Crisis rocks PPPRA over removal of cap on petrol pricing
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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