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Intrigues as FG Finally Deregulates Petroleum Sector

-By Gideon Osaka

The news of deregulating Nigeria’s petroleum sector and completely removing fuel subsidy has been greeted by mixed reactions especially from stakeholders in the industry.

Stakeholders believe that the deregulation of the sector ought to come with a legislation from the National Assembly to cement the proclamation.

As such, they urged the federal government to ensure that the policy is not a mere proclamation.

In the same vein, oil marketers also called on the Federal Government to immediately publicise the terms of the full deregulation that is already in effect, so as to eliminate uncertainty and guide operators in the sector.

Mr. Joseph Nwakwue, Chairman, Society of Petroleum Engineers (SPE) Nigerian Council, argued that the government was yet to deregulate the downstream, especially as there was yet to be an amendment or change in the existing legislative framework.

He said, “Deregulation? That is a tall one. Do you fix prices in a deregulated market? To deregulate the downstream would require change in the existing legislative framework and market structure in my humble opinion.

“We may have set the pump price at cost recovery levels but have not taken the necessary steps towards deregulating the sector”

Also speaking, Professor Wumi Iledare, immediate Past President of the Nigerian Association of Energy Economics (NAEE) and former President of the International Association for Energy Economics (IAEE), affirmed that the downstream sector cannot be deregulated by a simple pronouncement.

Iledare, who currently heads the Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management at the Institute for Oil and Gas Studies, University of Cape Coast, Ghana, said: “Deregulation has to be backed by dissolution or discontinuation of an existing regulation or law.

“The Petroleum Act 1969, as amended, empowers the Minister to set the price and the Petroleum Products Pricing Regulatory Agency (PPPRA) Act became the enabler even from the name.

He argued that the pronouncement of the Federal Government as concerns the deregulation of the downstream sector was in order, noting, however, that before taking such decision, the government should have consulted with critical stakeholders, especially PETROAN and other oil marketers.

He said, “There is no hard and fast rule as to how a particular policy can be reviewed. Most policy is mostly an executive exercise or order. If the Minister of Petroleum Resources, which is Mr. Muhammadu Buhari, is speaking through the Minister of State for Petroleum Resources to say that deregulation has started; we cannot fault it.
“The minister is not wrong if he said that deregulation has started. The only thing I would request him to do is to engage PETROAN and other stakeholders. This is because in the petroleum sector, PETROAN is a very critical stakeholder, because we are the last mile in the distribution chain, before the consumers get the products for their vehicles, or get gas in their cylinders to go and cook.

“PETROAN is the bulwark of the entire petroleum industry, from the upstream to the midstream, to the downstream. Everybody’s efforts culminate into our receptacle. It is so critical that whatever that is been done in the oil industry, be it policies, be it directives; it is always important to hear stakeholders’ opinions.
“And we, who are the ones who are at the ground level, need to contribute to how these decisions are arrived at, so that it could be easy to be obeyed. As an association, PETROAN has members who have over 300,000 filling stations across the country.”

It will be recalled after several calls for civil society organizations and analysts on the need for market forces to determine prices, the federal government restructured the downstream segment of the Nigerian oil industry through the removal of fuel subsidy.

This is coming as the global oil industry continues to grapple with the low demand and subsequent price slump occasioned by the Coronavirus pandemic.

According to the GMD of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, Nigeria would no longer be paying for under-recovery or subsidy on petrol, especially due to the current development in the global oil sector.

Kyari noted the demands for a law backing the deregulation, adding that plans are in place to ensure that it is backed with legislation so as to give a leeway for market operators to determine prices of petroleum products.

Checks have shown that about N650bn was budgeted in the 2020 budget for fuel subsidy, the amount which the GMD of the Corporation said can be channelled to other infrastructural projects in the country.

Similarly, the Federal Government through the PPPRA says it has removed the cap on Premium Motor Spirit (PMS) price, popularly known as petrol.

This was disclosed by the Petroleum Products Pricing Regulatory Agency (PPPRA) via a memo titled “Market Based Pricing Regime for Premium Motor Spirit (PMS) Regulations, 2020”

With the new development, it entailed that marketers now have the freedom to fix the price of the commodity and sell above the price given by the agency.

Meanwhile, few days after releasing the Memo, the Executive Secretary, PPPRA, Abdulkadir Saidu, explained that the agency would continue to monitor trends in the crude oil market and advise the Nigerian National Petroleum Corporation (NNPC) and oil marketers on the monthly guiding price for the commodity.

“The price cap per litre in respect of Premium Motor Spirit (PMS) is removed. From the commencement of these Regulations, a market-based pricing regime for PMS shall take effect,” he said.

However, despite removing fuel subsidy by the federal government, the Petroleum Products Prices Regulatory Agency (PPPRA) maintained that it has the regulatory power to still fix petroleum prices for marketers.

In fact, the agency recently announced a new retail price band for oil marketers. In another circular dated May 31st, the downstream regulator said oil marketers are now expected to sell petrol within the price range of N121.50 and N123.50.
Part of the circular reads: “Please recall the recently approved pricing regime which became effective March 19, 2020, and the provision for the establishment of a monthly price band within which petroleum marketers are expected to sell PMS at the retail stations.” the statement said.

The recent statement by the agency has cast doubts in the air as to whether the petroleum downstream sector has been deregulated since the PPPRA still holds the power to set price threshold for marketers