The director, Centre for Petroleum, Energy Economics and Law, Adeola Adenikinju says interference in oil pricing and political instability by government will always scare away banks from financing multi-million dollar oil and gas projects.
According to Adenikinju, a professor, in the oil sector, the pricing policy is controlled by government, and a government can come in today and make pronouncement on fuel price while another could come tomorrow and make another pricing policy which may not reflect the cost incurred by investors to refine the product.
“So there is no bank that will give loan if the economy of the project is not right or if there are lots of political risks involved.”
Addressing journalists speaking in Ibadan to herald the Annual Regional Conference on Energy which will come up between 24th and 25th of November, Adenikinju said those who were issued licences for private refineries would not invest in the project because of the government’s subsidy policy, which did not protect their investment.
Those who have the license, he pointed out, preferred to import the product and get paid by the government “with fuel subsidy in place, investment by the owners of refineries would not be protected because they would be expected to sell at a domestic price determined by government”.
He added “who will pay the difference between the cost of production and the amount they are forced to sell the products.”
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In order to address the problem, the Centre for Petroleum, Energy Economics and Law director said government could come up with a policy that will protect the refineries owners and take up their risks.
“If you must do subsidy and at the same time encourage ownership of private refineries in Nigeria, government must be ready to shoulder the risk, if you do away with the subsidy, there will be incentive for investors to go ahead and build refineries, if the public is well informed about the advantage of full deregulation, they will accept it because it only benefits the rich as it is now.”
He however stressed that the Petroleum Industry Bill would solve part of the oil and gas problems because “it will provide stability and certainty”.
The former Senior Special Assistant on Economics Matters in the office
of Chief Economist Adviser to the President decried the daily shortage of crude oil through oil thieves and vandals but urged the federal government to make the communities where pipelines pass through and oil producing areas as stakeholders for them to have a sense of ownership instead of the 13 percent derivation for oil producing states.
He also called for provision of oil theft detectors and a dispatch centre to respond appropriately when the need arises.
The don also called for appropriate sanctions noting that adequate punishment for oil thieves and vandals will serve as a deterrent to prevent future occurrences.
Remi Feyisipo
