Chairman, the Society of Petroleum Engineers (SPE) Nigerian Council, Joe Nwakwue has urged the federal government to ensure effective operational system to enable it achieve the proposed 10 dollar per barrel crude oil production cost.
Nwakwue made this known at an online workshop on the Competitiveness of Nigeria’s Fiscal Regime, organised by the Facility for Oil Sector Transparency and Reform (FOSTER).
He said government should not give orders and anticipate positive result but ensure systems were in place for things to work out effectively.
He said that the 10 dollars crude oil production cost target as announced by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, was a nice move.
He said that Kyari needed to make more clarification on the target and ensure that all partners were carried along on in the process.
“We need to put system in place that will help things to work, if you make it an order or mandate, it might not work out,’’ he said.
He further decried that the high cost of oil production in the country could lead to a very low return, just as the subsidy schemes remained a waste.
He added that there was a total disconnect between the oil sector and the entire economy, with a very low contribution to Gross Domestic Product (GDP).
He named Royalties, government stake, Tax rates, insecurity among the major challenges of ensuring low unit production cost.
He said that there was the need for a new fiscal regime that would help to tackle the challenge to ensure economic growth and development in the country.
Nwakwue noted that price-fixing, and the lapses in the NNPC Act, especially with the overburdened political interference remained critical challenges to the existing framework.
He said the fiscal system should be designed with revenue distribution in mind, as Nigeria needed a saving scheme to cushion price shocks, which may impact fiscal outlook.
In his presentation, Prof. Wumi Iledare, Professor of Petroleum Economics and Management, said that the importance of a new fiscal regime cannot be over emphasized.
He said that there was the need for a new fiscal regime that would be competitive, adding that government must ensure they separate the fiscal policy institutions, commercial and regulatory institutions.
Iledare canvassed clear mineral owner objectives, a downward review of the total marginal tax rate to attract investments as well as royalty rate for flexibility and progress.
He called for dual tax system and output based incentives, adding that Nigeria’s fiscal system design should enhance indigenous participation and utilisation of its resources.
Edited By: Ismail Abdulaziz (NAN)
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