Ordinarily, vehicle owners and those who use PMS primarily to fuel their generators ought to be delighting in gratitude to the Nigerian National Petroleum Corporation for what has happened with PMS prices. Thrice in two months, NNPC has reduced the pump head price of premium motor spirit. It reduced from N145 per litre to N108 per litre in the latest price slash.
The plaudits are not coming forth though because citizens and the industry alike are bemused over the actions that represent plenty of motion but no movement in real terms. NNPC is virtually the sole importer of PMS and refined petroleum products into the country even as theoretically the field is open to other players.
The confusion arises from the absence of a clear policy direction on the deregulation of the downstream sector of Nigeria’s oil industry. Nigeria’s oil has suffered the double blows of a global decline in oil prices bordering on disinterest in crude oil and the effects of COVID-19 that shut industries. Demand fell by more than 80 percent as did prices.
Since this development, NNPC has played the role of policy formulator, regulator, and player in the oil market.
Mele Kyari, Group Managing Director of NNPC, has been the spokesperson of government on the imperative of subsidy removal. Kyari articulated the outlines of the government’s view of the oil market on 7 April. He explained in a Nigerian Television Authority interview that the federal government is removing the subsidy on petroleum products because it does not benefit the ordinary Nigerian.
The statement was an outstanding reversal of the government’s mantra over the last 30 years that the petroleum subsidy is in place to protect the interest of the common man. Where and when the Federal Government agreed on the necessity to remove the subsidy, it lacked the political will to design and implement the needed policy and implementation.
Kyari now states that the federal government would leave market forces to determine the pump prices of the product. The NNPC boss said that deregulating the market would release funds for the government to spend on deepening the country’s infrastructural base.
“As you are aware, fuel was selling for N145 before the current COVID-19 impact came into play. Selling fuel at N145 means that you are doing some form of under-recovery which means that NNPC gets the product and sells at below market price and take the hit on cost differential,” Kyari stated. “What we have done is that market forces will come into play such that at the end of the day, Nigerians will benefit from the enormous resources when that amount is ploughed back.
“You are also aware that fuel under-recovery means that we are taking back some money which would have gone back to fund infrastructure, health and education that we know today we are lagging. Given this opportunity, we must ensure that these resources are available, then we stop subsidising the elite. And when we say subsidy or under-recovery, it is also an elitist thing.
“In some cases, it is the elite that has two, three or four cars in their houses, and the ordinary man or Nigerian does not benefit from it. This is the time to ensure that things get to the ordinary man and not for the elite.”
Kyari spoke extensively on cost-management in the oil industry and the challenge of responding to the expectations of its stakeholders. NNPC reduced the price of PMS on 19 March from N133.28 per litre to N113.28/litre. Group General Manager, Group Public Affairs Division Dr Kennie Obateru announced the latest price drop. He stated that “The new ex-depot price of Premium Motor Spirit (PMS), otherwise called petrol, reflects the company’s market strategy to make more sales while complying with the Petroleum Products Pricing Regulatory Agency’s (PPPRA) price template.”
It is unclear what to make of the statements and actions of the Federal Government on PMS prices and petroleum subsidy. If they are doing under-recovery at current prices, it means the subsidy regime still exists. What is then the talk about doing away with the subsidy?
More significantly, the Petroleum Prices Regulatory Agency has yet to come up with a fresh template and direction for the industry that would enable the involvement of other players in the importation of PMS and other products. The Federal Government should make pronouncements that provide clarity on where, when, and how Nigeria would do away with petroleum subsidy
