With yesterday’s extension of the implementation of the Petroleum Industry Act (PIA) by 18 months, President Muhammadu Buhari is shifting the task of implementing the long anticipated law to his successor, including tackling the fallout of the expected petrol subsidy removal agitating the generality of Nigerians.
The federal government has proposed a one year and six months extension of the implementation of the PIA to the National Assembly.
The law had been initially billed to kick off this February.
Buhari had on August 16, 2021 signed the Petroleum Industry Bill into law to national applause.
The minister of state for petroleum resources, Timipre Sylva, told State House correspondents yesterday after a meeting with President Buhari at the Presidential Villa, Abuja, that the government had suspended fuel subsidy removal until further notice due to humanitarian reasons – to cushion its effects in the suffering masses.
According to Sylva, the suspension is to give all the stakeholders time to ensure that the implementation is carried out in a manner that guarantees that all necessary modalities are in place to cushion the effect of removal of subsidy on premium motor spirit (PMS).
He said, “President Muhammadu Buhari has agreed to an extension of the statutory period for the implementation of the removal of subsidy on petrol PMS in accordance with extant laws.
“However, following extensive consultations with all key stakeholders within and outside the government, it has been agreed that the implementation period for the removal of subsidy should be extended.
“This extension will give all the stakeholders time to ensure that the implementation is carried out in a manner that guarantees that all necessary modalities are in place to cushion the effect of the PMS subsidy removal in line with prevailing economic realities.’’
Massive Investment In Oil, Gas In 2022 Through PIA Expected
On the likely effects of the subsidy removal on the livelihoods of the poor, Sylva said, “The president assures that his administration will continue to put in place all necessary measures to protect the livelihoods of all Nigerians, especially the most vulnerable.’’
On the fuel queues that have resurfaced, he advised Nigerians to stop hoarding fuel or engage in panic buying as the government has no plans to remove subsidy.
“We don’t intend to remove the subsidy now. That is why we are making this announcement,” he said.
On the possible legal implications after the assent to the PIA by President Buhari, the minister said, “We also see the legal implications. There is a six-month provision in the PIA which will expire in February and that is why we are coming out to say that before the expiration of this time, as I said earlier, we will engage the legislature.
“We believe that this will go to the legislature; we are applying for some amendment of the law so that we would still be within the law.
“We are proposing an 18-month extension but what the National Assembly is going to approve is up to them. We would approve an 18-month extension and then it is up to the National Assembly to look at it and pass the amendment as they see it.”
Asked if the suspension has something to do with the 2023 elections, he said, “Of course not. As I told you, first it’s just the human face of the government. Mr President especially wants certain structures to be in place. And he insisted if we want to remove subsidies, we must make sure that we put every measure in place to protect the suffering masses of Nigeria. That is the president’s insistence. So, we are now taking steps to ensure that these processes are in place.
“We are already talking with labour. And our discussion with labour is also around these palliatives and mitigations. So, all these will have to come together. That’s why we decided at this time, especially since we are running against time, with the legal timeframe approaching very quickly, we thought we should come to you and let you know that we are taking steps to amend the law and to ensure that we are within the law.”
On the possibility of gradual increase, which is not on the table right now, the minister said: “Gradual or increment in whatever guise is not on the table.
“We are going to see how to rejig the law; this is not going to be the only amendment to the PIA. A few months ago, the president already proposed an amendment to the law.”
NLC Suspends Planned Protest, Lawan Wants Fuel Smuggling Stemmed
Following the reversal of plans by the federal government to increase fuel pump price, the Nigeria Labour Congress (NLC) has suspended its planned January 27 nationwide protest.
Announcing the suspension yesterday in a statement, the congress’ leadership said the reversal was a victory for Nigerian workers and people.
In the statement, NLC national president, Comrade Ayuba Wabba, said, “The National Executive Council of the Nigeria Labour Congress had an emergency virtual meeting this (yesterday) morning to consider the new position of the government. After vigorous debates, the NEC decided to suspend the planned nationwide protest scheduled for 27th January, 2022 and the national protest in Abuja scheduled for 2nd February, 2022.
“The leadership of the congress has communicated this organ decision to our civil society allies who have stood stoically behind Nigerian workers in our quest for social and economic justice for workers and the downtrodden people of our country.”
The statement further said that going forward, labour will continue to engage with the government on the very critical issues of ensuring local refining of petroleum, creation of sustainable jobs and provision of petrol at an affordable price for Nigerian workers and people.
Meanwhile, Senate President Ahmad Lawan has urged heads of security and paramilitary agencies to do more to check the smuggling of petroleum products out of Nigeria.
