High import taxes drive rising cost of cooking gas – Isong, oil marketers’ scribe
Nigerians are groaning under the yoke of heavy prices of domestic cooking gas, but oil marketers are blaming the trend on high taxes imposed on the importation of products, in this interview with Dennis Mernyi, the Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Clement Isong, speaks on various challenges
What are you duties in MOMAN?
I am Clement Isong, the Executive Secretary and Chief Executive Officer of the Major Oil Marketers Association of Nigeria (MOMAN). I was at various times the General Manager Strategy, Regional Manager, Mid-West and Company Secretary/Legal Adviser of the association, having retired from Total Group, as deputy vice president for Southern Africa. In June 2017, after 29 years’ service, to join the Major Oil Marketers Association of Nigeria (MOMAN), as Chief Operating Officer.
I became the Executive Secretary and Chief Executive Officer in April 2018. I am charged with leading MOMAN’s efforts towards engaging with the government and other principal stakeholders to rebuild a sustainable downstream petroleum industry.
The petroleum Industry was recently bestowed with a very crucial law that will guide its operations, among other things, called the Petroleum Industry Act (PIA) 2021. This piece of legislation has come with mixed feelings and reactions among stakeholders and operators in the sector. What is wrong or good with this Act?
For us in MOMAN, we are concerned primarily with the sections of the PIA which focus on the downstream sector. Government policy in Nigeria has been to reform the downstream sector for over 30 years, so the PIA is a welcome piece of legislation that has as its objective, the removal of price controls, thereby weaning the country off petroleum subsidies as well as the establishment of a viable and sustainable petroleum sector.
Some of the benefits include the creation of a transparent and supportive governance system and the promotion of a fair and commercially competitive downstream sector which would benefit all consumers.
It also seeks to encourage investments and growth through incentivising the development of gas, which would not only enhance revenue to the government but also create business opportunities and jobs for Nigerians. However, success in achieving these objectives will depend on the implementation of the law by the new regulators.
There is currently a lack of clarity as it relates to fully understanding the context of the Act by the Nigerian public. Communication and engagement are necessary by the government to educate all key stakeholders (industry and the public) to ensure full buy-in.
The Nigerian National Petroleum Corporation (NNPC) has recently announced about N287 billion, the highest profit turnover of all time. The CAC has also confirmed that this is the first time a Nigerian firm will yield this. What impact or difference do you think this feat will bring into the industry?
The increased transparency in NNPC reporting its financial position is a step in the right direction and promotes accountability for Nigeria’s national oil company, and should be encouraged. We all wish to see NNPC eventually quoted on the Nigerian Stock Exchange, and possibly foreign exchanges to further enhance its governance, transparency, efficiency, and profitability, as well as encourage investment inflows.
The Federal Government is pursuing key reforms in the oil and gas sub-sector through the new Petroleum Industry law. But this is not coming without huge challenges of the stakeholders adjusting to this. How is MOMAN prepared for this task?
The legislation of reforms in the oil and gas sector of the economy through the passing of the PIA by the government should be recognised for the advancements it is expected to bring. These reforms have been discussed and debated for over 30 years, and have been a long time coming. Liberalisation and free and open market competition, rather than price-fixing, has been accepted the world over as being the most efficient manner of engendering sustainable growth in any industry.
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Transitioning will be difficult for Nigerians and the industry alike, but will eventually lead to innovation and bring the private sector investments necessary to revive, sustain and grow industry assets and businesses. MOMAN is committed to collaborating with the new industry regulators to help achieve the objectives of this reform effort. We believe that dialogue and engagement between the government and the industry is a necessary driver to ensure the successful implementation of the PIA.
In addition, the entire petroleum industry has been beset with a negative reputation, from the subsidy issues to a reputation of cheating at the pumps, to established cartels, unions, and associations always threatening strikes. The PIA advocates a strong push for consumer protection and eradicating anti-competitive behaviours within the sector by strengthening the powers of anti-competitive agencies.
MOMAN fully stands behind this charge by the government through its engagements with agencies to ensure compliance by industry players and industry adherence to the objectives in maintaining competitive markets and the promotion of economic efficiencies.
Today, cooking gas has already gone beyond the reach of ordinary Nigerians. The increase is over 100 per cent. It is also scarce to find. What exactly is the matter? When are we likely to get out of this problem?
The challenge with cooking gas or Liquefied Petroleum Gas (LPG) is essentially three-fold. Firstly, there is a worldwide and country supply shortage leading to an increase in prices worldwide. This will eventually abate as the market moves to source supply to fill this gap to meet demand.
As Nigeria imports LPG, its price is also affected by the foreign exchange scarcity and the increase in the I&E window, as well as the parallel market exchange rates. Finally, there was a recent application of taxes to cooking gas, which came at an inopportune moment. The PIA, which provides for a midstream gas infrastructure fund, will also help over time in providing the infrastructure to expand the use of gas and ultimately reduce the cost of distribution.
Part of the roles of the major petroleum marketers is the promotion of industry transformation. Today, the industry is headed towards that, with the PIA in place. How is MOMAN playing this vital role?
One of the ways MOMAN is leading this charge is its investment in carrying out relevant training related to the Nigerian petroleum industry downstream to bridge knowledge gaps in the industry to the benefit of its members and other stakeholders.
Another avenue that MOMAN uses to sustain operational excellence amongst downstream players and promote the petroleum industry transformation is by the deliberate action of increasing its self-regulatory culture and by putting in place internal policies, processes, and communication to encourage management staff to be exemplary in the demonstration of HSEQ practices. MOMAN has, for instance, deployed human and technological expertise to improve operations in depot operations, logistics value chain, product distribution, and delivery among its member companies.
Why can’t Nigeria refine petroleum products here?
The short answer is, or should we say, was price control. The country’s previous business model did not generate enough finances or capital to maintain the assets in the industry, and not only for the refineries. Other assets such as depots and pipelines, and even trucks and filling stations, were struggling for resources for maintenance. A lack of investment has resulted in a downward spiral in the refining capacity, where poor capacity utilisation and performance by the refineries are recorded year after year.
The reforms brought by the PIA which have encouraged the establishment of private refineries and allowed the financing of the rehabilitation of the NNPC refineries is a good sign. The emergence of the Dangote 650,000 barrels per day refinery could signify a turnaround in Nigeria’s refining sector by doubling Nigeria’s refining capacity. The Dangote refinery, at full capacity, would help to meet Nigeria’s increasing fuel demand.
When will Nigeria stop exporting crude oil and begin the importation of refined products?
It will take a few years of consistent government policy and the expert management of the petroleum sector by the regulators, collaborating with the private sector, but we are on the right path now to fully beneficiating Nigerian crude and establishing Nigeria as the refining hub for West and Central Africa.
