Nigeria had earlier announced the deregulation of the downstream segment of the petroleum industry as the government suspended a subsidy regime allegedly covered in corruption and secrecy.
At a time Nigerians are yet to come to terms with the last increase in pump price of Premium Motor Spirit (PMS), stakeholders in the petroleum industry are divided over a new price of N162 agreed between the Federal Government and the Organised Labour yesterday.
The principal concerns for most industry players are that Federal Government agencies, especially Nigerian National Petroleum Corporation (NNPC) and Petroleum Products Pricing Regulatory Agency (PPPRA), have allegedly failed to be transparent in fixing pump price, expected to be determined by market forces and other variables.
They are also worried that while the nation is only practising a partial deregulation, the regulatory roles of the PPRA and the Department of Petroleum Resources (DPR) have been neglected or taken over by a monopolistic market, controlled by the NNPC, which serves as the major importer.
NNPC had agreed to slash N5 from N167.44 per litre during negotiation with labour that ended early Tuesday morning as the Minister of Labour and Employment, Dr. Chris Ngige, stated that the reduction would bring down the pump price of Premium Motor Spirit (PMS) to N162.44K.
But petrol marketers, particularly the Independent Petroleum Marketers Association of Nigeria (IPMAN), stated that they were not aware of any reduction, stressing that they were never carried along on the matter.
Vice President of the association, Abubakar Maigani Shettima, said should the development become a reality, petrol marketers would be subjected to losses since they had stocked product.
Against projections that the price would drop following changes in some market forces, especially crude oil and somewhat stable exchange rate, the NNPC increased the ex-depot price, creating a hike from N148 to N161 per litre.
The development had received widespread condemnation, especially from the Nigeria Labour Congress (NLC) and Trade Union Congress (TUC), which threatened a strike action. The Peoples Democratic Party (PDP) and civil society organisations also condemned the development.
Although the pump price of petrol was reduced immediately government deregulated the market following the low price of crude at the international, the price has, however, risen steadily from June. The price rose from N121.50 to N123.50 per litre in June; N140.80 to N143.80 in July and N148 to N150 in August.
In September pump prices rose further to N158 and N162 per litre. The recent ex-depot in November took the price to N168 per litre.
Most stakeholders did not see anything positive in recent development as some insisted the development remained a setback to the much trumpeted deregulation as well as an situation that the price might not be right in the first place as most of them insisted that the pricing system was never transparent.
A transparent system of price modulation and determination has to be encouraged within the sector to ensure that inputs to price determination could be verified by experts, PricewaterhouseCoopers’s Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola told The Guardian.
According to him, while the announced reduction in pump price may be a good development, it points to the importance of the role of agencies the like PPPRA in monitoring of the price fluctuations within a deregulated sector to ensure Nigerians are paying the most reasonable prices for the products. “Marketers in the sector should work toward ensuring efficiency in operations to ensure profitability is achieved at minimal costs to Nigerians. The Federal Government needs to remain focused on the deregulation journey to encourage more involvement of private sector in the business of importation and sale of white products, while competition needs to be encouraged,” Jaiyeola stated.
Like Jaiyeola, Director of the Centre for Petroleum Energy Economics and Law, University of Ibadan, Adeola Adenikinju, had stressed the need for greater transparency in the price determination process to foster consumers’ confidence.
A Professor of Economics at Babcock University, Segun Ajibola, who had faulted the lack of a credible template for determining the fair price of petrol in the country, said the country had no full deregulation in the downstream sector of the oil and gas industry in Nigeria.
“NNPC still imports and in collaboration with other agencies dictate, to a very large extent, the happenings in the industry, including pricing. From the current reduction in the per litre price of petroleum, it is now clear that the price of petroleum in the country is not strictly annexed to the price of crude.
“The worry is that in the absence of a pricing template well known to the public, result may be on the rule of thumb in determining the price per litre of petroleum in the country from time to time. And this is no doubt happening as a response to the pressure and outcry for economic reliefs by the citizenry,” Ajibola stated.
An energy expert, Michael Faniran, said the intervention in the price of PMS remained a set back on the full deregulation regime, which was pronounced recently.
“We cannot have our cake and eat it,” he noted, adding that if the country does not want subsidy, under-recovery of whatever, there is the need to give full deregulation a chance.
“What the government needs to do is to make Consumer Protection alive to its responsibilities of ensuring that consumers are not paying for inefficiencies in the system. The press release states that the government consulted with NNPC to reduce the price. This also means that other marketers may not be able to import if the price is not profitable.
“Unless inefficiency is billed in the current pricing template used by NNPC, any increment in the price of crude now means we will be back to the era of subsidy if NNPC sticks to the current price,” Faniran stated.
Nigeria Natural Resource Charter (NNRC) described the decision as predictable, stressing that NNRC’s formulated civil society consortium had consistently demanded specific legal, institutional and process reforms to support the sustainability of government’s downstream deregulation policy commitment.
The programme coordinator of NNRC, Tengi George-Ikoli said PIB had proposed to address some of these by repealing the PPPRA and PEF acts, removing the institutional barriers to full deregulation.
“Still, the Price Control Act and Section 6(1) NNPC acts allow the government to set the oil prices and as long as that remains, deregulation cannot be said to be fully actualised,” she stated.
George-Ikoli insisted that while deregulation policy envisaged market forces being allowed to play freely without any government interference, the agreement to reduce oil prices, nullifies the principle of deregulation embraced by the government.
She noted that the prevailing situation called into question government’s commitment to deregulate.
George-Ikoli said: “The government setting prices, is a significant setback, inadvertently reversing efforts made towards deregulation. All the initial warnings put out by the consortium of a likelihood of reverting back without the decisive legal, institutional and process reforms have now been confirmed by this action taken.”
MEANWHILE, fears were expressed yesterday on the possibilities of Nigerians still paying more for petrol even at N162.44 per litre
NoRM gathered from oil and gas operators in the labour movement during negotiations between the Federal Government and organised labour that the Nigerian National Petroleum Corporation (NNPC) must come clean and disclose the landing costs.
A source described the idea of the NNPC removing five naira from demurrage, freighting and other commercial areas of the pricing as a grand deceit.
“Why is the Petroleum Products Pricing Regulatory Agency (PPPRA) not allowed to publish the template on its website if the Federal Government is desirous of enthroning transparency in the system? Why is it that the NNPC determines the price of petrol through its subsidiary, Petroleum Products Marketing Company (PPMC)? Why is the NNPC taking from what it gets from selling crude oil to buy refined petrol? Which agency of government is monitoring the NNPC spending? There must be other agencies of government that should supervise what NNPC does. Have we asked ourselves what are the factors that drive the profit the NNPC declared this year,” he asked.
There is anxiety in the industry that the Federal Government may unwittingly be creating a state monopoly in the NNPC, which has remained the only importer until last month when Total joined ostensibly because the sector had been ‘deregulated’.