Plans are underway by the Petroleum Products Pricing Regulatory Agency (PPPRA), Ministry of Petroleum Resources and the Office of the Attorney General of the Federation to issue a new guideline on the prices of petroleum products in the country.
The Executive Secretary of the PPPRA, Saidu Abdulkadir, who disclosed this in Abuja on Monday, explained that extant laws such as PPPRA Act No. 8 of 2003 and the Petroleum Act give the agency the legislative backing to formulate policy initiatives on pricing regime, limit price gouging, create a level playing field for operators and protect consumers.
“In accordance with the above, the development of Guidelines for Petroleum Products Commercial Framework has been concluded and Code of Conducts for Operators is currently being firmed-up to reflect the present price regime,” Abdulkadir said.
“The agency, in collaboration with the Office of the Minister of State for Petroleum Resources and Office of the Attorney-General of the Federation has put in place regulation on the PMS market-based pricing regime.”
The PPPRA also hinted that it is currently finalising the review of cost elements and profit margins on the pricing template for marketers to reflect the current market-driven pricing regime, which was last reviewed in 2016 while ensuring that consumers are not overcharged.
The PPPRA scribe maintained that while the new regime is expected to ensure transparency and enhance participation of operators in the sector, it undoubtedly raises several issues that the PPPRA will systematically address I the course of implementation of the deregulated market.
In arriving at prevailing pump price at any time, he said the agency takes into consideration a number of factors which includes amongst others: Petroleum Product Cost, Foreign Exchange (Forex) rate at which Oil Marketing Companies (OMCs) import petroleum products, other associated cost components that include freight rate, trans-shipment cost, statutory charges (NPA, NIMASA), terminal charges (storage and Jetty throughput), financing and distribution margins (Wholesalers/Marketers, Transporters, Retailers, Bridging Fund and Administrative Charges).
Abdulkadir denied PPPR fixes prices of petroleum products saying, “the agency does not fix prices but rather provides a guiding price band by monitoring petroleum products prices daily; using the average price of the previous month to determine prices for the following month, for appropriate cost-reflective pricing that ensures reasonable returns to Oil Marketing Companies (OMCs).
“This methodology is in line with international best practices which range from bi-monthly to monthly price reviews. Nigeria adopted the monthly review model considering the average duration for the importation of petroleum products into Nigeria from the closest spot market; Northwest Europe (NWE) to West Africa (WAF) is about 30 days. This period encompasses the Import Financing Process for delivery at retail outlets.”
He said the advantages of the new pricing regime encourages marketers to resume supply of PMS, leading to further value creation in the downstream.
He added: “This policy will foster job creation, ensure reasonable returns for investors, create healthy competition among marketers, enhance value for consumers and make funding available for other important infrastructure.”
Abdulkadir s stressed that the deregulation of the downstream sector will be dependent on the enforcement of appropriate laws by strong regulatory agencies.
He insisted that the new pricing regime is a market-reflective pricing system where the Agency advises marketers on guiding price.
“It is pertinent to also note that although crude oil price and petroleum products prices are positively correlated, the prices of petroleum products do not increase or reduce correspondingly with changes in crude oil price. The pump price we expect to see will be a reflection of the international market prices of petroleum products that are also rising,” he explained.
The PPPRA helmsman reiterated government insistence on retaining some levels of control, oversight and supervision of the market-based pricing regime and not leave prices at the pleasure of marketers.
Abdulkadir: “While the Market-Based Pricing Regime is a policy introduced to free the market of all encumbrances to investment and growth, it should not be misconstrued to mean a total abdication of government’s responsibility to the Sector and citizenry.”