DEREGULATION AND THE PRICE FIXTURE
DEREGULATION AND THE PRICE FIXTURE
DEREGULATION AND THE PRICE FIXTURE
By Jacob Aguomba
In the past few weeks, the most topical issue in Nigeria has been the controversial removal of government subsidy for petroleum products and the resultant effects of general price inflation in the country. That government could no longer sustain the burden of fuel subsidy or had lost interest in subsidizing national fossil fuel consumption has always been a contentious issue from the day Agbada or Danshiki politicians took over governance from their Khaki –clad counterparts in 1999. When the present administration came on board May last year, it surreptitiously broke the sacred calabash when President Bola Tinubu, in his inaugural speech announced the end of the subsidy payments to importers of refined petroleum products;
, informing his audience that the so called subsidy payments was a mere trap hole through which a few fat rats were siphoning the nation’s finances. The announcement was made with good intentions but the timing was manifestly awkward and drew widespread back flacks. It also drove an economy that was already reeling in pains to higher digits of inflation.
Worse still, while an ever resilient populace was trying to adjust to the new “season of anomy”, the national oil company, the Nigeria National Petroleum Company Limited (NNPC), not the regulator, suddenly announced a new fuel price regime which carried 450% increase. It was a bombshell and the echoes are yet to die down as greedy traders and speculators took their cue to raise the price of every commodity. Inflation has since known no bounds. What is clear at the moment is that price fixture for petroleum products would no longer be a light game in a deregulated sector. Even the government organ charged with the task of overseeing the operation of the downstream sector of the oil and gas market, the Nigerian Midstream and Downstream Petroleum Regulatory Authority(NMDPRA) has cautiously looked the other way, allowing market forces to decide what the price should be for the pump price of a liter of Premium Motor Spirit (PMS), better known locally as petrol.
It is easy to see that it would still take some weeks ahead for price of fuel to stabilize. For good a step, the government has agreed to sell crude oil in Naira instead of the US dollar. This removes one major plank on which the oil majors and big time retailers had sucked the Nigerian economy to its present state of Anemia. Again, NNPCL has detached itself from an arrangement which gave her the warehousing monopoly for products of the Dangote Refinery, Lagos. It was this extinct agreement that gave NNPCL the extra burden of allotting different price tags to fuel pumps at different market zones across the country. With this development, one would have thought that the deregulation policy had been completed. But there was yet another hydra-headed impediment which is the issue of who should import or sell petroleum finished products in Nigeria. The issue of what to do with our still-born refineries is matter for another day, at least nobody in government is ready to discuss that yet..
Sometime in June, shortly after the newly commissioned Dangote Refinery went into production, the question arose as to why other oil majors and importers should not be stopped as a measure of encouragement for private investment in the local refinery sub-sector. The argument sounded or appeared plausible. But yet, the importers themselves countered by insisting that Dangote alone cannot throw all of them and their workforce into the yawning job market. A deregulated oil and gas sector cannot encourage monopoly as we all saw in the cement and the wider building materials industry. Besides, Dangote Group’s claim to have the capacity to provide the local consumption quantity did not fly as there was still a short fall of about 700 and 800 million liters . Despite this glaring difference, the Dangote group went to an Abuja High Court to ask for an injunction to restrain all the licensed importers from further importation of petrol and by implication stop their workers from further engagement , and the regulatory agency. The suit also asked the Nigeria Downstream and Upstream Petroleum Regulatory Authority ( NMDPA) to stop issuing import licenses and pay a damage of 1billion Naira as damages for the import permits already issued. There were 5 other defendants whom the suit sought to restrict. This piece of litigation which, mercifully, the Dangote lawyer had lately informed the court should no longer proceed had opened a lot of the oil industry’s Pandora boxes. There were questions as to the real reasons why the nation’s 4 refineries could not function. Yes, there were questions but answers were not forthcoming. Speculations were rife that there may have been external hands that threw spanners into the works of the moribund refineries at Onne, Warri, Kaduna and Port Harcourt. Good news, however is that the suit which has been defused and settled out of court is to be hopefully cleared in Justice Eno Ekong’s court, Abuja on January 20, 2025.
Meanwhile, consumers are eagerly watching and feverishly hoping that as the price of petroleum products, especially PMS settles, it would anchor at an affordable level where neither the importer or local refinery would tamper.
