As Nigerian National Petroleum Corporation (NNPC)’s newly appointed Group General Manager, Mele Kyari, takes office on Monday, calls for the country’s oil industry to be deregulated and the subsidy on petroleum products to be removed have resurfaced.
Most players in the oil industry view Mr Kyari as a reform-minded technocrat committed to creating an open, transparent and responsible sector based on global best practices, values and norms.
Mr Kyari, who was the General Manager of the NNPC’s Crude Oil Marketing Department until his appointment, will take over from Maikanti Baru on Monday, who will retire from the corporation’s service on Sunday after he reaches the obligatory pension age of 60.
In his congratulatory message to Mr Kyari, the Nigerian Extractive Industries Transparency Initiative welcomed his appointment, describing his appointment as “well-deserved and an intimation of more openness and reforms in the national oil company.”
“Mr Kyari is a well-known transparency champion and one who enthusiastically shares the principles which underline the work of NEITI and the global EITI on good governance of the oil and gas industry,” the Executive Secretary of NEITI, Waziri Adio, said.
In its message to Mr Kyari, the Global Transparency Group, the EITI, encouraged him to use his new appointment to support the oil and gas sector reforms, in particular by bringing higher transparency and accountability to NNPC’s leadership of Nigerian oil and gas profits.
“We look forward to working with the new NNPC GMD to build on his earlier engagement in the EITI’s targeted effort on commodity trading transparency,” the EITI said in a statement.
But oil industry operators see the rise of Mr Kyari as the head of the domestic oil business to resuscitate the call for complete deregulation of the downstream sector of the oil industry of the country as well as the abolition of subsidies on petroleum products.
Some of the respondents used the forum at the just-concluded 2019 Nigeria Oil and Gas Conference to call on the new NNPC leader to give leadership to the oil and gas industry to talk with one voice in support of deregulation and the abolition of subsidies on petroleum products.
Nestoil Group’s Group Managing Director, Ernest Azudialu-Obiejesi, informed the federal government to enable market forces to dictate the price of gas and petroleum products to enable the vast endowments to benefit the economy of the country.
Mr Azudialu-Obiejesi expressed regret that despite having the world’s ninth biggest proven gas reserves, Nigeria continues to produce less than 4,000 megawatts of electricity.
According to him, the telecommunications sector’s effective deregulation was a nice case study to be emulated by the oil and gas industry to boost exponential growth in that sector.
The Group Chief Executive Oando PLC, Wale Tinubu, also encouraged Mr Kyari to provide sector leadership “to speak with one voice against the government’s continued payment of fuel subsidy.”
Mr Tinubu described fuel subsidy as one of the problems that hurt the oil and gas industry and the economy in the country.
“Government has chosen to effectively subsidize the price of petroleum products as a social palliative, not that we support. The debate about subsidy is one that needs to be made.
“The oil industry absolutely needs to challenge and champion the debate on subsidy removal. But, there is long-term damage to our country’s economy and the oil and gas industry with the continuous payment of petroleum subsidy. We need to ensure the subsidies are halted,” Mr Tinubu said.
Instead of accepting what the politicians are saying, he said the sector must have a voice on the issue of subsidy removal. “The industry has a voice that needs to be heard,” he said.
Mr Tinubu identified Mr Kyari as a blessing to the sector, not only because of his expertise, but also because of his positive willingness to reform sector.
The NNPC has been the importer of the bulk of petroleum products since 2016, with the independent marketers of petroleum products unable to join because of financing limitations.
The country’s oil sector deregulation will open up the market for petroleum products to competition among marketers and enable market forces of demand and supply to determine the retail cost of petrol.
The country will not intervene under deregulation to subsidize the price customers will pay in the nation for petroleum products.
Fuel subsidy is the payment of the price difference between the cost of landing and the price of retail pumps set by the government in the annual budget to allow petrol to be sold to customers at the N145 per liter control ceiling price.
A report study by BudgIT, a non-governmental organization focused on public finances, said in April about N10 trillion may have been spent by the country between 2006 and 2018 to subsidize the pump price on petroleum products.