–Scraps equalization fund

By Obas Esiedesa, Abuja

Following the removal of petrol subsidies, the Federal Government yesterday insisted that it will no longer fix the price of the product but will instead allow market forces to determine how much it is paid for at the pump.

The Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, Engr Farouk Ahmed told journalists in Abuja the Authority will also no longer release templates for petrol prices.

Ahmed explained that just like every other product in the industry, under the liberalised market, market forces are allowed to dictate prices.

He added that payments for bridging and equalization have also been scrapped as transportation cost would be borne by the marketers and added into the pump price.

He noted that with the deregulation of the downstream sector, NNPC has ceased to be the sole importer of petrol into the country as other marketers are now allowed to bring in their products.

According to him, “We put the regulation in place, we make sure quality control is complied with, we make sure the product is there and we give licence to a prospective importer. The market is now open for everybody that wants to import as far as they meet all the requirements.

“So, it is not about the NNPC alone. For everybody in the sector, we make sure we guide their operations whether at the depot or wherever the product is but we will not put a cap to say this is what the price must be. As far as we are concerned in the NMDPRA, this is not like before when the PPPRA fixed the price. In a deregulated market, it is the market force that dictates the price.”

He noted that the NNPC’s role is to fix the prices of the petrol it imported and not take over the responsibilities of the Authority.

“In the case of the NNPC, the organisation is the sole importer at this point. We told the NNPC to recover its costs because they know how much it cost them to import the product and sell it. Of course, we also know how much shipping, offshore, ex-depot and ex-pump are. But we cannot tell them to sell at a price because the market is deregulated,” he said.

The Authority Chief Executive also stated that the NMDPRA and the Federal Competition and Consumer Protection Commission, FCCPC, will mount aggressive monitoring of activities in the downstream sector to prevent profiteering by petroleum marketers.

Ahmed further disclosed that marketers are now free to source their foreign exchange anywhere around the world to import petroleum products and then recover their costs without impediments.

On where the importers will source their forex from, Farouk said: “The CBN will not give dollars to anyone because it is an open market. Anyone willing to import should get the dollars from anywhere to import. Anyone willing to open a letter of credit from any part of the world can do that to import. That marketers can source their forex from anywhere is the beauty of the liberalised market that the NMDPRA has introduced based on the provision of the law.”

He said petrol prices would change in line with market forces.

He added: “This means that the price will no longer be static. It will depend on the international price of the gasoline market. But this does not imply that marketers can sell at any price. If we find that certain prices are way above the expected profit margin, we and the FCCPC can move in to curb such excesses because that will be profiteering. The market structure will dictate the price swings at every point in time.”

Ahmed explained that the Dangote Refinery will help the nation in two ways, adding, “The refinery will give Nigeria easy access to petroleum products on-land for security reasons because it is within Nigerian territory. Secondly, it will increase employment for our professionals.”

He pointed out that the coming on stream of the Dangote Refinery would not necessarily lead to cheaper prices, noting that “the company will be buying crude oil at the international price. However, it is going to be cheaper in terms of freight rate for bringing cargoes from Europe. Dangote Refinery is a game changer in terms of accessibility. By the time the NNPC refineries and other modular refineries across the country come on stream, Nigeria will be a net exporter of petroleum products.”