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Liberalization of Oil Sector is Democracy in Business - Kupolokun

By Samuel Udeala, Vanguard (Lagos), 16 May 2001

The Federal government has reaffirmed its commitment to the liberalization of the downstream sector of the oil industry, saying that the policy will be in line with the present democratic dispensation which allows participation in business without restriction.

Engineer Funsho Kupolokun, the Special Assistant to the President on Petroleum said while fielding questions from editorial staff of Vanguard last Friday that this will ensure that more participants enter into the oil business in line with democracy.

Libralization means opening up the supply and distribution channels. That is part of democracy. You cannot be talking of democracy and at the same time, you are talking about regulations, Engr Kupolokun asserted.

According to him, this will ensure the removal of government control from buying and selling of petroleum products, adding that this would enhance competition and lead to price reduction.

Engineer Kupolokun who is also the chairman, technical campaign committee on liberalization stated: We can understand liberalization by first understanding the democracy we are practising. It involves participation in business without restriction, I therefore make bold to say that liberalization is democracy in business.

He said that when the oil sector was liberalized, it would not be the duty of the government to determine the pricing of petroleum products, pointing out that the Nigerian National Petroleum Corporation (NNPC) will no longer be the sole player in the market.

According to him, NNPC's monopoly will be broken by bringing other participants in. Among these participants, there will be healthy competition which will eventually bring down the prices of the products.

The Special Assistant disclosed that oil sector liberalization does not necessarily mean increase in prices, rather it is planned to enhance efficiency and ensure that monopoly does not work in the oil sector.

It has been found today that monopoly does not work. It will never work and it cannot work. The way forward is liberalization. That is why I am here to let people know the position of the government.<\q>

On why the country has spent fortune in refining of fuel instead of rehabilitation of the refineries and all their downstream infrastructure to make petroleum products available, Engineer Kupolokun blamed the past administration for not carrying out Turn Around Maintenance (TAM) on the refineries.

He disclosed that the Obasanjo administration has commenced rehabilitation work on the four refineries as well as working towards the provision of necessary infra structural support services,

According to him, the government was still spending a lot in subsidy to NNPC at refining cost of $9.50 per dollar , whereas the corporation could be allowed to compete with other oil companies at competitive price at the international market.

He stressed that it was as a result of inefficient distribution system and government subsidy to NNPC that accounted for N25 billion deficit recorded by the corporation in the first half of year 2000..

For the first half of year 2000, NNPC had a deficit of N25 billion resulting from supply and distribution. The government is getting disturbed by this development. When a Company suffers a loss of that magnitude, the Company is going down.

He disclosed that the Obasanjo administration would put in place functional structure to cushion the effect of liberalization, especially to the labour and vulnerable groups who were usually the victim of such policies in the past.