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Private sector involvement in operation of refineries laudable, says LCCI

The Lagos Chamber of Commerce and Industry, (LCCI) has commended the Nigerian National Petroleum Corporation (NNPC) for planning to involve the private sector in the operation of the country’s moribund refineries in the future 

This according to the Director-General of LCCI, Dr Muda Yusuf, in a statement, “is another laudable initiative which will ensure that these national assets are put to use for the growth and development of our economy.”

“One of the critical elements of the Oil and Gas Sector reform, particularly the downstream sector, is the complete deregulation of the sector. This was the spirit of the Petroleum Industry Bill which, regrettably, has got stuck in the legislative processes for close to two decades. The reform of the downstream oil and gas sector would create a number of advantages for the economy.”

According to him, “It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc. The deficit in all of these infrastructure areas are phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.

“It will unlock the huge private investment potentials in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as the burden on our foreign reserves.

“It will eliminate the patronage, rent-seeking activities and corruption that currently characterise the downstream oil sector.

“It will create more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.

The investment opportunities in our Oil and Gas sector are huge, considering our crude oil reserves and the even bigger prospects in respect of our gas reserves. We have a population now estimated at close to 200 million people. That is a big domestic market for energy, presenting huge opportunities for the downstream investments. We thus have a strong competitive advantage in oil and gas.

 “The abundance of investment opportunities is not in dispute, but investors are constrained by the policy, governance and political environments. These have slowed down the pace of development in the sector. Nigeria has been in the business of oil for over 50 years, but we don’t have any private refineries operating on a commercial scale. This is a big issue. No oil producing country imports refined petroleum products on a scale that we do in Nigeria.  It is inexcusable.”

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“Pipelines are very critical infrastructure for refineries and for the sector, but the current ones are ageing and have deteriorated due to poor investment and maintenance.  Again, this is because the pipelines are in public sector space. The story of the petrochemicals and fertiliser plants are not different, although the latter has witnessed some measure of privatisation.”

“The summary is that the dominance of the public sector in this space has significantly slowed down the progress and development of the oil and gas sector. The sector is so strategic that it could easily have provided the lever to accelerate the diversification of the Nigerian economy.”

He noted that the decision of the NNPC to put an end to the subsidy/under-recovery regime is a welcome development. 

“It will be a game-changer for the oil and gas sector and the economy as a whole.  The impact on the economy would be invaluable.”

“However, it is vital to ensure that this new policy direction will be entrenched so that there will be no contemplation of any form of reversal. We are aware that similar attempts to undertake this crucial reform in the past have not been successful.   However, we are confident that in the current dispensation, this will not be the case.”

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Ihesiulo Grace

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