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Analysts fear ‘arbitrage forex regime’ as FG lingers on pricing template for ‘no subsidy regime’

downstream sector
Analysts in Nigeria ‘s oil and gas sector have expressed fears that without proper template from the Petroleum products Pricing Regulatory Agency, PPPRA in the ‘no more subsidy regime’, Nigeria may be heading to an arbitrage forex regime which could see the nation return to the ugly period of fuel cues across the country.
This concern is further worsened by the lingering delays in the discussion between the PPPRA and the Central Bank of Nigeria, which is meant to have create a forex window for major oil marketers as the regulatory agency has lifted ban for their importation of the fuel.
Analysts say without a proper template that shows the landing costs, and the FX rate for the importers, the federal government may shoot itself in the leg through an arbitrage forex regime that could create chaos in the market without uniform pricing template.
“As it stands now, the government should have left everyone to see the template they have if truly they have deregulated,” Henry Ademola Adigun, an oil sector governance expert told BDSUNDAY.
“The lead questions for the government is what is the landing cost for petrol, kerosene if truly they have deregulated .The deregulation should ensure marketers get their forex from the market. Is it N360 to dollar in the template or N425.
“These are issues the government needs to clear for the marketers to really move in properly not just the PPPRA saying we have cleared the marketers to import he said.
Adeola Adenikinju, a professor of Energy Economics at the University of Ibadan told BDSUNDAY that the government needs to go on full deregulation of the downstream sector and the liberalisation of the downstream petroleum sector.
“Deregulation means you reduce government involvement and allow market to allocate resources. In this case NNPC would have to compete with others on a same level ground. In this case, there should be no preferential treatment that might create opportunistic arbitrage that possibly hijacks the market,” he notes.
“Government should not subsidise foreign exchange for domestic consumption of petroleum and let the market be fully deregulated he emphasised.
“What I said is that it is important for the government to implement full deregulation of the sector and we need to put the infra structural and institutional framework that would ensure that the downstream sector is deregulated and liberalised and removed unnecessary barrier in the sector.
“When it is liberalised you don’t need to issue licences to people, you just need to ensure quality control of what comes in into the sector.
Billy Gilis-Harry, president of the Petroleum Products Retail Outlets Owners Association of Nigeria told BDSUNDAY that the owners of all the retail outlets in the country which constitute the last mile of the supply chain in the downstream sector won’t allow any possible hijack of the sector.
He noted that the association is in full support of the deregulation of the downstream sector, noting also that as a stabilising factor in the downstream sector, they won’t allow any possible hijack of the sector.
It would be noted that major oil marketers have harped on the need for the federal government to back downstream deregulation with law, expressing concern that without requisite legislation to back the policy, the sector cannot be said to be fully deregulated.
The government had said it had deregulated the petroleum downstream sector, since March to allow oil markets resume importation, analysts are however worried that without a template that oil marketers could key in, there could be possibility of arbitrage forex regime which could possibly favour select few and lay foundation for possible sector hijack and chaos.

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