PPR/OSGF/PR/03 13th May, 2016
STATEMENT BY THE SECRETARY TO THE GOVERNMENT OF THE FEDERATION ON THE DECISION OF THE FEDERAL GOVERNMENT TO DEREGULATE THE DOWNSTREAM PETROLEUM SECTOR
Since our return to democratic rule in 1999, one problem that has troubled our nation incessantly has been the availability and cost of petroleum products. A number of reasons have been advanced for the problem and they include the cost of crude oil, the operational condition of our refineries and much later, the costs associated with the importation of petroleum products. All of these reasons however, can be attributed to one single factor which is simply our inability to produce locally the products that we consume. Our situation, over the years became compounded because of the total neglect of our refineries. Rather than address the issue of local refining of crude oil, we resorted to massive importation of petroleum products. This was criminalized when the cost of crude oil became very high and government revenue soared and could absorb the absurdity.
2. Regrettable, this monumental corruption that crept into this unreasonable business of products importation stayed with us until the departure of the last
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administration. By this time, the price of crude oil has plummeted to its lowest in a decade and our volume of sales had declined considerably due to the glut in the international oil market, and indeed the disruptions in our production capacity caused by the activities of unpatriotic and criminally minded militants. At the same time, the nation’s foreign exchange reserve was completely depleted. The consequences of our past actions are that the nation, today, cannot afford subsidy payments. Our reserves have become so low, government has to enthrone tight monetary measures in the allocation of foreign exchange.
3. For months now, Nigerians have been subjected to severe hardship as a result of scarcity of petroleum products. This scarcity has lingered for this long because government has largely been the sole importer of petroleum products. The private importers have refused to do business at this time because they truly cannot sell at the prevailing government controlled price and make profit especially, because of the inability of government to sell foreign exchange to these importers at the official rate.
In the circumstance, government is left with no option but to partially deregulate the sector and assume the role of a regulator. The ceiling of N145.00 per litre is the highest in the band approved for the cost of PMS (petrol). The implication is that the price can be lower. Indeed, for government imported products, it is lower. We also have assurances that prices of products will come down as the production from our refineries become more regular and stable and
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also as a result of the competitiveness and efficiencies that this deregulation policy will enthrone. This decision that this administration has made is sincere and in good faith.
In due course, the Honourable Minister of State for Petroleum Resources will present to Nigerians the details of the challenges of the petroleum sector inherited by this administration and the measures that are being put in place to surmount these challenges, including the courageous decision to deregulate the sector. Meanwhile, government will continue to dialogue with the labour unions to address their grievances and for all of us, stakeholders to agree on the measures to adopt to reinvent our country.
My appeal to everyone is that commentators should restrain from deliberately inflaming the situation. As we exchange ideas on the propriety or otherwise of this decision, let us be dispassionate as we advance our positions and endeavor to address the fundamentals as they relate to the cost elements in the downstream oil sector. It is time to demonstrate in our judgement a high sense of patriotism.
Engr. Babachir David Lawal,
Secretary to the Government of the Federation.