Lawan stated this during a meeting attended by the comptroller-general of Nigerian Customs Service, Col. Hameed Ali (rtd), commandant-general, Nigerian Security and Civil Defence Corps, Ahmed Abubakar Audi, representative of the director-general of the Department of State Services (DSS), San Gesto, and representative of the comptroller-general of Nigerian Correctional Service, Haliru Ishaka Abdulmumini
In a statement issued by the Senate president’s spokesman, Ola Awoniyi, Lawan said he was following up to the Monday meeting with Finance and Petroleum ministers which was to find a way forward on the administration and management of fuel subsidy in Nigeria
He told his guests: “We are all aware that some of the products, particularly the PMS, are smuggled out of the country and yet we pay subsidy on what is smuggled out.
“So, this meeting is to look into the ways and means of controlling the smuggling of petroleum products with a view to minimising the cost of fuel subsidy to our country.
“I know, individually, these organisations have been carrying out their responsibilities on this but I think that we are coming into a special moment. Our situation is such that we cannot afford anymore to allow this smuggling business to continue because the cost is very huge and debilitating to our people.
“At some point, I will hold a meeting with the National Security Adviser (NSA) who is supposed to coordinate the entire security apparatus for protecting our borders.
“I will also hold some engagements with the military, especially the Navy, because a lot of our products are shipped out to other countries through the water ways.
“At the end of the day what we hope to achieve is to minimise or, where possible, eliminate the incidents of smuggling of petroleum products that we import into the country for our people.”
Lawan expressed doubt on the figure of almost 100 million litres per day consumption, saying some of that figure are smuggled out of the country.
“We need to look at the strategy, maybe how we undertake our activities at the borders, the different agencies, the inter-agency cooperation that is so essential between the agencies, the application of technology in surveillance and who should host that technology.
“I believe there is a need for deployment of drones and other technologies that are available these days and, probably, the Office of the National Security Adviser should be able to be in charge of that and make the information and data available to all the agencies that need them,” he said.
Responding, the comptroller-general of the Nigerian Customs Service, Col. Hameed Ali said his agency had been doing a lot in trying to ensure that the smuggling of petroleum products out of Nigeria was minimised to the barest level.
He however complained of porous borders and absence of governance at the border communities which made the job more difficult.
Nigeria Cannot Afford Continuation Of Fuel Subsidy
Meanwhile, the Nigerian Economic Summit Group (NESG) has said the petrol subsidy was a temporary measure, which ought to have been stopped to open up the oil sector for real competition. It argued that Nigeria can no longer continue with implementation of the subsidy scheme. While applauding the passage of the PIA, NESG said the government should look for how to ensure that there is more transparency and openness in the sector.
NESG CEO, Laoye Jaiyeola, made the remarks yesterday at the launch of NESG economic outlook in Abuja.
Jaiyeola said the federal government has to resolve the issues around the foreign exchange market, deregulate the oil and gas sector and boost external revenue available by producing what is needed or consumed locally. He emphasized the need for the government to ensure transparency in the oil sector to fight the huge fraud going on in the industry.
“This nation cannot afford the continuation of this subsidy. Nigeria has a revenue challenge and how well we deal with that is important,” Jaiyeola said.
However, he said in removing petrol subsidies, the government must look at inflationary pressure and ensure efficient use of resources from the deregulation.
“As you remove the subsidy, also find a way to liberalise and make the oil sector competitive. Everyone should realise that 40 percent of our population consume fuel products. This is a subsidy for the rich rather than the poor. We should therefore look for ways to invest in the oil sector. Subsidy is not what I think we can sustain in a long while,” he stated.
Decision Hasty, Without Stakeholders’ Input — OPS
With the federal government set to approach the National Assembly to suspend the implementation of the Petroleum Industry Act (PIA) 2021 for another 18 months, stakeholders have tagged the move as another policy summersault.
The stakeholders, in separate interviews with LEADERSHIP yesterday, noted that the development is sending a wrong signal to the investing communities to continue to doubt implementability of certain laws in the country.
Reacting to the development, president of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr Prince Billy Harry, said the decision was hasty and without input from stakeholders.
Stating that though government may have empirical evidence that the suspension will not have much negative impact on the economy, nevertheless, he noted that, the decision will paint the country in a negative way, especially, among investors.
He expressed concern that investors will lose so much as many players had initiated capital projects so as to take advantage offered by the law, but suppressing such projects for another eighteen months would be hurtful.
