By Adeola Akinbobola
Mr Wumi Iledare, an energy expert, says the success of downstream deregulation should be measured by the public value created by the new market structure.
Iledare, a Professor Emeritus of Petroleum Economics at Louisiana State University, said this in an interview with the News Agency of Nigeria (NAN) on Monday in Abuja.
He said the value should be reflected in reliable fuel supplies, quality petroleum products, competitive prices, reduced exposure to foreign exchange risks, greater energy security and increased domestic value creation.
He said the objective of Nigeria’s emerging downstream petroleum era should be established in a genuinely competitive market when domestic refining becomes the economically preferred source of supply.
The expert said the downstream petroleum market should remain efficient, while imports should remain available to preserve competition and address genuine supply shortfalls.
According to him, the emergence of significant domestic refining capacity provides Nigeria with an opportunity to reduce its long-standing dependence on imported petroleum products while retaining the benefits of competition.
Iledare said locally refined petroleum products could reduce the financial and logistical burdens historically faced by marketers by limiting exposure to freight, insurance, port charges, demurrage and foreign exchange risks.
He said dependable domestic supply could strengthen competition, improve energy security and enable Nigeria to retain a larger share of the value generated within its petroleum economy.
According to him, deregulation should not be interpreted as a policy to eliminate imports from the Nigerian market.
“Imports can remain an important source of competition and market contestability, particularly when domestic production is inadequate or unable to compete effectively on price and quality,” he said.
Iledare said the economic concern arose when Nigeria continued to import petroleum products at a higher delivered cost than comparable products refined domestically.
He said in such circumstances, the country risked paying a premium for import dependence while leaving domestic productive capacity underutilised.
Iledare said the transition to a more competitive downstream market, therefore, required more than simply increasing refinery capacity.
He said that domestic refineries must have predictable and commercially viable access to crude oil, reliable infrastructure, adequate financing and operational efficiency.
“They must also operate within a regulatory framework that allows them to compete on a commercially sustainable basis.
“Domestic refiners should not be shielded from competition or guaranteed market share simply because they are Nigerian producers.
“Domestic refiners, importers and petroleum marketers should compete under transparent, predictable and non-discriminatory rules, while the regulator should function as an impartial referee rather than as a participant in the market,” he said.
Iledare identified the creation of a level playing field as one of the most important responsibilities of the Federal Government during the transition.
“The challenge for government is to design the rules and provide the regulatory tools that allow the market to deliver the welfare gain rather than convert regulatory failure into market failure,” Iledare said.
He also emphasised the importance of regulatory capacity, including independent testing of petroleum products to ensure that quality standards were enforced consistently.
He said that without credible regulatory oversight, government failure could ultimately become market failure. (NAN)
Edited by Kadiri Abdulrahman