This is to prevent the excesses of free markets, informational asymmetry, monopolistic practices, oligopolies and to safeguard public confidence. Nevertheless, a sensible balance always has to be struck between effective, necessary, proportionate and targeted regulation on the one hand, versus complex, disproportionate, excessive and stifling regulation which undermines market efficiency and harms the interests of consumers.
One thing is super clear; petroleum is the kernel of Nigeria’s economy. It is the country’s main foreign exchange earner. Roughly 90% of Nigeria’s foreign exchange revenue, and approximately 66% of the government’s income stems from petroleum exports. According to OPEC, through 2017 and 2021, Nigeria earned over $206 billion from crude oil exports; $37.9 billion in 2017, $54.5 billion in 2018 and $45.1billion in 2019.
Besides, Nigeria operates a dual foreign exchange mechanism with official rates, and the so-called parallel foreign exchange market with licensed forex dealers “bureau de change.” The former is scarce, strictly limited to priority areas of the economy and highly regulated by the Central Bank of Nigeria in part to manage tight forex amidst competing demands thereof. The latter is regulated albeit more flexibly allowing businesses and individuals in need to access the parallel markets.
The attritional Russian vs Ukrainian war has not only cost tens of thousands of lives, but has imperilled supply chains including petroleum products to Nigeria. Besides, the Dangote Refinery, with a project capacity of 650,000 barrels per day, of which the Nigerian government is a strategic investor, is yet to take off. Added to this, is the complex and opaque petroleum subsidy regime.
2.) Market forces, counterbalanced, with effective, light-touch and nimble regulatory practices and policies should govern the administration of the downstream petroleum sector;