Finally, the full deregulation of the downstream sector of the petroleum industry in line with the provisions of the Petroleum Industry Act (PIA) appears to have commenced, with the recent announcement of a new market structure for the distribution and supply of Premium Motor Spirit (PMS), popularly called petrol.
On Friday, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said contrary to what has been happening in recent months, marketers of petroleum products can now source the supply of petroleum products directly from local refineries.
Before now, all oil marketers, both independent and major, relied on the Nigerian National Petroleum Company (NNPC) Limited as the sole importer and supplier of petroleum products in the country.
Even when the first privately owned 670,000 barrels per day Dangote Refinery and Petrochemicals Company Limited commenced operations last August, NNPC Ltd still sought to remain as the sole middleman in charge of the supply of petrol from the plant for other marketers.
However, in a statement on Friday in Abuja, Edun said following the directive of the Executive Council of the Federation (FEC) on the implementation of the new Naira-based sales mechanism on the sale of crude oil and refined petroleum products in Naira, marketers are now free to buy petroleum products directly from local refineries and suppliers without the involvement of the NNPC Ltd.
Edun, who is also the Chairman of the Committee for the Sale of Crude Oil and Refined Petroleum Products in Naira, said the decision was taken during its second review meeting on Wednesday.
He said the meeting focused on assessing the transition towards a deregulated market structure for PMS and the need to address the changes in the purchasing model for petroleum product marketers in the country.
Under the New Direct Purchase Model introduced in the petroleum products market, the Minister said the most significant change was that petroleum product marketers can now purchase PMS directly from local refineries.
“This marks a departure from the previous arrangement where the Nigerian National Petroleum Corporation (NNPCL) served as the sole purchaser and distributor of PMS from the refineries,” the Minister explained.
This direct purchasing mechanism, he pointed out, allows marketers to negotiate commercial terms directly with the refineries, fostering a more competitive market environment and enabling a smoother supply chain for petroleum products.
On local production of PMS, the Minister noted that the petroleum products market was better equipped to support these direct transactions, adding that the transition was expected to enhance efficiency in product availability and stabilize market conditions for the benefit of all Nigerians.
On the changes in the market structure, Edun said the Committee was committed to providing clarity on the development and would continue to engage with stakeholders to ensure a seamless transition process.
“The direct purchase of PMS by petroleum product marketers marks a new era of growth and development for Nigeria’s petroleum industry,” the Minister said.