“We have always encouraged government to take into account the position of every stakeholder. Not every decision should be taken on political exigencies; economic imperatives should equally be considered,” Harry said
For instance, he said, PETROAN had entered into partnership with THLD Group for use of retail outlets of PETROAN as vehicle conversion (petrol-to-gas) centres to push the National Gas Expansion Programme (NGEP).
Harry said the autogas initiative of the federal government came at the right time, especially in the light of global crude oil fluctuations coupled with the deregulation of the local [petrol] market.
He added that the use of autogas will not only cushion the effect of downstream deregulation but also create new markets and enormous job opportunities for the people.
On his part, the president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Okoronkwo, said government should commence the implementation of programmes and palliatives aimed at cushioning the effects of the eventual removal of petrol subsidy in the country, following extension of the PIA.
According to him, the postponement offers government the opportunity to put the necessary programmes and palliatives in place.
“The government should improve domestic refining capacity by rehabilitating our refineries. This is ongoing and hopefully the contractors will adhere to the stipulated timelines.
”Also, government should give the necessary support to the Dangote Refinery and other privately-owned refineries under construction to enable them come on stream as soon as possible,” he said.
According to the CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, this is another instance of policy somersault as it also reflects the absence of political will to reform the oil and gas sector, which has been the case in the past few decades.
“Perhaps, there are entrenched and powerful interests working against the PIA. These forces have succeeded in upturning a major economic reform programme. It is a sad development. This would further aggravate the political and policy risk of investing in Nigeria. The oil and gas sector is one sector that has been starved of investment for several decades because of policy and regulatory issues.
“Regrettably, at a time when we thought we had turned the corner, we are now faced with the stark reality of a complete suspension of a major instrument of reform. It is certainly not good for our perception by investors as an investment destination. It will affect our country’s risk rating,” he said.
Yusuf noted that the implication of the current decision of government is that the implementation of the Act will not commence in the life of the present administration.
“It is difficult to predict what the succeeding administration will do. Meanwhile, attracting investment into the oil and gas space will be extremely difficult going forward,” he added.
Weighing in on the issue, the director-general of Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Alumona, stated that “in the face of this dilemma, the major concerns of the Organised Private Sector (OPS) are found in the policy inconsistencies that have tainted our policy environment; the loss of required foreign direct investments (FDIs), and the likely weak implementation of the Petroleum Industry Act (PIA).
“There is a dire need for more infrastructure to support production which would mean more job creation, poverty reduction, and improved economic growth.”
The LCCI boss called on federal government to consider doing all that is possible not to truncate the implementation of the PIA 2021, which has already brought so much hope to industry watchers as a big game-changer for the oil and gas sector, saying there is a need for stakeholders’ consultations on addressing the implications of lapsed provisions of the Act and forging the way ahead towards the full implementation of the Act.
“The most sustainable way to go is to increase our local refining capacity and save the huge spending of our forex on importation of fuel,” Alumona said.
Meanwhile, former director general at the West Africa Institute for Financial and Economic Management (WAIFEM) and chairman of the Foundation for Economic Research and Training, Professor Akpan Ekpo, said a suspension of the implementation of the PIA will be sending wrong signals to investors and would not bode well for the energy sector as well as the economy in general.
To him, the signing of the petroleum industry bill into law had been an attraction for many investors in the energy sector, and a suspension now will make the country look unserious, thus, discouraging investors.
He noted that a planned suspension means that there are loose ends that ought to have been fixed “but they could have done that without suspending the implementation ”
Professor Akpan, whilst noting that the suspension is linked to the subsidy removal that was earlier reversed, stated that government could have gone ahead with the implementation of the PIA whilst regulating the NNPC as a company.
“The government has the right to regulate any sector or product as it deems fit and it could have done so with the price of petrol by regulating how much the NNPC sells,” he stressed.
Moreover, following the decision of the federal government to reverse itself on fuel subsidy removal, the International Monetary Fund (IMF) has maintained that Nigeria needs to remove subsidies and focus funds used for subsidies to mitigate evolving health concerns as well as social development.
Speaking at the media briefing on the January World Economic Outlook (WEO) of the IMF yesterday, Division Chief, Research Department IMF, Malhar Nabar, stressed the need to scale back on subsidies to allow for more fiscal space to spend on real social needs.
Responding to Nigeria’s decision on fuel subsidies, he said “in terms of the subsidies, we have for long, not just for Nigeria, but for many low-income countries that have these programme of subsidy schemes in place, called for scaling back of poorly targeted subsidies to create fiscal space that can then be repurposed for meeting vital health and social spending needs and that recommendation applies in the case of Nigeria.”
