Last week, discussions on Twitter Nigeria harped on two cogent national issues in the oil and gas sector. One, the need to overhaul the downstream industry, and the other, the oversight audit of the state-owned oil company, Nigerian National Petroleum Corporation, NNPC’s accounts.
The Twitter discussions maintained the trend table towards the weekend, with Nigerians calling for the Nigerian National Petroleum Corporation. Their discussions centred on the 2018 and 2019 financial records of the national oil company and how Nigeria’s oil and gas industry can compete among peers in the world. It also dwelt on various shortcomings and irregularities of the NNPC management, and possible recommendations on how to run an independent oil firm like Saudi Aramco and others.
The Twitter trends were majorly done through #NNPCAuditReport, #DeregulateNigOil, #FixNigOil #NNPCBadDebt etc. So, what is the essence of the advocacy, and why does it matter now?
What is NNPCAuditReports all about?
In June 2020, the corporation publicly released its audited financial statements in 43 years of its operation. The financial reports were for the year ended December 31, 2018. The documents provided policymakers, financial analysts and even Nigerians, first-hand information on what had been more of guesswork and speculations for years. The financial statements delved into the activities of NNPC and its subsidiaries. A few months after the 2018 financial statements, the corporation released the 2019 financial audited statement, including the Corporation and Group’s account books.
Stakeholders raised an eyebrow at various discrepancies in the financial reports. Last year, Dataphyte raised ten salient questions on the NNPC’s 2018 financial report. Also, media platforms’ analysis revealed that NNPC needs effective and efficient management to ensure value for money and prevent unnecessary waste and loss.
Some of the discussions here:
What about Deregulation?
Deregulation of the downstream sector involves removing government control on petroleum products prices (limiting the government’s role to regulatory functions) and eliminating restrictions on the establishment and operations of refining jetties and depots, among other related oil business entities. These imply private sector-led innovations in refining, supply & distribution and infrastructure such as pipelines, depots, terminals, etc.
Over the years, Nigeria has mulled on the Downstream Petroleum Sector’s deregulation as a strategic policy towards attaining a transparent, competitive, and efficient oil and gas industry. But an inconsistent policy thrust on the part of the government fuels rising concerns. For instance, in 2020, the government claimed it had stopped subsidy payment, but the recent Petroleum Products Pricing Regulatory Agency (PPPRA) statement on the guiding price of petrol (PMS) reveals otherwise.
“The role of the government must be redefined, and markets must be fully deregulated i.e. state interventions such as special treatments of state-owned oil companies, price controls and monopolies must be broken up,” Olu David (@iamoludavid) said in a tweet.
Other contributions:
Why it matters
Popular consensus on the revelations in the NNPC audit report point at the need to unbundle the NNPC and toe the path of a full deregulation of the downstream oil sector. Besides excessive political interference in the operations of the NNPC, the company’s monopolistic tendencies also allow for little to no competition from the private sector. Consequently, the management of the NNPC struggles with sundry issues of inefficiency, poor maintenance of oil facilities and refineries, and recurrent challenges in products supply and distribution.
The deregulation of the oil sector would also forestall the recent kind of policy contradictions occasioned by mismatching PPRA’s market-based pricing of products with NNPC’s reintroduction of petrol subsidy. It will also eliminate inefficiency and wastages, improve output from oil facilities, and open up higher revenue for the government to execute other developmental projects.
Deregulation helps the country unlock enormous opportunities in the oil and energy economy. It encourages investment in the gas sector, supporting power generation and other industries. The attendant rise in employment and output will provide a more stable macroeconomic environment.