FG Begins Full Deregulation, Says Market Forces to Determine Fuel Price

The Petroleum Products Pricing Regulatory Agency (PPPRA) Tuesday announced that it was no longer involved in the fixing of the pump price of petrol, disclosing that the interplay of market forces and not the organisation now determines how much Nigerians buy the product.

The agency noted, however, that it will continue to monitor the operators in the downstream petroleum sector to ensure that marketers do not abuse the freedom that has come with the deregulation of the pump price of petrol.

Executive Secretary of the PPPRA, Mr Abdulkadir Saidu, who spoke during a press briefing in Abuja, explained that the job of the agency henceforth was to ‘police’ the marketers and prevent profiteering at the expense of consumers.

Saidu, who was represented by the General Manager, Administration and Human Resources, Mr Victor Shidok, stressed that one of the reasons Nigerians were not experiencing the real impact of deregulation yet was because of the foreign exchange challenges being faced by marketers who were supposed to bring in the product.

According to him, the shortage of forex , which he said was already being sorted out by the Central Bank of Nigeria (CBN), was making the Petroleum Products Marketing Company (PPMC), look like the sole marketer for now.

“The government pronouncement that the sector is deregulated means that prices strictly obey the forces of demand and supply. You could have a regulator that will always stand as a watchdog to see how these forces play out and how the interest of both operators and consumers will be protected.

“In this situation, in a deregulated regime, you don’t expect that, because it’s different from price fixing where we have a clear say in the final price you see in the market. It is the market that is operating and it’s based on bargain power. It is based on where you source your products.

“For PPMC, it is a marketer , it also sells products. It also carries out analysis to say, this is my own price because I sourced for this product and it’s that mechanism they have adopted. It is based on their costs. It’s like bottle water which is produced in a deregulated market. You look at how much you produced it and what price you can sell” he said.

The PPPRA boss posited that its function henceforth is to ensure that operators in the downstream play fairly and consumers of petrol in the country are not short-changed.

“ In a truly deregulated regime, there’s nothing like price band because you are free to source your product. All you need to do is look at how much you spent. We will ensure that all stakeholders play fairly.

“PPPRA remains the regulator of the downstream and will keep monitoring operators. The difference now is that we do not indicate or fix prices that you will sell because if you do that, it is price fixing. We will intervene when somebody is going beyond and profiteering,” he added.

According to the agency, there’s a code of conduct that applies to all operators, explaining that even in developed countries where they have fully developed system of deregulation, there are always regulators.

Saidu said that the confusion on the role of the PPPRA stemmed from the fact that this is a transition period , noting that very soon Nigerians will enjoy the choices that accrue from a liberalised market, even with the PPMC as a marketer like some private operators.

“The only difference we are seeing now is that PPMC still remains the only source of product supply and I think for other marketers, it’s because of the challenge of forex that’s why they are not importing, given the role forex plays in the sourcing of petroleum products.

“The product we are talking about is PMS (petrol). Other products have been deregulated a long time ago. Only PMS. PPMC is a marketer like OANDO. For PPPRA we know the trend in the market and we intervene when the marketer is going out of hands.

“PPMC will have to follow the rules and be treated like a marketer. In a deregulated environment PPMC are traders. PPMC is into business too. We are facing a difficult situation because  foreign exchange is not allowing other marketers come in yet. That’s why the gains are not seen yet.

“If you are not seeing other marketers come in, it’s because they are still understudying the market and due to the exchange rate. This year has been a difficult year not just in Nigeria.

“When you are not earning foreign exchange as you should , there will be so much pressure on the little that you have and that’s what we are seeing. It will not remain like that forever. The exchange rate will still fall. There’s no more price band or fixing” he noted.