Oil marketers under the umbrella of Major Marketers Association of Nigeria (MOMAN) has called for full liberalization of the downstream sector rather than modulating the price of Premium Motor Spirit (PMS) commonly known as petrol.
Its Chairman, Tunji Oyebanji made the disclosure yesterday, declaring that full price deregulation will bring about long-term stability in the downstream sector.
Oyebanji said that it had become necessary for the Association to state its position, adding that recently, the Minister of State for Petroleum Resources, Chief Timipre Sylva, announced in a statement that the government would implement a policy of “price modulation” which means it will give effect to existing legislation enabling it to set prices in line with market realities through the Petroleum Products Pricing Regulatory Agency (PPPRA) as provided in its Act.
According to MOMAN, the clear and obvious risk is that the country has never been able to increase pump prices under this law, leading to high and unsustainable subsidies and depriving other key sectors of the economy of necessary funds.
“Our current situation, laid bare by the challenges of coronavirus to the health of our citizens in particular and economy of our country in general, demands that we are honest with ourselves at this time. A fundamental and radical change in legislation is necessary.
“When crude oil prices go up, government has always been unable to increase pump prices for socio-political reasons leading to these high subsidies and we believe the only solution is to remove the power of the government to determine fuel pump prices altogether by law.
“Purchase costs and open market sales prices should not be fixed but monitored against anticompetitive and antitrust abuses by the already established competition commission and subject to its clearly stated rules and regulations”, he added.
He emphasised that there was no country or economy where governments do not have the power to influence prices, adding that Nigeria is no different with respect to any other commodity or product.
“Governments use economic tools such as taxes or interventions on the demand side or the supply side of the market and other administrative interventions to influence prices where it needs to.
“The problem here is that government has retained for itself by law the power and the responsibility to fix pump prices of PMS which is what puts it under so much pressure and costs the country so much in terms of under-recoveries or subsidies when it cannot increase prices when necessary to do so. It makes sense to relieve itself of this obligation now when crude prices are low and resort to influencing prices using the same tools it does for any other commodity or item on the market.”
“We want the market to determine the price. There should be a level playing field. Everybody should have access to foreign exchange to be able to import and sell petrol at a pump price taking its landing and distribution costs into consideration.”
“Government should no longer fix petroleum prices. Health and educational sector should be given a higher priority than paying for subsidy on petroleum. We support the pronouncement of the NNPC GMD, Mallam Mele Kyari which said subsidy or under recovery must be things of the past,” he said.
On importation, he said that fuel import will however need to enjoy priority access in allocation of foreign exchange, again through a transparent auditable and audited process of open bidding.
He said that MOMAN recommends a legal and operational framework comprising of a downstream Industry operations regulator, the Federal Competition and Consumer Protection Commission (FCCPC) or Competition Commission (for pricing issues) and the interplay between demand and supply which will ensure a level playing field, protect the Nigerian Consumer and curb any market abuse or attempts to deliberately cause inequities in the system by any stakeholder.
He added the pricing system should allow internal equalisation by marketers, which would be both competitive and equitable.