The Nigeria Natural Resource Charter (NNRC) has urged President Muhammadu Buhari to allow market forces determine prices of petroleum resources in the country, stressing that the move would go a long way to sustain the nation’s revenues in the short to medium term.
Asking the government to fully deregulate the sector, NNRC, a not-for-profit policy institute, which prioritises effective management of natural resources for the public good, said such move would ensure the availability of revenues necessary for more critical areas of the economy;
“Improve the efficiency of the downstream oil sector by reviewing its policies, regulations and operational guidelines to ensure profitability, improved private sector participation and improved employment,” the group stated in the report made available to journalists.
The group added that while attempts to curb the spread of Covid-19 disease continued to significantly affect global revenues and resources, the sustained low oil prices and price volatility would negatively impact the Nigerian economy.
The group insisted that the prevailing situation must force the government to take seriously, the policy of economic diversification.
While commending the Nigerian government on the steps taken to sustain the Nigerian economy through oil sector reforms; to deregulate the downstream sector, re-open bid rounds of marginal fields, cut the 2020 budget, contemplate privatisation of the refineries and others, NNRC stressed that additional interventions were required to crystalize those policies and further support the Nigerian economy.
“Moving forward, all strategies must be sustainable, if Nigeria is to minimize the effects of the inevitable recession due to the falling oil prices, depreciating revenues, rising debt ratio and diminishing reserves,” the report noted.
According to NNRC, the recent OPEC + production cuts may be too little too late and so Nigeria must look internally for solutions and adopt interventions that take a longer-term view.
Program Coordinator of NNRC, Tengi George-Ikoli stated that the group arrived at this position based on the gaps identified in its recently published Benchmarking Exercise Report (BER 2019) which x-rayed the state of the Nigerian petroleum sector, highlighting policy options to support the Nigerian government’s efforts to stimulate the growth of the economy and its post-covid-19 recovery.
To optimize the opportunities from oil and gas exploitation to withstand the prevailing COVID-19 shocks and its after-effects, she pointed that Nigeria must consider a number of policy options to stabilise the sector, maintain revenue flows, attract investment and drive growth.
Gorge-Ikoli said there was a need to maintain peace and stability in the Niger Delta to sustain revenue flows from oil production, particularly by sustaining existing schemes in the region.
She also stressed the to improve coordination between federal and Niger Delta state governments on the response to the Covid-19 pandemic including the design and implementation of stimulus plans.
According to her, the is need to liberalize downstream sector to allow market forces to determine pump prices for petroleum and other products.
While calling for the efficiency of the downstream oil sector through improved policies, regulations and operational guidelines to ensure profitability, improved private sector participation and improved employment, Gorge-Ikoli asked the government to adopt and constitutionalize a savings mechanism with clear and transparent operational rules.
“This could be by retaining the more effective sovereign wealth fund (SWF) in the NSIA and transferring funds from the Excess Crude Account, the stabilization fund and other similar funds to the SWF. This will help fortify the Nigerian economy from oil price volatilities and other economic shocks. Ramping and prioritizing domestic gas-based industrialization projects, to diversify Nigeria’s energy supply, increase local employment and reduce domestic demand and Nigeria’s reliance on oil.