Investors want Nigeria to deregulate now or face fresh harsh recession in months


* Says fuel will sell below N100 per litre if we deregulate now

By Codratus Godson

The federal government has been urged to go full hog into deregulation of the downstream sector of the oil industry and allow market forces to fix the prices of petroleum products instead of price modulation announced by the minister of state for petroleum, Dimipre Sylva.

The group that first advised the FG to use the opportunity of crash of oil prices to deregulate, the Rivers Entrepreneurs and Investor Forum (REIF), in a reaction, commended the government for price reduction but said deregulation is what is needed.

The REIF president, Ibifiri Bobmanuel, the CEO of a construction company and a tractor manufacturing company, warned that if Nigeria failed to deregulate now, it would dangerous to attempt it when oil prices rise. He also warned that Nigeria may slip back into recession in few months time if it failed to act now.

His words: “As we speak, the petroleum pump price is at its lowest ebbs worldwide. So, if the FG decides to take its hands off the till and allow the private sector to import fuel and sell to the people, it will sell at less than N100 per litre. If you look at the difference in crude oil price when we pegged it at N145, you will see what the price should be now. So, let the FG deregulate the downstream sector completely. The FG should take its hands off and allow market forces to determine how much petroleum products will sell in the market. That is how it is done everywhere.

“We had granted an interview to a national business daily on what was expected of the FG especially at such a trying time. I had observed that this is the best time to deregulate and thus urged the FG to carry out full deregulation of the downstream sector of the oil/gas sector. My take was to clearly call on the FG to see the opportunity and strike. I said it cannot be any better than now. It is simple.

“From the early days of our history, the problem with FG from has always been that they seem to want to do everything for the people and end up doing nothing. They want to do subsidy on petroleum, power, roads, etc. You cannot subsidise everything and remain the same. We do not have the financial resources to do so. We do not even have the organisation (and discipline) to do that as a country. We are not wired to do it. We as a people do not practise socialism like in China where government provides everything for the citizen. Yet, China has handed over some sectors to the private sector. As long as the FG of Nigeria continues to run subsidy, there will never be good space for the private sector.

“Look at what Dangote Group is doing in Lagos, where he is pumping $22Bn into three major plants; petrochemical, fertilizer, and refinery. The FG cannot try such huge investment or project today. So, government should leave it to those who can do it.

“Any moment the FG decides to deregulate, things will happen. The market is there for Nigeria because Nigeria feeds the West and Central Africa. Our petroleum comes too cheap and even cheaper than the one they buy from their governments. That is why smuggling is taking place across the borders at the expense of the average Nigerian. These are series of largesse that were created to provide degrees of comfort but we do not have the capacity to manage it. The best solution is to stop the bleeding of our economy.

“If you deregulate, automatically, the big elephant in the house (Nigeria) today is fuel subsidy because the FG spends the biggest chunk in it and we end up subsiding for half of Africa. We are just HURTING ourselves.

So, we at the Rivers Entrepreneurs and Investors Forum (REIF) hereby urge the FG to go the full hog. They have done well by bringing the price down but they need to take their hands off the matter. They should allow the likes of Dangote to do the investing.”

Bobmanuel said what Nigeria needs is not money but to provide space for investors. “We have always known we could get investors into the modular refinery market because the amount is not very high, but the space is not encouraging. They have not given enough incentives to attract private funds for modular refineries. For instance, if you produce from modular refinery and you go to sell in the same market with the FG subsidized products, you can’t sell. FG has given licenses to companies but when you go to look for financiers or partners, they will ask you, look, if we invest say $3Bn, is your government going to stop subsidy? The answer is no. Immediately subsidy is removed over $100Bn will flow into Nigeria’s downstream sub=sector.

“The first rule is that money follows the market. Why is the money not following the Nigerian market? It is so because the climate is not there. The moment we deregulate, massive jobs will emerge. If the fear is that prices will go up, this would have been during peak crude price time. Currently, crude is at its lowest point. This is when you need to act.

“Act now. For starters, fuel will sell below N100 this time if we deregulated. This gives an opportunity to export fuel. The market will reorganise itself and different players would play in different areas; exporting, investing in refineries, etc. It will create a gamut of market. This is why we think the FG should please stop drowning itself. Nigerians need to come together and encourage the FG to act now.

“Fuel in most other countries with oil is more expensive because they have taken their hands off it and Nigeria is subsidising for them. Now, I see this as a golden opportunity that will make the Nigerian economy bounce back bigger. If we wait for oil to start to peak again, regulating at that point will come with bigger pains to Nigerians and investors.

“We received this news of reduction in price with a lot of excitement because everybody seems to commend the FG, but if they go by our suggestion, it means they need to go a step further; complete deregulation. It will not just be modulation which only means that government is still adjusting prices. You are still subsidising fuel. What we ask them to do is please take off your hand completely. You will even generate more money and goodwill by just regulating the space. It’s a win-win for the FG; that why we at the REIF keep asking why the FG is still staying on that streak.”