News - Oil & Gas - February 28, 2021

Petrol pricing: Group wants Nigerian govt. to sustain deregulation policy

A coalition of Nigerian civil society groups for petroleum and energy security in the country on Saturday asked the Federal Government to sustain the deregulation policy in the pricing of petroleum products to ensure the growth of the sector.
The convene of the coalition, Timothy Ademola, said a reversal of the deregulation policy in the downstream sector of the country’s petroleum industry which began in March 2020 would bring back the era in the past when fuel consumers experienced perennial scarcity of the product.
The coalition said reversing the deregulation policy would also return athe Nigerian National Petroleum Corporation (NNPC) to those it has been operating with huge losses and negative financial records.
“With the agitation of organised labour for the roll back of the deregulation policy, NNPC will inadvertently to paying fuel subsidy by absorbing the cost of the price differential between landing cost of imported petroleum products and retail pump price.
“This would most likely put NNPC in a very bad spot financially and eventually lead to a situation where it would be difficult to further import petroleum products.
“The obvious implication of that is fuel scarcity and the return of fuel queues,” Mr Adeola said.
The organised Labour, he said, is presently pressing for the reinstatement of petrol regulation regime in the country to allow the government to continue to intervene in the pricing of petroleum products pricing.
Rather the group is asking the Nigeria Labour Congress (NLC) and their affiliates to team up and partner with the NNPC to sustain a people-centred deregulation policy.
“If this happens, organised labour that is presently resisting deregulation policy in the downstream sector of the petroleum industry would be forced to castigate NNPC for not supplying enough fuel to guarantee zero fuel queues and for not making a profit at the end of its financial year.
“Truly, the situation calls for a new and bold approach by the government. Our suggestion is for Labour to not just constitute downright opposition to the deregulation policy, but to also partner with the government to proffer ways to best achieve patriotic, people-centred deregulation; leveraging the new government policy for the refineries that would soon resume operations. The approval of modular refineries and the welcome development of Dangote Mega Refinery,” he said.
Asked why the government would not rather wait for the refineries to be revived before introducing the full deregulation policy, a member of the Coalition, Henry Adigun, said petroleum products from the Dangote refinery would not change the petrol price in the country because crude oil is sold at international market rate.
Mr Adigun said there was never a time that customers would admit as right for effecting the policy.
He advised that the citizenry should endure the temporary change of policy in the downstream sector, stressing that could result in price decrease in the long run.
Meanwhile, Mr Ademola explained that the deregulation of the petroleum downstream was supposed to bring about some sort of liberalisation of the sector, which would eventually make it possible for all petroleum products marketers to source their products from anywhere and sell at any price dictated by prevailing market forces.
“The competition arising from that would have helped to force pump prices down to the benefit of the citizens.
“But the scarcity of foreign exchange has made it difficult for the marketers to import products, thereby making NNPC the sole importer in keeping with its statutory role as marketer of last resort.
“It will do our nation much good if our respected labour leaders spearheading the resistance to deregulation would recognise that deregulation has largely stabilised petroleum products supply over this past year.
“Once the foreign exchange issue that has made it difficult for major and independent marketers to engage in importation of petroleum products is resolved, the other gains of the deregulation policy will kick in and Nigerians will be better for it.
“The market stabilisation that has been brought about by the past one year of deregulation is strong assurance that full deregulation is the way to go if Nigerians are to enjoy the full benefits of their hydrocarbon wealth.
“Resisting deregulation may only slow down our national progress in this regard.”
Earlier, Mr Ademola recalled that last week, the price of crude oil in the international market rallied to $65 per barrel, the highest in 13 months.
This, according to him, was after crude oil price sank to sub-zero level in the wake of the COVID-19 pandemic in 2020.
“Ordinarily, for a country like ours that is heavily dependent on revenues from oil, the price rally should be good news as it portends more money for the government to provide social amenities for the welfare of the citizens.
“But this good news of crude oil price rally is dampened by the prospect of a rise in the pump price of Premium Motor Spirit (petrol).
“During the launch of the Nigerian Upstream Cost Optimisation Programme (NUCOP) recently, both the Minister of State for Petroleum Resources, Timipre Sylva, and the Group Managing Director of NNPC, Mele Kyari, hinted at the prospect of a rise in the pump price of petrol in the country in line with the deregulation regime in operation in the downstream, following the rise in the price of crude oil.
“Since then, the leadership of organised labour have been vigorously contending that a pump price increase would impose more hardship on Nigerians who are already battling the effect of a sluggish economy.
“In Nigeria, the deregulation of petroleum downstream and pump price increase have been very difficult issues that have generated a lot of conflict between the Government and Labour for close to two decades.
“Since 2004 when the Federal Government started the policy of selling the crude oil earmarked for local refining/consumption at international price, it created a situation where the landing price of petroleum products was higher than the regulated pump price of petroleum products in the country.
“The old system where crude oil earmarked for local refining/consumption was sold to the NNPC at a subsidised rate was able to take care of price differential between landing cost and regulated pump price. With the new policy, a system of subsidy payment was introduced to take care of the price differential.
“But over time, the subsidy system became cumbersome and the government began to find it unsustainable.
“The various attempts to end the subsidy regime by deregulating the downstream became a constant subject of bitter conflicts between the government and labour sometimes resulting in debilitating strikes that crippled the national economy.
“In March 2020, the government finally took the bull by the horns and deregulated the downstream by taking advantage of the low oil prices induced by the COVID-19 pandemic.
“The Minister of State for Petroleum Resources and the Petroleum Products Pricing Regulatory Agency stated repeatedly that going forward, the price of PMS would be determined by prevailing market forces.
“One of those forces is the price of crude oil.
“With the current rise in the price of crude oil, it is inevitable that the price of petrol would go up in the local market.
“More so, when there is no provision in the 2021 Appropriation Act for subsidy payment, ” he said.

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