PPPRA Goes Full Blast, Dumps Petrol Price Fixing
Organised private sector backs FG on electricity subsidy removal Fuel should be cheaper, says Atiku
Henceforth, fuel marketers would fix the pump price of petrol under the deregulation regime, the industry's regulator, the Petroleum Products Pricing Regulatory Agency (PPPRA) has said.
The agency stated yesterday that its roles would change from price-fixing to policing the downstream sector of the oil and gas industry.
The deregulation policy also received a boost yesterday as the Organised Private Sector (OPS) rallied support for it.
However, former Vice President Atiku Abubakar has faulted the position of the federal government that the deregulation of the price of petrol is the reason the pump price of fuel was increased.
PPPRA General Manager, Administration and Human Resources, Mr. Victor Shidok, told reporters in Abuja that the interplay of market forces and not the organisation would now determine petrol price.
He added that the job of the agency henceforth is to police the marketers and prevent profiteering at the expense of consumers.
He, however, stated that it would continue to monitor the operators in the downstream petroleum sector to ensure that marketers do not abuse the freedom that has come with the deregulation of the pump price of petrol.
Shidok said one of the reasons Nigerians are not experiencing the real impact of deregulation yet is because of the foreign exchange challenges being faced by marketers who are now free to import the product.
According to him, the shortage of forex, which is already being sorted out by the Central Bank of Nigeria (CBN), is making the Petroleum Products Marketing Company (PPMC), look like the sole marketer for now.
He explained: “The government pronouncement that the sector is deregulated means that prices strictly obey the forces of demand and supply. You could have a regulator that will always stand as a watchdog to see how these forces play out and how the interest of both operators and consumers will be protected.
“In this situation, in a deregulated regime, you don’t expect that, because it’s different from price-fixing where we have a clear say in the final price you see in the market. It is the market that is operating and it’s based on bargain power. It is based on where you source your products.
“For PPMC, it is a marketer; it also sells products. It also carries out analysis to say, this is my own price because I sourced for this product and it’s that mechanism they have adopted. It is based on their costs. It’s like bottled water which is produced in a deregulated market. You look at how much you produced it and what price you can sell.”
Shidok said PPPRA would henceforth restrict itself to ensuring that operators in the downstream play fairly and consumers of petrol are not short-changed.
“In a truly deregulated regime, there’s nothing like price band because you are free to source your product. All you need to do is look at how much you spent. We will ensure that all stakeholders play fairly.
“PPPRA remains the regulator of the downstream and will keep monitoring operators. The difference now is that we do not indicate or fix prices that you will sell because if you do that, it is price-fixing. We will intervene when somebody is going beyond and profiteering,” he added.
He said there’s a code of conduct that is applicable to all operators, adding that even in developed countries where they have fully developed a system of deregulation, there are always regulators.
Shidok said the confusion on the role of PPPRA stemmed from the fact that this is a transition period, noting that soon Nigerians would enjoy the choices that accrue from a liberalised market, even with PPMC as a marketer like some private operators.
“The only difference we are seeing now is that PPMC still remains the only source of product supply and I think for other marketers, it’s because of the challenge of forex that’s why they are not importing given the role forex plays in the sourcing of petroleum products.
“The product we are talking about is PMS (petrol). Other products have been deregulated a long time ago; only PMS. PPMC is a marketer like OANDO. For PPPRA, we know the trend in the market and we intervene when the marketer is going out of hands.
According to him, “PPMC will have to follow the rules and be treated like a marketer. In a deregulated environment, PPMC is a trader. PPMC is into the business too. We are facing a difficult situation because foreign exchange is not allowing other marketers to come in yet. That’s why the gains are not seen yet.
“If you are not seeing other marketers come in, it’s because they are still understudying the market and due to the exchange rate. This year has been a difficult year not just in Nigeria.
“When you are not earning foreign exchange as you should, there will be so much pressure on the little that you have and that’s what we are seeing. It will not remain like that forever. The exchange rate will still fall. There’s no more price band or fixing.”
Organised Private Sector Backs FG on Electricity Subsidy Removal
Meanwhile, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture’s (NACCIMA), Manufacturers Association of Nigeria (MAN), Nigeria Employers' Consultative Association (NECA), Nigerian Association of Small and Medium Scale Enterprises (NASME), and Nigerian Association of Small Scale Industrialists (NASSI), under the aegis of Organised Private Sector of Nigeria (OPSN), have backed the removal of subsidy on electricity.
OPSN, however, asked the federal government to implement measures to ameliorate the impact of the recent increase in electricity tariffs in order to reduce its burden on industrial consumers and prevent the retrenchment of workers.
