FG, deregulation and the climate of deception

Buhari flags off $1.96bn Kano-Niger rail project


The present confusion and controversy over the pump price of petrol can only point to one thing: mediocrity or deceit on the part of the Federal Government.  In other words, the present situation with petrol prices has exposed government as not being sincere with its citizens.

In March 2020, the government announced that it had removed subsidy on petrol and started full deregulation of the downstream sector of the oil industry. It said henceforth, market forces would be allowed to determine the price of petrol. This announcement was roundly applauded, because to majority of informed Nigerians, full deregulation was the ultimate solution to the problem of subsidy, rising fuel prices and the periodic fuel scarcity in the country.

Full deregulation, they held, would attract investment and allow fuel marketers to import fuel and fix their own prices. This will engender competition which will eventually drive down fuel price to the benefit of fuel consumers.

But this scenario has not been allowed to become a reality as government has continued to hold the rope after saying it has released the goat. The Petroleum Pricing and Marketing Company (PPMC), the subsidiary of the Nigerian National Petroleum Corporation (NNPC) has continued to be the sole importer of petroleum products into the country.  The company imports the product and announces the price it will sell to depot owners.

Similarly, the Petroleum Products Pricing Regulatory Agency (PPPRA) has maintained its powers and function of modulating prices of products and performing other duties against the spirit of deregulation.

Meanwhile, oil marketers cannot participate in fuel importation because of lack of access to foreign exchange and government’s equivocation. Curiously, this drawback in the process does not border government, while still claiming full deregulation.

Since last year, the oil marketers have been accusing government of deceit –and rightly so. According to them, there has been no change in the downstream sector since NNPC is still the sole importer of petrol and still determines the pump price indirectly through the price at which it sells to depot owners.

They maintain that after announcing full deregulation, government ought to have come out with a set of guidelines and regulations, pending the passage of the Petroleum Industry Bill (PIB). The existing laws also ought to have been amended for deregulation to take off. Unfortunately, government has failed to do all these, but instead created a monopoly which is responsible for the present situation.

In clear terms, the marketers have been saying it since last year that their decision to hands off fuel import stemmed from the uncertainty, policy inconsistency and lack of clarity of governments’ plans and programmes for the downstream sector as well as the absence of a level playing field in accessing foreign exchange. They maintain that government’s failure to develop clear policy and modalities for them to access dollars from the Central Bank of Nigeria (CBN) is responsible for their not participating in fuel importation.

To illustrate the level of government deceit as far as deregulation is concerned, the oil marketers once told of how, in several meetings between them and officials of the Ministry of Petroleum Resources, the government officials would claim to have issued directive to the CBN to make foreign exchange available to them at certain rates for fuel importation.  But on approaching the CBN, they would be told by the CBN officials that they were not aware of such a directive.

For over one year now, government has been deceiving Nigerians on the issue of deregulation. Commenting on the nebulous policy last year, the National President of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr. Billy Gillis-Harry, said once the deregulation is properly outlined and the rules of engagement brought out, its members, comprising major and independent marketers, as well as depot owners, would begin fuel importation.

He observed, “We, as Nigerians, have only one guaranteed and legal source of getting funds for international trade transactions of any kind, and that is only from the Central Bank of Nigeria (CBN). One of the things we have canvassed at PETROAN is that all FOREX allocations for any of our transactions should be on a level playing ground.  Nobody should access dollar at a privileged price above the other.”

“Whether, it is Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA); Independent Petroleum Marketers Association of Nigeria (IPMAN) or PETROAN, we should all have access to dollar at the same price. That way, the market would be properly defined by market forces,” he said.

He insisted that government should do the right thing by ensuring that the rules are properly spelt out and policies are clear enough to enable oil marketers understand government’s plans and roadmap, so as to enable them know what to do at any given time.

In the same vein, the Chairman of MOMAN, Adetunji Oyebanji, said government must have appropriate legislation to back up the pronouncement of deregulation. Proper legislation, he said, will allow market dynamics to prevail.

“Government must ensure that there is a level playing field by removing monopolies, while a strong anti-competition agent should be in place to discourage operators from taking advantage of a free system.”

To Israel Aye, an energy expert and Senior Partner, Energy & Commercial Contracts, Primera Africa Legal, until the Petroleum Act was amended, the government should not say it has deregulated the downstream petroleum sector.

According to him, “The bedrock of the regulation of the downstream and petroleum product price control is Section 6(1) of the Petroleum Act…In order to deregulate the downstream sector, we need to amend or expunge Section 6(1) as it is currently written. We need a framework that prescribes the role and responsibilities of each institution taking decisions at every point in the petroleum producing pricing process.”

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

“Do you fix prices in a deregulated market?” he queried. “To deregulate the downstream would require change in the existing legislative framework and market structure. We may have set the pump price at cost recovery levels but have not taken the necessary steps towards deregulating the sector.”

The Federal Government’s claim of full deregulation was finally deflated by Professor Wumi Iledare, the current Head of 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, who 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.

“To deregulate there must be a regulation gazette, not implied from executive order or in the front pages of the newspaper. You cannot have an un-restructured PPPRA and Petroleum Equalisation Fund (PEF) and claim to have a deregulated downstream.  Who is fooling who?”

The false claims and the deceit became very clear this March when less than two weeks after assuring Nigerians that there will be no increase in fuel price in March, the government increased petrol price while still denying that there is fuel increase. This has been the pattern of most of the things the administration has been doing with the issue of deregulation –running with the hare and hunting with the hounds.

The Petroleum Products Pricing Regulatory Agency (PPPRA) had announced that the retail price for a litre of petrol for the month of March would be between N209.61 and N212.61. It said the ex-depot price, the amount sold by fuel depot owners to marketers, will be N206.42. The agency also stated that the landing cost stood at N189.61 per litre. All these appeared on its website. But following public outcry, the template was quickly deleted, but that was after the damage had been done or government had achieved its objective.

Since then, it has been confusion galore as most marketers have been selling at pump prices that reflect the PPPRA template for March.

One recalls that on March 1, the NNPC had said that contrary to speculations of imminent increase in the price of petrol there would be no increase in the ex-depot price of petrol in March. This he said was “in order not to jeopardize ongoing engagements with organized labour and other stakeholders on an acceptable framework that will not expose the ordinary Nigerian to any hardship.”

Not taking the government serious, depot owners started hoarding the product and raising prices in anticipation of a hike by government. This led to return of fuel queues in major cities like Abuja and Lagos. The marketers had their way as PPPRA later published the expected increase which is now regarded as a mistake. But the marketers had hiked their prices, despite the usual threats by government.

Issuing the threats, the Minister of State for Petroleum, Timipre Sylva, said the decision did not get his approval or that of President Muhammadu Buhari, and urged Nigerians to disregard the “unfortunate information”.

He noted that government could not have abandoned the ongoing discussions with labour to suddenly increase the price of fuel without a mutual agreement on the issue.

Sylva stressed that government has been in consultation with the organised labour to find the least painful option to respond to the global rise in the price of crude, which in turn has inevitably led to an increase in the price of PMS. He reiterated that government, labour and other stakeholders were working on a reasonable price to sell fuel, and that Nigerians would be informed at the appropriate time.

Will all this happen in a deregulated terrain where market forces are in operation? From all that has transpired in the last one week, it is now clear that government is still paying subsidy and that there is no full deregulation. Or is anyone still in doubt?