On June 4, 2020, the
Executive Secretary of the PPPRA, Abdulkadir Saidu, announced the immediate
removal of the existing cap on the pricing template per litre of petrol.
Mr Saidu said the
decision was in the exercise of the powers conferred on the agency by Sections
7 and 24 of the PPPRA (Establishment) Act, No. 8 of 2003.
In removing the cap,
Mr Saidu said the PPPRA would replace it with a “Market Based Pricing Regime.”
To implement the new
arrangement, he said the PPPRA would monitor market trends and advise the
Nigerian National Petroleum Corporation (NNPC) and oil marketing companies on
the monthly guiding market-based price for petrol.
The official said
henceforth the retail price of petrol throughout the country as advised by the
PPPRA would be guided by the new pricing regime.
The agency has since
backtracked on its proposal, an official has said.
Implication
Under the new
capless pricing regime by the PPPRA, fuel marketers were granted the licence to
fix prices of petrol arbitrarily across the country, regardless of the
prevailing market fundamentals.
The arrangement
contradicted the recent announcement by the Minister of State for Petroleum
Resources, Timipreye Sylva, of a price band to be established and reviewed
regularly based on the realities of the oil market fundamentals.
With the price band,
Mr Sylva said fuel marketers were permitted to sell petrol at filling stations
across the country “within the limits of a range of prices determined by the
petroleum products market fundamentals.”
The price band, he
said, consisted of lower limit price, “which the marketers cannot go below”,
and a upper limit “which retail petrol prices cannot exceed.”
When petrol price
was reviewed from the previous N145 per litre, a price band of N123 and N125
per litre was introduced for March.
Later it was
reviewed to the current band of N121 and N123.50 per litre.
Under the
arrangement, the minister said marketers were free to sell the product at any
of the existing prices within the established band and must not risk infringing
the law.
The arrangement, he
said, was to protect the consumers from excessive exploitation by the marketers
under the recently introduced deregulation policy in the downstream sector of
the petroleum industry.
Opposition
However, in a
protest letter to the Executive Secretary of the PPPRA on Monday in Abuja, a
former General Secretary of the Nigeria Labour Congress (NLC), Peter Ozo-Eson,
frowned at the controversial announcement replacing the price band and removing
the cap on petrol retail pricing in the country.
The tone of the
letter, which suggested disagreement among members of the Board over the issue,
said the introduction of the capless pricing regime was a unilateral decision
by the Executive Secretary.
Expressing shock, Mr
Ozo-Eson, a member of the board, said the commencement of a market based
pricing system was at “no time presented to the Board for consideration,
deliberation, or even for information.”
“What use is the
Board if such weighty decision can be adopted, announced and implemented
without the knowledge, input or deliberation of the Board?
“Given the above, it
is wrong to ascribe the policy or decision you (Executive Secretary) announced
to the PPPRA,” Mr Ozo-Eson said.
He said despite the
three meetings of the Board held since the deregulation of the petroleum sector
policy was announced on March 20, “no mention was made of the removal of the
cap on the price of petrol.”
Beyond the
procedural gaffe, the former labour chief drew Mr Saidu’s attention to the
negative implications of the announcement.
He said the
introduction of the cap in the petrol pricing template was to provide adequate
protection for consumers, given the monopolistic market environment operating
in the country.
He reminded the
executive secretary of what is currently happening with diesel, the price of
which was deregulated several years ago.
Mr Ozo-Eson said the
absence of a price cap for the commodity resulted in the marketers always
refusing to adjust their domestic prices to reflect the market fundamentals as
prices fall at the international crude oil market.
‘Ruthless marketers’
He said for a long
time, this exploitative practice by the fuel marketers has constituted a “heavy
knee on consumers’ neck making it difficult for them to breathe.”
“The PPPRA must rise
up to provide this need (protect fuel consumers) or cease to exist. The
oligopolies in the oil industry have had their knees on the neck of ordinary
Nigerians for too long.
“It is time to
demand that they remove their knees from our neck. For long they have had their
knee on our necks in respect of diesel. We are having difficulty breathing.
“Your policy on PMS
will place their two crushing knees permanently on the necks of poor Nigerians
and the Nigerian economy.
“Please, please,
please, we cannot breathe! The exploitative opportunities in the case of PMS
will be much graver than those of diesel, given the more pervasive use and
lower price elasticity of demand of the former.
” Unregulated
pricing, in an import based regime, will be at the expense of the consumers.
“I wish to urge you
to do what is in the interest of Nigerians and the Nigerian economy. Bring
these matters to the Board for deliberations.
“If, however, you
persist in succumbing to the blackmail and pressures of the marketers and
operators, note that there will be no objective basis for the continued
existence of PPPRA and PEF (Petroleum Equalisation Fund) in the scheme you are
now touting.
“I call on you to
withdraw your circular and, in consultation with the chairman, call an urgent
meeting of the Board to discuss these issues,” Mr Ozo-Eson said, apparently
addressing the PPPRA boss.
PPPRA backtracks
The PPPRA has since
backtracked on the controversial policy.
In a statement on
Friday, Mr Saidu denied “giving marketers the freedom to fix the price of
petrol above the stipulated price.”
He said the
announcement by the PPPRA “was to create a legal framework for the regulation
on the market-based pricing regime announced earlier by the Minister of State
for Petroleum Resources”.
He said the
publication “did not confer on marketers the power to fix prices for petrol,
but to guide prices to be advised by the PPPRA in line with market realities.”
Marketers, minister
react
The fuel marketers
have reacted to the decision by the PPPRA to backtrack on its earlier
announcement.
The marketers, under
the aegis of the Major Oil Marketers Association of Nigeria (MOMAN) and the
Independent Petroleum Marketers Association of Nigeria (IPMAN), called for
caution by the PPPRA in the management of the fuel pricing regime in the
country.
But, the minister,
Mr Sylva told PREMIUM TIMES on Monday the government would continue to insist
on a price band that protects the consumers.
“Nigerians are now
enjoying the benefits of deregulation. What this means is that the government
is leaving the business for the private sector, to allow the government face
its traditional role as the regulator, like government everywhere does,” he
said.
He added: “We will
not completely abandon the people to the mercy of the marketers because of
deregulation. What we are saying is that as a regulator, consumers must be
protected. In the U.S., UK and everywhere, there is always the recommended
retail price for every commodity.”
The official said
for a very strategic commodity as petroleum products, “we must have a regulated
price for the marketers, so that they will be selling within a band and not
(make) profit at the expense of the people.”
“If we allow the
marketers to fix prices of petroleum products and sell at any prices they
choose, then they will profit at the expense of the people,” he noted. “The way
of thinking of an average marketer as a business is different from the masses.
So, as a government, we owe the people a responsibility to make sure the
consumers are protected at all times.”
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