A statement issued by NACCIMA’s Research, Statistics and Development Unit, on behalf of OPSN, said the members met with the presidency on September 4, through the Special Adviser on Infrastructure to President Muhammadu Buhari, and resolved to back the removal of subsidy.
OPSN said the meeting attended by NACCIMA, MAN, NECA, NASME and NASSI, was held for the government to justify “the necessity for this tariff increase at a time when the economy is facing a potentially deep recession and Nigerians are facing increasing hardships, with unemployment rising to over 27 per cent as many factories are facing total closure.”
The statement said the special adviser informed them that “over the past five years, subsidy on electricity has skyrocketed from N165 billion in 2015 to over N500 billion in 2019, superseding the federal government’s budgetary allocations to health and education combined. These figures were also confirmed from the recent Senate Committee on Power’s Investigative hearing in June 2020.”
OPSN said it agreed with the government that the subsidy situation is unsustainable, adding that “if allowed to continue, the electricity industry will collapse as the government no longer has the fiscal capacity to sustain the increasing subsidy level and at the same time finance the capital investment necessary to extend electricity supply to the over 90 million Nigerians who lack access to electricity.”
“After extensive, frank and open discussions, the meeting agreed as follows:
“The subsidy situation is simply unsustainable. And if allowed to continue, the electricity industry will collapse as the government no longer has the fiscal capacity to sustain the increasing subsidy level and at the same time finance the capital investment necessary to extend electricity supply to the over 90 million Nigerians who lack access to electricity.
“It is, therefore, necessary to create conditions that will attract private investment in the industry for which costreflective tariff is inevitable.
“It is however imperative that the confidence of electricity consumers must be inspired and they must be assured that the new tariff regime will lead to significant and sustained improvement in the quantity and quality of electricity supply.
“The new tariff structure must be transparent, charges must be fair and consumers must be able to verify that they are paying only for what they consume.
“Government must compel distribution companies(DISCOS) to massively invest in a metering program that will totally eliminate estimated billing which they (DISCOS) routinely resort to, to extort money from consumers to boost their revenue and make up for their chronic inefficiencies. The metering programme through the central bank, to fund locally made meter manufacturing bulk purchase should be accelerated.
"Measures that should ease the burden of industrial consumers must be implemented even if as temporary arrangements. This is to enable them to sustain operations and remain competitive without resorting to laying off employees. Such measures as the Eligible Customer Scheme, which has been approved by NERC, but has been blocked by distribution companies must be allowed to come into play without any further delay,” the statement explained.
OPSN specifically requested from the government the implementation of the Eligible Customer Scheme (ECS), which has been approved by Nigeria Electricity Regulation Commission (NERC) but has been blocked by Distribution Companies (DISCOs) and the review of the border closure that has remained closed since August 2019.
OPSN urged the federal government to prevail on the Central Bank of Nigeria (CBN) to review its recent decision that banned banks from approving Form M that is routed through the third party for payments of imports.
It also requested the government to help to “resolve the current dispute between the Manufacturers Association of Nigeria (MAN) and the DISCOs, which has resulted in never-ending litigation holding back the utilisation of over 5000MW of stranded electricity that is not deliverable to consumers.
“Government must prevail on NERC to be more firm and fair in dealing with stakeholders in the electricity supply market,” OPSN said.
It stated that it would continue to engage the government through the presidency, the Ministry of Power, NERC and other key agencies to continue deliberations and provide feedback on the monitoring of the implementation of the Service-Based Tariff structure.
Petrol Price Shouldn’t Be High under Deregulation, Says Atiku
Atiku yesterday faulted the position of the federal government that the deregulation of the price of petrol is the main reason why the pump price of fuel increased.
He said the increase is not justified when compared with the prices of petrol in Europe and the United States.
He explained that the price of petrol is currently down when compared with the price in 2019.
In his verified tweeter handle, Atiku said: "I am a businessman. I look at things from an economic perspective. Questions beg answers.
"The price of crude is down from where it was in 2019. In the US and Europe, fuel prices are far lower than they were in 2019. If we truly deregulated, shouldn’t fuel price have dropped?”
The former vice president had earlier condemned the increase, describing it as unjustifiable.
He also said the time for the increase was wrong, as the government is supposed to provide a palliative for the people to cushion the effects of COVID-19.
"I reject the increased electricity tariffs. Coming out of the lockdown, Nigerians need a stimulus, not an impetuous disregard for the challenges they face,” he said, adding: "Many Nigerians have not earned an income for months, due to no fault of theirs. This increase is ill-timed and ill-advised."