficiency. Cost of domestic supply is less than N31.50 per litre." Using cost analysis similar to that of the American Petroleum Institute (API), the group said the summation of the cost components of producing premium motor spirit (petrol) from exploration and production to refining and to the end-user, showed that litre of petrol should be N31.50, which shows that at the current price of N65 per litre for petrol, there is negative subsidy and government makes a profit of N33.5 per lire.