By Tony Obiechina, Abuja
Economic Expert, Professor Uche Uwaleke has said that the Petroleum Industry Act will open up the petroleum sector for more investments thereby boosting economic growth.
President Muhammadu Buhari on Monday signed the Petroleum Industry Bill 2021 into law.
The Senate had passed the Bill on July 15, 2021, while the House of Representatives did same on July 16, thus ending a long wait since early 2000s, thus giving kudos to the Buhari administration.
The Petroleum Industry Act provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and related matters and for speedy granting of licenses to investors especially in the downstream sector.
Reacting to the development, Uwaleke said, “This is likely to translate to the establishment of more refineries in Nigeria which will go a long way to meet local consumption with prospects of ending fuel importation and the loss of forex associated with it.
According to him, this could strengthen the value of the naira in the long run as well as create job opportunities in the petroleum value chain.
His words, “The Bill also provided for the application of cost reflective tariffs by operators and the commercialization of NNPC Limited. One implication of this is that fuel subsidy will completely be removed. The reality is that fuel subsidy is causing incalculable damage to the economy.
“A situation where the government spends close to N1 trillion subsidiszing fuel consumption is counter productive. First and foremost, the fiscal situation of the government can no longer support it given the rising fiscal deficit.
“Again, it has been one scheme that is fraught with corruption given the fact that there is no accurate figure of volume of domestic fuel consumption.
“More importantly, fuel subsidy is regressive in the sense that it benefits the rich more than the poor. It also crowds out developmental funds which benefit the poor. There is no doubt that the removal of fuel subsidy will result to some hardship by way of rising inflation in the near term.
“But in the medium to long term, it is in the overall interest of the economy as it will free up more resources to fund critical sectors of the economy.
“In order to cushion the impact of fuel subsidy removal on the ordinary Nigerian, the government should quickly roll out compensation schemes in the area of Health, such as by expanding the National Health Insurance Scheme, Education and mass Transportation.
“Be that as it may, it’s important to point out that the Petroleum Industry Bill now signed into law still has grey areas.
For instance, the PIB made attempt to curb pipelines vandalism and restiveness in the Niger Delta region through various provisions that entitle the Host Communities to a percentage of oil revenue. Unfortunately, this area has not been properly tidied up as the percentage of oil revenue initially proposed for Host Communities was reduced.
“The PIB did not also make provision for eventual partial privatisation of NNPC Limited which guarantees a more efficiently run company”.