(Ecofin Agency) - Workers in the Nigeria’s oil and gas industry have said that government’s regulation of petroleum products prices has created more obstacles than encouragements in the system. This obstacles, according to the Chairman/Managing Director of Mobil Oil Nigeria Plc, Mr. Tunji Oyebanji, includes fixed margins, delay in subsidy refunds, product adulteration, indiscriminate construction of stations and terminals, distortion in the market and prolonged products outages.
Operators of the downstream sector are calling on government to liberalize petroleum products price regime also listing opaque allocation of imports quotas, which gives opportunities to importers with no retail outlets, as another obstacle arising from continued regulation of the price regime.
According to Oyebanji marketers could operate in either a regulated or deregulated environment as long as they were receiving economic returns that allow them to cover their costs, encourage investment and make reasonable returns.
Refer to the Indonesian experience on subsidy as an example; Oyebanji stated that the reduction in petroleum subsidies in Nigeria will result in a growth in the price level and a reduction in household consumption.
“Even though higher-income groups lose the most from subsidy reduction, the poor are also affected; the later could be protected by well-targeted social safety nets, using some of the fiscal savings generated by subsidy reform.
“Given the contribution of subsidy reduction to fiscal sustainability, higher petroleum prices are unlikely to adversely affect the poor in the long run,” he told sweet crude
He therefore called for a viable downstream sector that would witness a liberalized petroleum products pricing, improve large scale investment, efficient competitive landscape, effective technology tools and anti-monopoly legislation as well as improved consumer protection and quality products.