IPMAN: Deregulation remains best solution to ending fuel scarcity

The Independent Petroleum Marketers Association of Nigeria (IPMAN) says total deregulation is the best solution to ending petrol scarcity.

Mike Osatuyi, national operations controller, lPMAN, said this in an interview with NAN in Lagos on Monday.

Osatuyi said total deregulation of the downstream sector of the petroleum industry remained the solution to fuel scarcity.

According to the lPMAN boss, deregulation remains the answer to all challenges confronting the downstream sector and also allows all the players to key into the sector and import freely.

“Total deregulation remains the best solution to ending fuel scarcity,” he added.

“The deregulation of the downstream sector remains the only potent and lasting solution to scarcity.

“But the cost implication of the policy will make the price of petrol too expensive for Nigerians, as deregulation will shift the burden from the government to users of the product.”

Speaking on the subsidy, Osatuyi condemned payment of subsidy on premium motor spirit, also known as petrol, adding that it is no longer sustainable.

Osatuyi said this against the backdrop of the ongoing hike in the pump price of petrol in filling stations across the country.

He said the federal government had N20.51 trillion expenditure in the 2023 budget against revenue of N9.7 trillion, leaving a deficit of N10.78 trillion.

Osatuyi also said the government hoped to finance fuel subsidy up to June 2023 at a cost of N3.6 trillion, using the Central Bank of Nigeria (CBN) official rate of N435 to a dollar.

According to him, the naira official rate, as well as subsidy, has encouraged smuggling and does not allow competition.

He added that the subsidy regime has led to increasing in budget deficit and caused borrowing setbacks to the economy.

“At present, the CBN official rate is hovering around N445 to a dollar which is above the N435 to a dollar projected in the 2023 budget,” he said.

“Subsidy regime does not allow competition, while monopoly is the language of petrol business as the Nigerian National Petroleum Company (NNPC) Limited is the sole importer, manager and distributor of petrol.

“Subsidy kills efficiency in the procurement and supply chain of petrol business operations and deprives the government of huge revenue.

“Nigeria’s debt servicing of N6.3 trillion per year is not healthy for the country with mere capital expenditure of N5.35 trillion.

“2023 budget projected crude oil production of 1.69 million per day, which is achievable in view of pragmatic measures taken by the government for pipeline surveillance and zero tolerance to crude oil theft.”

Osatuyi also said Mele Kyari, group chief executive of NNPC, confirmed that the cost of petrol was around N510 per litre without subsidy.

He added that if CBN made forex available at official rate to the importers at N445 to a dollar, pump price of 510 per litre was achievable.

“As at October 2022 exchange rate of naira to dollar stood at N445 against N435 projected in the 2023 budget,” he added.

“If CBN failed to avail marketers forex at an official rate of N445 to a dollar after deregulation, importers will have no choice than to turn to the black market for forex, which will push up the pump price of petrol to between N650  to N700  per litre.”

The IPMAN boss further said petrol subsidy could have benefitted Nigerians but half of the assumed consumption found its way to neighboring countries.

He said Nigeria’s petrol was cheaper at landing cost compared to neighboring countries.

He, however, urged the government to put all necessary palliatives in place to cushion the negative effects of the imminent increase in price of petrol before removing subsidy.