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PIB: Why proposed legislation should leave PEF and PPPRA intact

With the opportunity for public input into the Petroleum Industry Bill (PIB) foreclosed as the National Assembly winded up its Public Hearing on the matter last July, Nigerians are awaiting with anxiety what would eventually come out of the two chambers as a final Act for the President to endorse or reject.

But, of major concern to the majority, is how the proposed legislation would affect their wellbeing. And when institutions that the PIB seeks to modify are considered, two stand out as having direct bearing on the day-to-day lives of all those who live in Nigeria. These are the Petroleum Product Pricing Regulatory Agency (PPPRA) and the Petroleum Equalisation Fund Management Board, PEF (M) Board, simply put as the “Board” in the PIB.

Part 2 Section 75 and Part 2 Section 200 of the PIB guarantee the existence of the PPPRA and of the PEF (M) Board.
The PIB made wide ranging recommendations on PPPRA and the “Board”, but all with the view of enhancing their efficiency.
The PPPRA was set up by the PPPRA Act of 2003 – as the name implies – to regulate pricing of petroleum products in Nigeria and to handle the Petroleum Support Fund (PSF)

PEF was created by Decree No.9 of 1975 (which was subsequently amended by Decree No.32 of 1989)
Its main aim was to see that prices of petroleum products were  uniform through the county, as wide differentials in prices from zone to zone  at that time, had led to chaos in the sector. It has ever been playing that role.

The money source of PEF, is from the net surplus revenue recovered from Oil Marketing Companies. This fund is used for the reimbursement of petroleum products marketing companies in Nigeria for any losses sustained by them as a result of sales of petroleum products at uniform prices throughout the country.

But, some ardent  pundits of full blast deregulation of the Nigerian oil and gas sector are said to be lobbying members of the National Assembly to throw away PEF and the PPPRA. These people, who have the means to “convince” federal legislators, argue that with the determined pursuit of the present administration for a full blast deregulation of the downstream petroleum sector, there would be no wisdom in allowing these agencies to exist.

Indeed, at the Public Hearing on the Bill, Major marketers, under umbrella Major Oil Markers Association of Nigerian (MOMAON) teasingly asked that they take over the PEF and run it for profit.

Misrepresentation on how PEF derives its funds
The misrepresentation always put is that government is spending so much though the PEF Management Board and the PPPRA to subsidise mainly petrol Premium Motor Spirit (PMS) for domestic consumption. While, it is quite true for PPPRA which has the mandate of running the multi-billion Petroleum Support Fund (PSF), the PEF Management Board does not take a kobo from government to pay reimburse marketers. The “Board” gets its funds from consumers. That is, we the consumers of PMS pay.

At the point of loading imported PMS, Oil Marketing Companies pay what is regarded as Bridging Fund (Plus Marine Transport Average) of N3.95 per litre. The “Board” collects this money at the ports and subsequently uses it to upset transport and bridging cost to all marketers in Nigeria so that prices of petrol would remain fairly the same all over the county. We the consumers of petrol eventually pay back these marketers the same N3.95 per litre when we buy fuel at filling stations, because that amount is part of the N65 per litre that we pay.

Therefore, government does not spend a penny on equalisation.
The monthly average is actually in billions, when you think of the fact that we consume an average of 32 million litres per day of PMS of which 85% of it is imported.

But the imperative of allowing an equalisation regime to thrive in Nigeria cannot be over-emphasised, giving the grim reality of living in Nigeria. Those calling for the killing of the PPPRA and PEF are doing so to pave way for massive exploitation of Nigerians in the name of full deregulation In the fist place, the idea of calling for a full deregulation of the petroleum industry with the way things stand today.

, is a clear call for anarchy; and if this government is for the people, elected by the people, then it must distant itself from such clamour.
Deregulation of diesel has failed

With what is happening to diesel, there is no more doubt that deregulation whether we like it or not, simply means “increase in prices”. At the time when government had control of the sales of diesel, its average price was about N45 per liter. But with full deregulation today, a combination of largely domestic issues, such high interest rates by Nigerian Banks, bridging and transportation cost, all kinds of taxes and have led diesel to sell for between N105 and N120 per litre today.

In some remote areas it goes for as high as N250 per litre. The International cost of crude seems to matter less here, because even when the price of crude oil came down to $45 per barrel some months back, the price of diesel keep climbing marginally. Now, the effect of that is that, Nigerian Manufacturers now spend an average of N7.6 billion to keep their factories running, according to the Chairman of Nigerian Manufactures Association, (MAN), Mr.Bashir Borodo.

