Mr. Saidu Abdulkadir, Executive Secretary of PPPRA
The Petroleum Products Pricing Regulatory Agency (PPPRA) disclosed that Premium Motor Spirit (PMS) also known as fuel has been fully deregulated. The agency will no longer fix prices.
PPPRA Executive Secretary Saidu Abdulkadir said the agency would every month, develop a guiding price for the commodity, with which it would advise marketers.
He noted that the deregulation of the downstream sector was dependent on the enforcement of appropriate laws by strong regulatory agencies, hence its continued intervention.
In his words, “For the purpose of emphasis, let me reiterate that different sectors of the polity operate under the guidance of national regulators. The Central Bank of Nigeria (CBN) regulates the banks and the financial sector; Nigerian Communication Commission (NCC) regulates telecommunications; National Insurance Commission (NAICOM) regulates the insurance sector and the same exists for operators in Nigeria’s downstream petroleum sector. To this end, it is not out of place for the Agency to provide a guiding price band with the aim to protect consumers against price gouging.
According to the Executive Secretary, deregulation does not mean total lack of control or supervision oversight. There is need for certain measures in place for operational activities.
He said, “While the Market-Based Pricing Regime is a policy introduced to free the market of all encumbrances to investment and growth, it should not be misconstrued to mean a total abdication of government’s responsibility to the sector and citizenry.”
The agency is providing the guiding price band by monitoring petroleum products prices on daily basis.
Abdulkadir made it known that the average price of the previous month is used to determine prices for the following month, for appropriate cost-reflective pricing that ensures reasonable returns to Oil Marketing Companies (OMCs).
The Executive Secretary stated that the methodology is in line with international best practices which range from bi-monthly to monthly price reviews. Nigeria adopted the monthly review model considering the average duration for the importation of petroleum products into Nigeria from the closest spot market; North West Europe (NWE) to West Africa (WAF) is about 30 days.
He added that this period encompasses the import financing process to delivery at retail outlets. The new pricing regime would encourage oil marketers to resume supply of PMS, leading to further value creation in the downstream; foster job creation and ensure reasonable returns for investors.
Abdulkadir was of the view that the new measures will create healthy competition among marketers, enhance value for consumers and make funding available for other important infrastructure.
PPPRA would continue to regulate the downstream petroleum industry, irrespective of the deregulation of the sector. This would also prevent petroleum products marketers from exploiting consumers and help to enforce the appropriate laws guiding the industry.
On code of conduct for oil marketers, he said although crude oil price and petroleum products prices were positively correlated, the prices of petroleum products do not increase or reduce correspondingly with changes in crude oil price.
He noted that the pump price will be a reflection of the international market prices of petroleum products that were also rising. The is in line with its laws, the PPPRA developed Guidelines for Petroleum Products Commercial Framework and was drawing up Code of Conducts for Operators in the new pricing regime.
The PPPRA boss said the agency was finalising the review of cost elements and profit margins on the pricing template for marketers, to reflect the current market-driven pricing regime which was last reviewed in 2016.
Present position of PPPRA will gladdens marketers in the downstream as they have clamored for the agency to off its hands from fuel pricing and allows market forces to drive the sub-sector. Marketers were of the view that continuous interference from the agency has affected their profit margins as they run the petroleum business at loss.
In some cases, marketers would have bought PMS at a particular cost only to discover that the price has been fixed downwards of which they will be compelled by PPPRA to adjust to current price. This has led to agitations from the marketers that the regulatory body should be scrapped.
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