Interviews Politics

Deregulation: Why refineries are not working – Petroleum Miniser, Sylva

Chief Timipre Sylva is the Minister of State for Petroleum Resources. In this interview with a section of the media in Abuja, he speaks on the controversy trailing the removal of fuel subsidy, what Nigeria and Nigerians stand to gain and steps being taking to fix four refineries across the country. The AUTHORITY was represented

On the controversy surrounding the removal of fuel subsidy

I believe that this discussion around subsidy has been a vexed issue that has captured the imagination of this country for a long time now. Successive administrations have attempted to deregulate. But sometimes, some administration lacked the political will and at other time, the time was not good for it. And why did I say the time was not good for it? Does that imply the time is good for it now? The problem around deregulation is that people must understand first and for most, that the product we are talking about is a derivative of crude oil. It is refined from crude oil. Therefore, it has a direct relationship with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative. So, the best time to achieve this we looked at was the time when crude oil prices are low so that Nigerians will get the benefit of those low prices. In March, when we announced the deregulation, the prices were low and that advantage was transferred at the consumer. So, we brought down the price of petrol. The unfortunate thing is that when we brought down the price of petrol, nobody reacted in the market place. The prices were the same. Nobody reduced their prices because price of petrol had reduced. Even bus fares, taxi fares were the same. It did not go down when we reduced the pump price of petrol. We thought that those people in the market; the transport drivers and transport owners would reduce their price. But nobody reduced their prices. But anytime there is even a kobo increase in the pump price of product, you see that people will increase their prices triple fold and four fold. At this moment, let Nigerians not be fooled; there are people who are ready to take advantage of every situation to create anarchy and chaos. And it is this people that are at work now. Is anybody saying that this policy direction is a wrong policy direction? That is the discussion we should be having. If it is a wrong policy direction why has every successive government attempted to do the same thing? Because it is something that is unsustainable, subsidy is unsustainable. Let us look at it: subsidy means that you buy the product at a certain price and then you reduce the price and sell it at a loss to the people. It is something that is good to do. It is something that our president would like to do so much because of his love for the common man. But is it something that can be sustained in perpetuity? You get the product and sell it less at the pump. And that is not the only subsidy. You also subsidise the effects that is used to import the product. So at the end, the subsidy is going on two ways. It is like burning your candle from both ends. How long can that candle last? So in the wisdom of the President and all of us, we felt that it was time because this subsidy is something that cannot be sustained in perpetuity. It is time for Nigerians to face reality and do the right thing. What is deregulation going to do? It is going to free up a lot more money. At least from the very beginning it will save us up to a trillion and more every year. Already, we have taken off the budgetary provision for subsidy which is about N500 billion in the budget. Also, we have taken off the excess forex price special rate that was given to NNPC which also came at a cost. So, all the money that we used to defend the naira at that time to subsidise the dollar will now be freed up for development. And, I believe that going forward, we will begin to see a lot more development, a lot more money available to the government that will be put into critical infrastructure instead of being burnt in our cars. And, let us look at subsidy critically. Who are the beneficiaries of subsidy? When a few years ago you have this subsidy scam all over the place all the monies that were taken by the subsidy thieves and so on, how many poor Nigerians were among those people? Subsidy only provides opportunity for rich and unscrupulous Nigerians to steal and enrich themselves at our expense, at your expense. So deregulation is actually a policy direction that is good for the common Nigerian. It is going to produce a lot of opportunities. Before now, you would ask Why has the refining sector not developed? It is because no refinery can operate commercially in Nigeria with subsidy. If you have a refinery and you refine your product and you are expected to sell it at a subsidised rate, how is the refinery going to make profit and survive? So, nobody wanted to invest in refineries. And that is one of the reasons why our refineries became unsustainable as well because they were refining and selling at a loss. So, every time they came back to government to ask for money. Anytime any part got bad they had to come back because they were not operating commercially. So, they don’t have money to replace those parts. With deregulation, it means that refineries can operate commercially. And then you can see a lot more investment in that sector and it is going to create a lot of opportunities and jobs for our people. With deregulation, it also means that marketers can import product by themselves and sell at market rates to Nigerians. It is going to create a lot more activities and opportunities. So, deregulation is going to really open up. You know what happened in the banking sector with deregulation. We had a few banks but today I cannot count the banks because that sector was deregulated.

Look at the deregulation of the telecom sector; look at the revolution that it has created for Nigeria and for Nigerians. So, why are we shying away from deregulating this sector that is going to provide a lot of opportunities if we do deregulate because we believe that once we deregulate there would be a lot of investment coming into Nigeria to build refineries because at that point it will become commercially viable for them to build refineries because all these issues we are talking about will not be there.

So, is removal of fuel subsidy the solution for the country to earn more revenue?

