Towards the end of the previous week, Nigerians woke up to the news that the Nigerian downstream petroleum sector had been fully deregulated by the FG. This was as several media outlets reported that the Petroleum Product Pricing Regulatory Agency (PPPRA) had removed the existing price cap on the premium motor spirit (popularly known as petrol), adopting a market-based pricing system and allowing marketers the freedom to fix the price at which they can sell the product to consumers.
However, PPPRA had since debunked the news, clarifying that the agency has not conferred such powers on petrol marketers as the power still dwells with the PPPRA, who will continue to guide market participants on the monthly fair retail market price at which petrol shall be sold across the country. The PPPRA argued further that in a deregulated market, the role of a regulator in monitoring and regulating activities in the sector cannot be overemphasised. Thus, quenching all the initial euphoria about full sector deregulation – having already deregulated diesel (AGO) and kerosene (DPK) pricing.
In our view, the need to totally deregulate the downstream sector is tied to the need to eliminate subsidy on petrol and reprioritizing funds spent on subsidy to develop Nigeria’s critically needed infrastructures. Thus, reluctance to fully deregulate before crude oil price, recovers might leave room for the return of the now-forgotten subsidy. Also, we believe the mechanism for the monthly price change might be challenging, given the volatile nature of oil prices and its effect on oil marketers’ inventories. In the end, the power to truly deregulate petrol price remains with the President who doubles as Nigeria’s Minister of Petroleum until the petroleum industry bill is passed.
United Capital Research
