Group demands framework for fuel subsidy removal, oil licensing round

Melee Kolo Kyari, NNPC GMD
Mele Kolo Kyari, NNPC GMD

The federal government should provide a detailed framework for its decisions to end fuel subsidy in the country and the planned oil and gas licensing round, civil society groups advocating for the reform of the country’s oil and gas industry have demanded.

The groups under the aegis of the Centre for Transparency Advocacy said although they support the government’s intention to finally remove fuel subsidy, the framework will show the technical details of the approach government will adopt.

The framework will also state the roles and responsibilities of the different interest groups and agencies of government involved in the petroleum products supply and distribution, to ensure transparency and accountability in the use of the proceeds from the subsidy removal for the benefit of the people.

“Fuel subsidy has been a source of bleeding of huge government resources for a long time. Successive administrations have not been able to bring an end to fuel subsidy regime. Now that the present administration has announced its intention to finally end subsidy.

“We commend government for this decision and pledge to support the process to realise the national objective, which we believe aligns with our aspirations to help harness the national wealth for the benefit of all Nigerians.

“However, we demand for a framework for the domestic utilisation of petroleum products to properly guide the process as most Nigerians are unaware what the fuel subsidy regime idea is all about.

“We believe the framework will spell out the roles and the limit of the responsibilities for agencies like the Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA) to make policy a reality,” the group said.

Although they noted the recent decision by the NNPC to adjust downwards the price of petrol from N145 per litre to N125 and N123.50, the groups said Nigerians are not yet aware of any clearly defined mechanism on how this adjustments were done and how the new prices were arrived at.

They said there appears not to be a similar mechanism to guide the process in the event that crude oil price rises again in future and petrol price increases again above a certain threshold.

“If by tomorrow, fuel price rises above the previous N145 per per litre level, there is no word from government what would happen then – whether fuel subsidy will come back or not, or other issues capable of causing the reversal of the subsidy removal regime.” the group noted.

The observations were contained in the communique issued at the end of a one-day meeting on urgent oil and gas sector reform issues organised in collaboration with the Facility for Oil Sector Reforms (FOSTER) supported by the Media Initiative on Transparency in Extractive Industries (MITEI).

During the meeting, the lead presentation by an industry expert, Israel Aye, on ‘An Urgent Case for Reforms in the Petroleum Industry’ highlighted the huge opportunities available in the country’s oil and gas sector, but the lamented the inability to attract new investments and growth.

Discussions focused on the scope of the reforms, proposed fuel subsidy removal, downstream petroleum industry deregulation and the Petroleum Industry Bill (PIB).

Delayed PIB stalling industry growth

While participants agreed the oil and gas sector requires urgent reforms to grow, they called for improved quality of service delivery, fiscal prudence, quick passage of the PIB, and development adequate capacity utilization of petroleum resources, among others.

On the non-passage of the PIB, the group noted the high cost the country has to pay waiting for the law. They also lamented the steady decline in the funding of petroleum exploration activities in the country.

Apart from a loss of about $150 billion in deferred and cancelled investment decisions in the industry as a result of the delay in PIB passage, the groups said the situation has virtually stalled further progress in the country’s oil and gas industry.

“The PIB and the industry should encourage domestic petroleum utilization and indigenous participation in the oil and gas sector. As such, Nigeria, as a matter of national importance and urgency needs to develop a trading platform for her hydrocarbon resources,” they said.

Consequently, the groups urged President Muhammadu Buhari, who is the Minister of Petroleum Resources, to immediately transfer the redraft PIB to the National Assembly for consideration, deliberation and passage.

Transparent oil licensing round

On plans by the government to hold an oil and gas licensing bid round this year, the noted that the inability of government to hold the exercise for more than 13 years to bring fresh investors has adversely affected the growth of the country’s oil and gas industry.

Despite the urgent need for the exercise, the group said the absence of the terms, conditions and guidelines for the exercise does not give Nigerians sufficient confidence and assurance that government was not rushing to give away the oil licenses as patronage to party loyalists as was the case in the past.

They called for the guidelines for the oil licensing round to be made public, while steps should be taken to ensure the award processes are not only open, but transparent and accountable to the people.

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