They say the definition of madness is to continue to do the same thing and expecting a different result. Are we going to continue as a country to do the same thing and expecting a different result and all of us are just blaming ourselves? Let us reason together, gentlemen. This is something that is necessary to be done now. Because even if you say that we want to bring back subsidy, where is the money? How much are we earning? I mean, how much is the crude oil price of today? Some of you will know. It has even dropped from forty something dollar to thirty something dollar today (Thursday) after all the effort we have put in today to shore up the prices, look at where we still are. Our production dropped. Our OPEC quota is 1.412 million barrels. You can imagine and that sold at how much? It is sold at $35 to $40. How much is coming to this country today and how much do you want us to continue to subsidise petroleum products?. This is a very critical time in the history of this country and the world. Everybody’s patriotism will be called to question.

Alhaji Atiku Abubakar kicked against for increase in price. Would you say Atiku was just playing to the gallery?

Of course, it is very clear to everyone including yourself that he is playing to the gallery. What other solution does he have? This is somebody that already told Nigerians that if he was president he would have sold NNPC. Didn’t he say so before? That is he would have commercialised NNPC. Would he have been operating subsidy in an NNPC that has been commercialised? So, we should be very careful with some of these leaders who speak from both side of their mouth because today they are on the wrong side of the divide. He said and he swore that he was going to sell NNPC. That means NNPC was going to be privatised. So, a privatised NNPC would still be subsidising? That meant that he never ever thought one day of keeping subsidy if he were president. He is just playing to the gallery. Are you not seeing that we are being truthful about what we are trying to do? This is in the interest of Nigerians and let us not follow these politicians who want to politicise everything. At this time of our national life we should jettison politics and try to salvage the national economy first which is at risk now in our best interest.

What would be the fate of Petroleum Equalisation Fund (PEF) in a deregulated oil sector regime? And how soon will the nation’s four refineries be resuscitated?

PEF will no longer be after the Petroleum Industry Bill (PIB) is passed into law. Even the Petroleum Products Pricing Regulatory Agency (PPPRA) will no longer exist. They will be subsumed under what is going to be the authority. But, I do not want to go into discussing the PIB now. They will reincarnate in a different form but not exactly in this form but of course, I do not want to pre empt the passage of the PIB. It is for the National Assembly now.

Talking about refineries; what we have done is to sequence the rehabilitation of the refineries. We are going to start first with Port Harcourt refinery. In Port Harcourt we have two refineries; the old refinery and the new refinery. The old refinery of 60,000 barrels and the new refinery, which is a total capacity of 250,000 capacity barrels. Now, there is going to be a third refinery within Port Harcourt refinery, it is going to be a private refinery. That project will be signed in the fourth quarter of 2020. And by the first quarter of 2021, work will start in earnest. Discussions are ongoing with rehabilitations of Warri and Kaduna as well. And I want to assure you that with deregulation it would not be difficult for us to fix these refineries because this will be commercially viable ventures now and properly managed. Government is not going to continuously manage them. We want to put the Operate and Manage contract so that the professional managers of refineries will take over the management of these refineries. Before now, because of subsidy no professional will take over the management of a refinery when he is going to be producing at a loss. But now, every professional manager of refinery is interested in managing these refineries. We believe that the four refineries in Nigeria will soon be rehabilitated and be brought back to production because of deregulation.

What do you make of the timing for the removal of subsidy in the face of the COVID 19 challenges?

This government is a pro-people government and it is in the interest of Nigerians for us to do this. Nobody saw COVID-19 coming. Did you? So, we react to the situation. This is happening today because the government is being proactive and realistic on the basis of COVID-19 which was not anticipated. To give it a human face, we are introducing an alternative fuel. We are giving auto gas. Gas will now become a fuel for our cars. This programme will be rolled out within the next one month. So, if you go to a filling station and you convert your car to dual capability or dual fuel, then you drive into a typical filling station you will find gas LPG, you find CNG and NLG being sold. So, if you look at the price of PMS versus the price of gas and you think that gas is cheaper which of course, it is going to be cheaper. Gas will even be cheaper that PMS as it is today. So you see that we are also giving an alternative to the ordinary Nigerians. You now have a situation where tricycle, I pass my neighbour generators etc will convert to gas. So, you connect your gas cylinder in your house to your generator and it becomes easier for you, cheaper and cleaner. We are not just deregulating, we are also giving you an alternative to make it easier for the average Nigerians. What I want you to begin to really understand more is how you are going to transit from fuel to gas, and you will see that you will not miss much. The average transporter will probably even be better off with gas. So we are introducing it as an alternative at least to cushion the effect so that when you go to a filling station you have options. And that programmes will be rolled out within the next one month. And it is going to create a lot of opportunities and jobs. So, you see that deregulation has not taken away the human face from this government. This government is still a government of the people and by the people.

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