We Don't Have The Power To Fight Corruption In The Oil Subsidy, Total Deregulation Is The Key -Oil & Gas Expert

Mr Adebola Babs-Ogundele  runs a gas and oil and logistics company. In this interview, he says the only way Nigeria can get out of perennial  fuel scarcity problem is to deregulate the down stream sector

Economic crunch affecting all businesses

It is affecting everybody and all businesses. Nigeria is a country that has been under economic crunch in the last 20 years. So, it is the same story. The forces working against this nation are diverse and strong. If you read a newspaper of 1990 and you didnt check the date, you are probably think you are reading today’s paper, because you will be reading about dollar devaluation, salary and wage increase, no power and bad infrastructure. It’s for you to ask yourself if you will allow the situation to depress you or you fight it. That is my attitude to Nigeria business. When the budget came out, I was only interested in the indices as it relates to my business. I don’t look at the negatives because if you do, you may not move forward. I operate from the downstream. When the price of crude is below 30, the products are supposed to be cheaper in terms of the pricing. But it is usually more expensive. Why? In other open countries, pricing is going down. Is it because of our extreme exchange rate? The exchange rate,  at the time crude was 100 dollars, was about 150; one would have thought that now that the price of crude is below 30, the price will automatically come down, so, nothing really has changed in terms of pricing. The landing cost of fuel right now is far above N87 they are selling. The landing cost is about N110. And that is because of the exchange rate. The government has a supplementary budget in order to meet up with the subsidy money which is for about two quarters ago.

Which is better?

A total deregulation of the down stream sector will help the sector to survive. We don’t have the machinery to combat the fraud that is in the subsidy regime. It is like the days of the commodity board when a cabal would leverage on the common wealth for their own interest. What happens in the subsidy regime is that, there is a lot of over invoicing that does not determine what actually comes into the economy. So, when you say you bring in 1m barrel of refined products, at the end of the day, you probably brought in 800m  barrel; so you have about 200m over invoice. That would put pressure on the economy and exchange rate because there has to be creation of currency to meet with that supply. At the end of the day, you realised that you are actually paying for what you didn’t get, and that would bite hard on the economy. But if you deregulate, everyone comes back to the table with his own imported product and with his own money. Government is not concerned. You can then determine at what rate you want to sell; once there is standardisation. This will reduce the pressure on government resources. Again, just as we have in the telecoms, operators will be pure businessmen and professionals, devoid of the sentiments of politics or change of government. Government comes, government goes, operations of the various private operators are going on. If we have investors in local refineries here, it would reduce the burden of of the NNPC. If there is deregulation today, the price might go to about N130, but within the next one year or so, the price will come down to as low as N60 to N70.  Until we have a courageous government who has the political will to take this kind of measure, we might still be singing the same old song.