Bismarck Rewane, Managing Director of Financial Derivatives Company, has pushed for a refinery-based subsidy scheme that directly benefits consumers in the face of increased gasoline costs brought on by the ongoing hostilities in the Middle East.
The well-known economist contended that Nigeria’s geographical location and abundance of resources offer a solid basis for a more effective subsidy scheme based on domestic refining.
In order to increase Nigeria’s domestic refining capacity, he stated at the same time that the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) stressed the necessity for the Nigerian National Petroleum Company Limited (NNPCL) to increase the amount of crude oil distributed to regional refineries.
According to DailyTrust, many Nigerians are upset about the rising costs of petroleum goods, particularly premium motor spirit (PMS), often known as gasoline, which currently retails for N1255 to N1300 per litre.
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Before the US-Israel war with Iran more over a month ago, the price of PMS was N750 per litre; since then, it has nearly doubled.
Speaking at a discussion on Nairametrics TV, Rewane pointed out that Nigeria might take a focused approach by utilizing local refineries to stabilize gasoline costs and cut inefficiencies, as opposed to continuing a broad subsidy regime.
According to Rewane, the suggested approach would guarantee that refined petroleum products are offered to consumers at reduced prices while the government supplies domestic refiners with crude oil at a controlled price.
In reality, Nigeria will supply the refiners oil at a specific price and demand that they lower down their own pricing and pay the difference.
He claimed that rather than subsidizing the whole petroleum supply chain, this strategy would enable the government to concentrate on assisting a small number of refiners.
“Paying three or four refineries to continue operating and transferring the subsidies to the consumers is more efficient for Nigeria.”
Additionally, he emphasized Nigeria’s geographical location and oil and gas resources as structural advantages that bolster the model’s viability.
Rewane’s idea coincides with the continuing discussions that followed the elimination of the gasoline subsidy, a change in policy intended to ease fiscal strain and get rid of distortions in the downstream industry.
Although the elimination of subsidies has benefited government finances, it has also increased inflationary pressures and gasoline prices, which have an impact on households and companies.
Additionally, Rewane connected the maintenance of such a system.
Due to an increase in oil prices, Nigeria will see a doubling of its oil earnings. The oil windfall needs to be recycled into people’s pocketbook.
In order to increase local refining capacity and lessen reliance on imports, PETROAN President Dr. Billy Gillis-Harry recommended the NNPCL to guarantee the prompt start of production at the Port Harcourt Refinery and Warri Refinery.
“The GCEO should find time to undertake operational visits to the Port Harcourt, Warri, and Kaduna refineries to assess progress firsthand, engage with stakeholders on the ground, and reinforce commitment to their timely and sustainable functionality,” he continued.
Regular discussions and inclusive decision-making procedures throughout the downstream industry should help increase stakeholder engagement.
In order to expand and increase Nigeria’s crude oil production, he added, the NNPC needs reinforce and solidify the pipeline security architecture.
He called on the NNPCL leadership to establish policies with greater inclusivity, particularly in areas that impact infrastructure development, logistics, and product allocation.
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