Mr Adetunji Oyebanji is the new Chairman of the Major Oil Marketers Association of Nigeria and Managing Director, 11 Plc (formerly Mobil Oil Nigeria Plc). He speaks with ’FEMI ASU on the state of the nation’s downstream oil and gas industry

What are your thoughts about the downstream subsector of the Nigerian oil and gas industry?

The industry is in a very bad shape, from my own perspective. We are coming out from a period where government – and I am not talking about any particular government – has owed us money for up to 36 months now, significant amount of money that represents loans that our members and members of other marketers’ associations have borrowed from various banks and have continued to pay interests on. And it has taken us a lot of efforts over time to finally get government to respond to our call. But at the same time, we are grateful to government for at least having taken some steps to address this problem. We must also acknowledge that many of these debts originated not during this particular dispensation. So, we understand, given the competing requirements of government, why it has taken a bit of time. We are thankful but at the same time, it has put us in a very tight financial situation generally. It has limited the investments that we can make. As you can imagine, some other organisations, not MOMAN members, actually got to a point where they were even thinking of closing down their operations. The bottom line is that it has been tough and continued to be tough for our industry. I think we are in a situation where we are financially hard hit, and we are not able to do as much as we probably would have been able to do by way of investments and so on.

The Nigerian National Petroleum Corporation has been the sole importer of petrol into the country for more than a year. How is this impacting the growth of the subsector?

We are also in a situation where we have the NNPC as the sole importer of products into the country. While this has led to a situation where you may say there is stability of supply, the big question every well-meaning person should ask is that: is it something that is sustainable long term, and is this purely and 100 per cent on commercial basis? If the NNPC was a purely private-commercially run entity, would it be able to continue to do exactly what it was doing on a continuous basis? So, this is the question we should all ask ourselves. It is a reflection of the state of the industry. I believe this is not something that is sustainable long term. Indeed, I don’t think it is healthy for the industry as a whole for us to continue to do that.

So, the result of this is that many institutions that obviously depend on this business are gradually folding up, because they are being crowded out because we have a giant operator in the industry that is not really operating under the same commercial terms that we operate under. I don’t think it bodes well for the health of the industry if all the players start folding up one by one and we end up with only a national oil company.

I think the country needs a very vibrant downstream sector that is very competitive, that is investing and where the players are getting adequate returns on their investments. That is increasingly not the case and what that does is that it discourages investment and many companies that should actually be growing bigger are becoming smaller. As you would have noticed, many of the multinational players have actually divested and left. You may argue and say that it is good that Nigerians are buying over; this is local content. Forte Oil’s Femi Otedola has recently announced his departure from the downstream business. If you say Nigerians have bought over, why are they not staying in the business? Why are they, after some time, divesting from it and looking at other options? So, these are the challenges I think the industry faces. I think what is going to be very important for the future is really for government to determine what it really wants for the industry. What kind of policies does it want? Does it want to have a situation where it has only a national oil company being the dominant player and others are very small and weak operators? Is that the direction it wants to go? The role of the organised private sector is to work with government; government forms policies in line with the direction it wants an industry to go, and then work with the private sector to achieve those policy objectives. Today, I will say it is not very clear as far as the downstream industry is concerned because what we see is that the national oil company is becoming the dominant player and smaller companies are gradually being squeezed and being crowded out of the industry. I don’t think this is good for the industry long term.

There was a partial liberalisation or deregulation of the industry in May 2016, leading to the hike in the pump price of petrol to N145 per litre? Why weren’t private marketers encouraged to resume importation as envisaged by the government?

If we want to deregulate, let’s deregulate. What happened in May 2016 was purely an economic challenge. The price of crude oil went down significantly, foreign exchange receipts went down, and then it became a challenge to continue to pay for imports of fuel. The only way to bridge the gap was to increase the price of petrol. So, it wasn’t really so much about a deliberate plan to deregulate; it was a situation in which the cost of bringing in products was high – don’t forget the naira also depreciated significantly against the US dollar. So, we had a perfect storm in that oil prices went down significantly and the exchange rate worsened, and the cost of importing fuel became a problem.

I have always talked about this issue of deregulation and people have various ways of looking at it. I am not a politician: I only look at it from an economic viewpoint. I believe the politicians do look at the political side of things. But from an economist’s standpoint, at the end of the day, I believe one of the reasons that have enabled us to continue to sustain the subsidy is because we have crude oil. If we didn’t have crude oil, there wouldn’t even have been any debate because we would not have been able to afford it anyway. So, at the end of the day, it is a question of what do we want to do with the foreign exchange earnings that we make from crude oil. Do we want to use it to invest in developing infrastructure and in preparing for a time when there will not be any oil anymore? We are all aware about renewable energy, about the fact that many car manufacturers are now beginning to focus on electric cars. The days of crude being the major source of energy are numbered. So, we need to take the earnings we have today to invest in other areas that will generate income for us and future generations. What happens 15 years from now if the demand for crude oil falls or the price goes to $10?

What do you think needs to be done to ensure that there is full deregulation in the downstream industry and how soon do you think this should happen?

First and foremost, like I said earlier, the role of the private sector, not only MOMAN, is to continue to work with government and advocate what we think is good long term for the economy. Of course, the government has political considerations; so it has to manage all that to bring about solutions that are holistic in nature. We will continue to play our own role in terms of advocating and suggesting to government to leave the industry to be deregulated, with government really just playing the role of a referee, making sure quality is okay, that standards are operated properly, and that nobody is cheating; those are the kinds of things we expect government to be doing. What we need to do is to work with government to try and articulate what should really be the plan for the downstream – where should it be going and how does it get there – and to work with government to achieve that.

Of course, we know that there has been opposition in the past because people’s perception of deregulation seems to be that it is only about price increase. We need to work together with government to continue to educate the populace that it is not just about increasing prices. We are not an island. We are part of a community of nations and many other countries have had to go through this path, even countries that also have crude oil; they have realised that it is not sustainable to continue to regulate and subsidise fuel. So, I think we will need to work to find out what can be done to ameliorate any short-term negative impact that deregulation may bring about, and make suggestions to government as to what could be done. As long as people have misgivings about what the resources will be used for, there would always be concerns. But I think the more we can demonstrate to the public that the money that is saved can then be deployed in other areas, the better chance we have for making an improvement.

As the new chairman of MOMAN, how do you intend to contribute to the repositioning of the association?

MOMAN is made up of companies that have probably been in this business longer than most of the players that are in the industry today. The company I represent, 11 Plc (which used to be Mobil Oil Nigeria Plc), has over a 100 years of experience in the downstream industry in Nigeria. So, the combined experience of all these companies is such that I would like to see MOMAN becoming the reference point in the industry, especially as far as standards of operation are concerned. People should be able to come and look towards MOMAN members for direction on the proper standards that we should operate on, whether it is our trucks, retail outlets and terminals. So, it is something that I am going to drive very actively. Another area will be to work with government to articulate a clear-cut policy for the downstream; where do we want to see the industry in five, 10 0r 15 years? What role will renewable energy play? How are we going to make sure consumers are better served in the years to come? The other thing will be to continue to work and collaborate among ourselves, not in a negative way or to destabilise the industry, but to bring greater efficiency to the industry. One of the things that would have come out if we were in a deregulated environment is that because you do not have fixed and guaranteed margin, you would have to look for ways to reduce your costs. And the easiest way to do that is to collaborate in areas of logistics, facility management, etc. so that you are able to have an efficient, low-cost operation that will help your bottom line.

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