CLARA NWACHUKWU
The Petroleum Products Pricing Regulatory Agency, PPPRA, has proposed a multi-phased programme on deregulation as the best option out of the current predicament.

The Agency said Federal Government could adopt the policy of a once off deregulation, in which it would have to make provisions for the “building of adequate fuel reserve, securing and making the pipeline network function optimally, providing various cushioning measures as may be necessary and agreed to by all stakeholders,” or a phased.

In a presentation on: Deregulation of Petroleum Products in Nigeria: Real Sector Perspective, the PPPRA argued that under the latter programme, “Stakeholders in conjunction with the PPPRA will progressively determine in line with the trends in market fundamentals the quantum of subsidy the government will contribute for the pre-determined periods.”

In yet another proposal, the agency suggested that deregulation could be done by appropriation. “In this case, the projected amount of annual subsidy required is determined by the PPPRA. The empirically determined amount is then appropriated by the National Assembly. The implementation during the year is reviewed and advised by the PPPRA.”

It enumerated the benefits of this multi-phased approach to include;

? Adequate and efficient supply and distribution of products nationwide.

? Elimination of inefficiencies in the management of the Downstream oil sector.

? Adjustment in the template (if necessary).

? Additional refining capacity would made possible

? Healthy competition within the sector.

? Self-financing and self-sustaining of local refining.

? Efficient allocation of resources and steady revenue generation, and,

Given the above supply gaps, the PPPRA argued that this could be eliminated through investment in additional refining capacity, which, in turn, will create opportunities for export particularly abound for AGO and HHK.

Furthermore, it said this will attract additional investment in import reception facilities such as Jetties, Ports, Vessels and a host of others, which are currently inadequate.

But before these investments can come, the PPPRA stressed the need to “decongest the Lagos area, as viable alternatives are presented by the two active free trade zones in Lekki & Olokola for the citing of jetties and depots.”

It added that the draughts advantage of these locations would improve on the economy of scale on bulk discharge of products.

In the recent time, the deregulation of the downstream petroleum sector, particularly with regard to the removal petroleum subsidy on petrol and kerosene has occupied the national discuss.

Stakeholders have expressed varied opinions and interests depending on what side of the divide they are on.

While on one hand, some argue that subsidy removal will increase the hardship of the common man, others believe that subjecting the downstream sector to market forces of demand and supply is the only way to free up the sector in order to attract the much need foreign direct investment.

The PPPRA, the organisation currently in charge of administering the contentious subsidy, criticized the policy saying that it has “constrained government spending on the development of adequate infrastructural facilities and depletion of national revenue profile.

Besides, it added, “It encourages inefficient utilization of resources and product smuggling across the borders. The consumers of HHK do not buy the product at a regulated/subsidized price set by the government due to distribution bottlenecks, multiple handling and malpractices by Marketers.

“It does not encourage healthy competitions among operators as the regulatory environment is controlled by the government.

“Similarly, subsidy regime is inimical to building an investor friendly environment for improving the national Foreign Direct Investment (FDI) profile.”

Even as the arguments rage, there are concerns about the place of determines the pricing policy of petroleum products through monitoring of relevant pricing indices.

Accordingly, the agency has tried to put its role into perspective, noting that even with full deregulation and the passage of the Petroleum Industry Bill, PIB, its current roles will be strengthened and expanded. These will include:

Regulation of the Market and Marketer’s Activities

Determination of Appropriate Operational Tariff/Margins

Administration of Open-Access, Common-Carrier Regime

Implementation & Management of Strategic Fuel Reserve

Monitoring and Enforcement of Industry Standards

Development of Gas Utilization Initiatives

Setting rules for the administration of the open access regime, regulate and administer the open access to transportation and bulk storage facilities

Determine the tariffs for the open access

Establish methodology for bulk transportation and storage tariffs

Administer and monitor the National Operating and Strategic stocks

Arbitration, mediation and conflict resolution

Supervision of the transport logistics company which will take over the products pipelines and depots

Division, segmentation and licensing of pipelines and depots to facility management companies.