By Felix Ayanruoh

The decision of the Federal High Court Abuja, on March 19, 2013 declaring the policy of deregulation of the petroleum industry downstream sector unconstitutional, illegal, null and void, calls for a prudent and speedy passage of the Petroleum Industry Bill (PIB).

The court in its decision ordered the government to desist from deregulation of the downstream sector and fix prices of petroleum products – violation of section 6 of the Petroleum Act, 2004 and the Price Control Act also of 2004.

Under our current laws the downstream petroleum sector remains regulated. This means that all energy providing process including pricing is governed by a regulatory or government body – the Petroleum Product Pricing Regulatory Agency (PPPRA).

The PPPRA is the Nigerian government agency that determines pricing policy of petroleum product; create an information databank through liaison with all relevant agencies to facilitate the making of informed and realistic decisions on pricing policies among others.

As rightly decided by the Abuja high court, not until a new law is passed repealing section 6 of the Petroleum Act or the act in its entirety, the nation’s petroleum industry including the downstream sector remains regulated and not deregulated.

Deregulation is the lifting of certain government controls (such as price control) on several aspects of a specific industry, specifically the oil industry. It allows for competition of petroleum product refiners and suppliers to enter the market and offer their petroleum products to consumers.

One of the objectives of the PIB is to deregulate and liberalize the downstream sector – Section 221of the draft bill provides that the pricing of petroleum product in the downstream product sector is deregulated to ensure:

(a)    A market related pricing;

(b)    Adequate supply of petroleum product;

(c)    Removal of economic distortions; and

(d)    The creation of a fair market value for petroleum product in the Nigerian economy.

The National Assembly should see this case as a clarion call and challenge, coupled with the recent oil subsidy scandal and acute fuel shortages as an example for the need to pass the PIB now. The advantages of passing the law will among other things lead to improve and efficient use of scarce economic resources by subjecting decisions to the operations of the forces of demand and supply.

This will attract new sellers, buyers and investors into the market, thereby increasing competition, promoting overall higher productivity and, consequently, lowering prices over time. The ultimate effect of this chain of activities is increased gains to consumers.

Furthermore, deregulation will reduce economic waste and lightens social burdens caused by government control, stimulate economic activities, and decrease the cost of doing business drastically. Deregulation promises to be the way forward in expanding opportunities for economic growth and a competitive downstream petroleum sector.

Congruous pricing of petroleum products is one of the preeminent antecedents in attracting private investment into the Nigerian downstream petroleum sector. This is due to the fact that the prices of the petroleum products will be set by independent marketers based on the interaction of supply and demands of the products – independent oil marketers would be free to set their prices. The resultant market price is dependent on these fundamental components of the market – price reduction until the price is right.

With the passage of the PIB, the Aturu decision will become moot by virtue of the provisions of Section 354, which repeals the Petroleum Act and Section 221 discussed above.