In this interview, conducted by Emma Ujah, our Abuja Bureau Chief, the President of the Nigeria Economic Society, Prof. Adeola Adenikinju, discusses the ongoing challenges in Nigeria’s fuel market despite the commissioning of the Dangote Refinery. Below are the key excerpts from the interview:
Question: How would you look at the fact that Dangote Refinery has come on stream, but rather than the price of PMS coming down, it has escalated?
Prof. Adeola Adenikinju: I advocate for a free market economy, privatization, and such reforms. The aim of these reforms is to replace government inefficiency with private sector efficiency. Unfortunately, what we’re witnessing in the relationship between the NNPC and the Dangote Refinery has not provided the comfort we expected.
If local production were to function effectively, we could anticipate a price reduction of about 10 to 15%. For example, we would save on shipping costs, insurance, freight, and other port taxes. However, the prevailing message seems to be that we should not expect any change in prices, indicating a significant lack of transparency.
You can’t effectively manage reforms without transparency. The public needs to have confidence in the system, and transparency is essential. The NNPC must lead this initiative. There should be clarity on the procurement costs of crude oil. If we understand how much we are being charged and the additional costs involved, it will foster trust in the process.
Question: What do you suggest for the market?
Prof. Adenikinju: Many Nigerians have lost confidence in the current process. If the government claims to have removed subsidies, then the market should be fully opened up. Currently, NNPC serves as the sole off-taker of PMS, compelling everyone else to buy from them. This approach is typical when trying to maintain a subsidy and control the market.
However, if it’s true that subsidies have been lifted, then we need a liberalized market. All operators should have the freedom to purchase from Dangote or import their products. Competition is vital for better pricing and service delivery.
Question: Before now, we were told that petroleum products importation was responsible for about 30 percent of total foreign exchange demand. At some other times, it was said to be 25% and lately 15%. How do you expect local production to affect the FX market?
Prof. Adenikinju: The impact of local production on the foreign exchange (FX) market could be significant. If we can reduce our reliance on imported petroleum products, we can expect a decrease in foreign exchange demand. This shift will help stabilize the naira and possibly enhance our economic standing.
By producing locally, we can retain more of our foreign exchange within the country. This would lead to a more favorable FX environment and ultimately strengthen the economy. However, for this to materialize, we must ensure that local production is effective, transparent, and competitive.
In conclusion, there are numerous opportunities for growth and stability in Nigeria’s fuel market if reforms are implemented with transparency and accountability. The establishment of a truly competitive market will not only improve prices but also enhance the overall economic landscape.