The Managing Director of Cowry Assets Management Limited, Mr Johnson Chukwu has said that proper deregulation of petroleum prices would trigger investment into the nation’s oil and gas sector of the economy. Chukwu who made this statement while addressing financial journalists in Lagos said, the current modulated pricing system has clearly not attracted investors and would not likely attract investors.
According to him “A shift from a finished products importing nation to local refining would reduce Nigeria’s monthly import bills from $4billion to $2.4billion based on Central Bank of Nigeria (CBN’s) statement that refined petroleum products importation account for 40 per cent of the total demand at the official foreign exchange market. He said although the government has now allowed for cost reflective price for two of the regulated refined petroleum products, Premium Motor Spirit (PMS) or Petrol and to a larger extent, Dual Purpose Kerosene (DPK) or Kerosene, this does not amount to deregulation.
He explained that What the government has only done is to increase their prices above their cost of import at a time when crude prices are very low with the attendant low landing costs for these products, adding that should their landing cost go up when crude prices recover, government would be hard pressed to convince citizens on the need to pay higher prices for these products, but the most important drawback to the modulated pricing adopted by NNPC for PMS and Kerosene was that the policy would not encourage investment in the downstream sector of the Nigerian Oil industry hence our country’s continued dependence on imports to meet domestic demand.
He however said that we need a more flexible exchange rate management, devaluation of the naira alone would not address the problems of the economy. Chukwu stated that said the nation’s economy needs a cocktail of policies which will include exchange rate adjustment, creating windows of investment for long-term funds through concessioning of commercially viable infrastructure, full deregulation of the downstream petroleum industry and stimulating investment in sectors where Nigeria has comparative advantage, as well as investing heavily in social infrastructure such as health, education, security, etc.
He said It is such holistic approach to economic management that will change the structure on Nigerian economy and wean it from dependence on Oil for export earnings.
He said that the concerns of the government have been that these routes will inflict pains on the citizens but noted that; there is no easy route to come out of the crisis. Chukwu has the believe that it is better for the citizens to take this pain once and have the economy restructured so that the country will not be exposed to another crude oil crises as we suffered in the 1980s, 1990s, 2008 and 2015/16.
