Efforts by the Federal Government to tinker with the petrol pricing regime by option for pricing modulation may trigger a new crisis in the downstream sector as major oil marketers believe full price liberalization of the subsector have better benefits to the economy if adopted.
The oil marketers, under the aegis of Major Marketers Association of Nigeria (MOMAN), called for Premium Motor Spirit (PMS) commonly known as petrol full ‘price liberalisation’ in the downstream sub-sector against the government’s preference for ‘price modulation’. The MOMAN’s Chairman, Mr. Tunji Oyebanji, in a statement, insisted that only full price deregulation will bring about long term stability in the downstream sector.
Oyebanji said it had become necessary for the major oil marketers to state their position in view of the comments credited to the Minister of State for Petroleum Resources, Chief Timipre Sylva that government would implement a policy of ‘price modulation’ in the subsector. The MOMAN chief stated that this implied that government would give effect to existing legislation enabling it to set prices in line with market realities through the Petroleum Products Pricing Regulatory Agency (PPPRA) as provided in its Act.
Oyebanji explained that the clear and obvious risk of the policy stance was that the country had never been able to increase pump prices under this law, leading to high and unsustainable subsidies and depriving other key sectors of the economy of necessary funds.
He clarified: “Our current situation laid bare by the challenges of coronavirus to the health of our citizens in particular and economy of our country in general, demands that we are honest with ourselves at this time. A fundamental and radical change in legislation is necessary”, he said.
“When crude oil prices go up, government has always been unable to increase pump prices for socio-political reasons leading to these high subsidies and we believe the only solution is to remove the power of the government to determine fuel pump prices altogether by law”, the marketer stressed.
According to Oyebanji, purchase costs and open market sales prices should not be fixed but monitored against anticompetitive and antitrust abuses by the already established competition commission and subject to its clearly stated rules and regulations.
“The problem here is that government has retained for itself by law the power and the responsibility to fix pump prices of PMS which is what puts it under so much pressure and costs the country so much in terms of under-recoveries or subsidies when it cannot increase prices when necessary to do so. It makes sense to relieve itself of this obligation now when crude prices are low and resort to influencing prices using the same tools it does for any other commodity or item on the market. “We want the market to determine the price. There should be a level playing field. Everybody should have access to foreign exchange to be able to import and sell petrol at a pump price taking its landing and distribution costs into consideration.”
“We support the pronouncement of the NNPC GMD, Mallam Mele Kyari which said subsidy or under recovery must be things of the past,” Oyebanji added.
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