If the Nigerian power utility where working, that cost of energy could have been just a fraction of that amount. But, the manufacturer must, at the end of it, make his profit. The Nigerian consumer is made to pay for it. That is part of the reason why increasing inflation is making rubbish of the pay of the few Nigerian who are able to get work. So, the idea in any guise that full deregulation would set in competition and drive the price of PMS down is not true given the PMS scenario and if prices must remain fairly equal across the country, it would be wrong to eliminate the Equalisation Fund.

All Senators and Members of Reps may need to reach out to their constituencies and sound out the thinking of their electorates
Poor infrastructure

Since the re-introduction of civilian rule in the past ten years, government has visited the issue of road, rail and marine transport with shocking laxity, in spite noisy promises. But, of note is the dredging of the River Niger which commenced last month after being on the drawing board for over ten years.

But, Railways system and the oil pipelines from existing Nigerian refineries which pumps products to the few available depots, have simply been put out of use by vandals and from old age. Government has not been able to fix them back.

And what would that have amounted to anyway, when the refineries can at best produce only 15% of our domestic need.
The cost of road transport is high because of the bad state of our road; extortion from all kinds of agencies of government and various forms of taxes that oil tankers must pay to be allowed access to road from state to state.

How much for example would an Ijaw fisherman in a remote creek of Bayesla buy a litter of petrol to power his engine boat if marketers were to be allowed to fix prices as they like in the absence of the intervention of PEF and PPPRA? How much would a truck driver on the rugged hills of Manguna in Plataue State, or on the treacherous slopes of Manbila Mountain in Taraba State, buy a litre of fuel if government does not intervene in moderating its price?

Has no Federal Legislature seen the multiplying effect it would have on the cost of say, crayfish, tomatoes and beans? And would that not rub off on the cost of a plate of meal, and even lead to higher rents and even school fees? As long as the railway system is dead, as long as pipelines that pump the paltry fuel we produce to the various depots in Nigeria remained ruined, a call for a full deregulation of the oil industry is a call to push down the leaving standard of l most Nigerians.

And the last two administrations have succeeded in doing so. If it is not a deliberate ploy to keep Nigerian enslave by politicians, no sane government should attempt a full deregulation now.
Nigeria could do other things with the billions of PSF

A lot of Nigerian find fault with the argument that the PSF could be put to “better” use than in subsidising for fuel. This is because if government where to pay back to Nigerians what most of us, except those in power, subsidise for the failure of government, none of them in power would be able to receive a kobo as remuneration, talk less of the Billion thy appropriate  for themselves each year for their comfort.

Nigerians today, build their homes, produce their electricity, provide water for themselves and provide their own security. If that cost where to be computed properly, it would certainly be in trillions of Nairra monthly. While most of the people in power today went to school free on government scholarship, they have ruined the educational system so much that only private schools today remain the main places to get ones child fairly educated, all at forbidden cost to a parent. So, if the Federal government spends N350 billion in a year to stabilise petrol at N65 per litre what is too much about this? And the wisdom is simple.

If you allow the price of petrol to go to say N70 per litre, the price of gari and yam will jump high, because transportation fare would have risen. The local barber will increase his price, because he generates his power with petrol. Spare pat supplier will hike his price. Even GSM operators will start arguing for increased call rate, and it would make sense, since they all generate the power wit to run their base stations. with diesel and petrol. Clinics will make marginal increases on their services to adjust for the increase in generating energy. The Landlord will increase his rent, arguing that what he takes as rent cannot support him again.

At the end, for trying to “save” N350 billion, Nigerian would have to subsidise their daily living with trillion of Naira. So, in what way would it help voters? The need for subsidy to stay is important to the existence of this democracy. Therefore, all institutions that regulate the petroleum pricing, stability and equal pricing of petrol must be strengthened at least for now, as contained in the PIB.

In Egypt, Australia, Canada and Australia to name a few, there are governments interventions at making sure that prices of petroleum products are same all over the country.

N1 trillion of unspent fund in two years
Again, the notion that removing the PSF would lead to a “save” has been rubbished by revelations of not less than idle N1 trillion Naira appropriated for various projects under the Federal Government in the past two years.

The Speaker of the House of Representatives, Hon. Dimeji Bankole has always say this at various public functions he attains. In June this year, the House of Representatives moved a motion to remove President Umaru Yar’Adua from power, when they realised again, that huge sums of monies under the 2009 Appropriation Act which has been approved and released were still lying idle. They accused him of implementing the 2009 budget at that time, to less than 20%. In 2008, N700 billion marked for projects that would improve power, roads and so on, was not spend, according to Bankole


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