Nigeria set to fully deregulate downstream

Fuel subsidy palava.

*Fuel subsidy palaver.

*Petrol to sell for over N100 a litre

10 May 2016, Abuja —
Barring any last-minute change in plans, the federal government will, in a few days, introduce policy changes heŕalding the full deregulation of the downstream sector of the Nigerian petroleum industry, officials well briefed on the matter have disclosed.

Nigerians may have to brace up for a minimum of 27.17 per cent hike in fuel price nationwide, the officials said.

The policy, they say, is likely to push the pump price of petrol to about N110 per litre at NNPC-owned filling stations and higher at other independent outlets.

Amid fears of a possible backlash reminiscent of the reaction by Nigerians in January 2012 when former President Goodluck Jonathan attempted to introduce a similar measure, it was learnt that no formal announcement of the policy would be made by the government.

Industry sources familiar with the plan said the government was on the verge of discreetly giving permission to petroleum products marketers to gradually adjust their pump prices as early as midweek to signal the formal take-off of deregulation in the country.

The sources, who asked not to be named because of the sensitive nature of the matter, said government resorted to that drastic decision to end the vicious cycle of fuel scarcity crises and avoid subsidy payments.

Unlike the situation in 2012, the sources said government appeared to have successfully wooed organised labour and its affiliate unions to its side.

That claim could not be independently verified. The General Secretary of the Nigeria Labour Congress, NLC, Peter Ozo-Eson, said he was unable to respond to the reporter’s enquiries, as he was in a meeting. He did not also respond to the text message sent to his telephone on Sunday.

Also, the acting Executive Secretary, PPPRA, Sotonye Iyoyo, did not respond to calls, and a text message.

Insiders well briefed on the matter said top level secret meetings had been going on all week to weigh the security implications of the possible fallouts of the policy.

One of the meetings was held at the headquarters of the State Security Service in Abuja where the Minister of State for Petroleum Resources, Ibe Kachikwu, and his counterpart in the Ministry of Labour and Employment, Chris Ngige, met with heads of security agencies to fine tune possible security response should Nigerians pour into the streets to protest the policy.

Official spokespersons for key petroleum industry agencies were evasive when asked for comments Sunday afternoon.

NNPC spokesperson, Garbadeen Mohammed, said reports of the planned introduction of deregulation by the government was new to him.

Full deregulation policy, which involves opening up the downstream petroleum industry for participation by all players, particularly the private sector, is widely considered the panacea for the incessant fuel supply crisis in the country.

With full deregulation, there will be fair competition, with the burden of petroleum products supply and distribution shared between private investors and government, with both having equal access to all aspects of industry operations, ranging from refining, sourcing, to marketing and distribution.

While the government will continue to monitor and enforce compliance with established standards, products pricing will be determined by the prevailing market forces in an atmosphere of competition.

Over the years, the government bore the burden of subsidy payments on petroleum products consumed in the country.

Under the arrangement, landing cost of fuel, plus the distribution margins included in the Petroleum Product Pricing Regulatory Agency (PPPRA) pricing template have always imposed on government the extra burden of shouldering all costs in excess of a fixed retail pump price of N86 per litre as the subsidy.

Until January this year when the price of crude oil at the international market dropped to less than $28 per barrel, the government was paying the subsidy in multiples of billions of Naira annually throughout the period of high oil prices.

With the introduction of price modulating mechanism by the government, Nigerians experienced for the first time a situation where marketers had to refund to the PPPRA costs recovered for importing fuel at a landing price lower than government approved price band of N85.50 per litre for NNPC mega stations and N86 for other stations.

With crude oil prices gradually picking up in recent times, Nigerians have begun to hear reports of the return of subsidy payments by the government.

A review of the latest PPPRA fuel pricing template for April 28 showed that retail price for petrol stood at N99.38, showing a fresh subsiďy level of between N12.08 and N13.08 per litre.

Our sources said government felt there was no better time than now to implement the decision, particularly when the price of crude oil, which stood at about $41 per barrel at the close of trading on Friday, was still low.

In January 2012, the NLC successfully mobilised Nigerians to shut down the country’s economy for five days to oppose the attempt by the Goodluck Jonathan administration to remove fuel subsidy, which resulted in a hike in fuel prices nationwide.

That action by labour forced the government to rescind its decision on the issue.

*Premium Times

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