Stakeholders proffer solutions to downstream challenges

Lack of access to loans, inconsistency in government policies, infrastructural decay, and political interference are some of the challenges identified by stakeholders at the just concluded Oil Trading and Logistics Africa Downstream Week in Lagos.

Operators in the downstream sector of the oil and gas industry believe that more investments would be attracted into the sector if these challenges are tackled.

Speaking on the challenges of petroleum product distribution in Nigeria, the Managing Director/Chief Executive Officer, Emadeb Energy Serv. Lmited, Adebowale Olujimi, decried the low capacity utilisation of Nigeria’s state-owned refineries and petrochemicals plants; thus increasing the cost of sourcing products.

Olujimi also identified limited access to funding as a result of the huge gap suffered by oil marketers after devaluation thus resulting into non-performing loans as one of the biggest challenges facing the sector.

He listed other challenges to include frequent changes in government regulations, such as introduction of Petroleum Equalisation Fund, and administrative charges on local cargoes; and bureaucracy and bottlenecks in government agencies. These result in delays, increased cost of doing business, and continuous drop in margins thus making it difficult for operators to remain in business.

Olujimi argued that for oil marketers to fully take advantage of the opportunities in the sector, funding has to be made available at a competitive rate, preferably at a single digit repayable over a longer period depending on the nature of the transaction.

“As recommended earlier, international funding is the most competitive option, however specialised banks locally could also focus on such credit facilities in order to boost economic
development,” he added.

Speaking at the occasion, Chairman, House of Representatives Committee on Petroleum Resources, Downstream, Joseph Iranola Akinlaja, emphasized the need for NNPC to be run as a profitable entity. “So they must begin to move the market to a point where private sector operators are more involved. If the country achieves that, everybody will compete and have a longer term view of the market from an investment standpoint. When 50 per cent or more of products are being brought in by marketers, there will be more activity in the sector, jobs will be created and more taxes will be paid to the government.”

More importantly, he emphasized the need for NNPC, and other key players in the petroleum downstream sector to see the interplay between them and the legislators as an indispensible element of the democratic process with potential positive spin-off effect on the oil and gas industry.

He noted that the occasional struggles between the executive and the legislature when handled with the interest of Nigerians at heart could be a healthy rivalry capable of unlocking the potential of the nation for prosperity, good governance and democratic excellence.

The Chairman, OTl, Emeka Akabogu, said in his welcome address that recent market tendencies in Nigeria have shown an appetite for some categories of investment in the downstream value chain.

He added that there have been considerable investments in retail outlet development, marine, logistics platforms and storage facilities across the country, while several refinery projects that aim to balance the discrepancy caused by inadequate refining capacity on the continent are currently underway.

Akabogu also touched other issues bordering on the industry regulation and independence, adding that policy development and implementation have not kept pace with the urgency of industry needs and the appetite of market operators.

Explaining the theme for this year’s event title: “Downstream-Renewed Opportunities,” Akabogu said this is in view of an increasing focus by African countries on opening up petroleum markets to price and value completion. “The theme sees discussion focused on the range of emerging opportunities inherent in the downstream value-chain which have hitherto witnessed sub-optimal focus.”