Saving the midstream petroleum sector

THE petroleum industry is, perhaps, the biggest source of worry for the Nigerian economy. Its most sensitive part is the downstream segment where the populist product, petrol, is messing up both the economy and the fiscal profile of the Federal Government. Key problems surround the inability of the government to create a domesticated downstream petroleum sector. Rather, the country relies heavily on imports in spite of four refineries on which it spends huge resources in maintaining.

Last year about N3.4 trillion was spent importing petrol amidst excruciating resource constraints that had bedevilled the nation’s infrastructure and other development funding requirements.

This year, the figure is expected to rise to N4.0 trillion and beyond.  Hence, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, noted last week that this  has to stop.

We are sure that Kachikwu is not enjoying the most respect he may deserve in the comity of oil nations due to the parlous state of affairs in the country’s oil industry.

He may have initiated several good policy measures to reposition the nation’s oil industry but we believe that the most basic and credible evidence of his success whenever he leaves office will be if Nigeria exits importation of refined products under his watch.

This achievement would make a huge impact on the nation’s economic health and indeed, the stature of her oil industry.  One of the key impacts would be a massive relief to the foreign reserves, a large proportion of which has been going into the importation of this singular product for  decades now.

A reactivation of the nation’s mid-stream sector would also boost  government’s job creation agenda as the refineries, petrochemicals and allied industries come back to life. As Kachikwu himself noted last week, unless we focus strongly on how to bring long-term sustainability in refining and boosting the local supply of products, we will continue to face serious challenges.

As at today, the petroleum products supply chain is on a fragile balance where subsidy is escalating towards the breaking point, leading to a likelihood of renewed scarcity. Otherwise, a pump price increase may again become inevitable.

We urge  government to become more assertive, clear-headed and transparent in the direction it has resolved to go to put the mid-stream on sustainable stability.

A situation where the government is still saddled with managing importation and selling petrol is, to say the least, undesirable. It is also prone to monumental corruption.

We call for the speeding up and strengthening of government support for private sector-led Greenfield refinery projects as well as the structuring and mainstreaming of private sector-driven modular refineries to further increase the supply of petroleum products to end importation.

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