A foremost economic analyst and Chief Executive Officer of Economic Associates, one of the leading economic consulting services firms in Nigeria, Dr. Ayo Teriba, has urged President Bola Tinubu-led administration to unbundle the Nigerian National Petroleum Company Limited (NNPCL) and the Central Bank of Nigeria (CBN) as a strategic step to mitigate the current whirlwinds in the nation’s economy
Teriba this advice t at the 2023 mid-year economic review and outlook event by the Lagos Chamber of Commerce and Industry (LCCI), an annual event designed to review key policy developments and macroeconomic performance in the first half of the year, discuss the outlook and expectations for the second half of the year focusing on risks and opportunities.
He said: “For a successful reform of the downstream sector, you need to break monopoly parts and ensure that prices are cost-reflective so that suppliers can easily enter to compete with the government, which is the only way to liberalise price, making it come down.
“It was the competition that helped consumers to benefit from the reforms in the telecommunication sector. And I do not see that competition happening in the downstream of the petroleum sector where you have the NNPCL being a virtual monopolist”, the analyst added.
On the need to unbundle the NNPCL, he canvassed: “My suggestion is that you should unbundle NNPCL to separate the upstream exploration and production operations from the mid-stream refinery operations and also separate the downstream operations. Put them under the oversight of functionary separate entities.”
According to him, adjusting prices without institutional reforms will not address the challenges the country is facing, and the same situation applies to the unification of the exchange rate.
Teriba further clarified: “If you want the country to benefit from the reform of the foreign exchange market, you will need to do institutional reforms that will ensure transparency and competition.
“One of the problems with the CBN and its operations in the FX market since 2015 was the tendency to favour banks over other players in the market.
“Since May 29, when President Bola Tinubu announced the removal of the petrol subsidy, petrol prices have tripled to N617 per litre, while the value of the naira has plunged following the floating of the currency.
“The floating of the naira has increased the official exchange rate from N463.38/$ to N774.77/$ as at Tuesday, while the parallel market rate stood at N910/$”, he stressed.
Noting that policies of subsidy removal and floating of the currency have pushed up the country’s inflation rate to its highest in nearly 18 years of 24.08 percent in July 2023, the analyst stressed that “the policies’ pronouncements were embarked on without any rigorous diagnosis of the economy. No preparations or engagements were made to deal with the fallouts from the policies.”
