Dr. Timothy Okon, Managing Partner at Teno Energy, has stated that Nigeria must move urgently to implement strategic petroleum product reserves. This move, he believes, is vital for protecting the nation from global supply disruptions and ensuring consistent fuel availability across the country.
During an interview with ARISE News on Thursday, Okon highlighted that the current pressures within the global oil market are primarily influenced by external factors, not domestic issues.
"The crisis we now find in our hands is not instigated by Nigeria and therefore the consequences necessarily comes from what economists would call negative externalities," he remarked.
He explained that disruptions in crucial global supply routes, specifically mentioning the Straits of Hormuz, have significantly restricted global crude supply, thereby impacting market stability and prices.
"The biggest issue, of course, is the Straits of Hormuz and that has meant that 20% of its supply has now been constrained or restricted," Okon noted.
He further elaborated that Nigeria's own crude supply challenges are exacerbated by existing commitments and financial agreements linked to crude oil, which limit the volume available for domestic refining.
"Nigeria has always had an issue with the fact that we also use the crude to borrow money, et cetera,"
Okon asserted that a crucial solution lies in the implementation of strategic petroleum product reserves, a provision already outlined in Section 181 of the Petroleum Industry Act (PIA).
He pointed out that this situation affects the ability of local refineries to access adequate crude, forcing dependence on imports even as global conditions are already strained.
"What you really need is a strategic reserve with respect to the products"
He elaborated that such reserves typically aim to cover between 60 to 90 days of supply, providing a buffer for countries to manage during periods of disruption.
"Usually, that can vary between 60 to 90 days sufficiency. So you can tide yourself over when these events take place,"
Okon underscored that establishing these reserves necessitates infrastructure development, meticulous planning, and significant political will. He acknowledged that concerns regarding pricing and additional expenses have contributed to the slow progress.
"Given the sensitivities around pricing… Nigeria may not be very receptive… even though the provisions of the law are there"
Looking beyond immediate measures, he called for robust long-term policy planning, including investment in storage facilities and the establishment of structured reserve systems to guarantee fuel availability.
"So the strategic product reserve, really, is what we need to implement in both the near and the long term. That has to be done."
While acknowledging the growing importance of renewable energy, Okon maintained that Nigeria must continue to rely on petroleum products in the near future, given the current infrastructure realities.
"we still need to rely on petroleum products, your PMS, your diesel, and rely on that, because that’s what Nigeria currently has"
He also cautioned against the reintroduction of fuel subsidy, describing it as financially unsustainable and potentially a significant drain on government resources.
"What we do not want is to have a general policy on subsidy. That would be very retrogressive, because it would be a huge commitment and it could end up being an unending commitment."
Instead, he proposed adopting targeted economic interventions, such as increasing wages, to help citizens cope with the impact of rising fuel costs.
"the public sector should increase people’s take-home pay to cushion that effect"
Furthermore, Okon urged the government to utilise any potential revenue gains from high oil prices to reduce debt and strengthen fiscal stability, rather than increasing recurrent expenditure.
"that money needs to be saved, needs to be used to write down our debt"
He concluded that reducing debt obligations would free up crude volumes for domestic economic utilisation and enhance Nigeria's involvement in structured crude oil transactions.
"Once you can pay down your debt, then you wouldn’t need to devote those barrels"
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