The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr Emmanuel Kachikwu has argued that fuel subsidy was an unsustainable drain on the economy. He, therefore, called for speedy deregulation of the nation’s oil and gas sector.
“Subsidy creates distortion in government revenue distribution as a result of round-tripping and unnecessary carryover of expenditures every year in a way that is difficult for government to control or sustain,” Kachikwu said.
The NNPC GMD said this while presenting a keynote address titled Energy Crisis and Sustainable Development in Nigeria: The Way Forward, at the National Association of Energy Correspondents (NAEC) Conference held at the Eko Hotel & Suites, Victoria Island, Lagos, yesterday.
Kachikwu, who was represented by Mrs Bolanle Ashafa, Acting Managing Director of Nigeria Engineering and Technical Company (NETCO), said deregulation would encourage domestic private sector participation and inflow of foreign investments.
He contended that deregulation will also provide a fair deal for Nigerians from the abundant petroleum resources, through fair product prices for consumers, full cost recovery, and reasonable margins for operators.
“Subsidy accounted for 20 per cent of the federal government budget in 2013. Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors, hence ending products shortage.
“However, critical enablers such as security of supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices,” the NNPC boss said.
Kachikwu said that the corporation was fully committed to reforming existing refineries, to boost domestic petroleum products supply. He said that the refineries had been re-streamed, but were yet to attain optimal capacity in production.
“Removal of price control mechanisms is deemed imperative to ensure full growth of the sub-sector, by allowing private stakeholders to complement the effort of government in developing the industry,” he said.
He reassured Nigerians that NNPC would continue to maintain stability in the supply and distribution of petroleum products nationwide. He added that the Nigerian oil and gas industry would be transformed for greater efficiency and sustainable growth, through market reforms, diversification of the revenue base and monetization of the natural gas resources.
“We will focus on the need to address infrastructure constraints, to ensure sustainability of gas and petroleum products supply and distribution nationwide. We will be tackling infrastructure gaps and promoting inclusive growth, as well as capacity building,” he said.