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Paradox of a deregulation regime in a shrinking economy

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Notwithstanding the pains being elicited by the deregulation policy of the Federal Government, major stakeholders in the petroleum sector have maintained that the new era would completely eradicate the recurrent fuel queues and spur more investments in refineries and retail businesses.

Already, the organized labour has begun to mobilise for what it described the ‘mother of all strikes’ and Nigerians are irked to witness the replication of the struggle experienced in 2012, which almost grounded the entire nation.

Indeed, the development has split the Nigerian populace into two interest groups (for and against deregulation) and confusion has enveloped the air, even as government insisted that it could not sustain the N1 trillion yearly subsidy regime.

Just as these were going on, many petroleum marketers have already changed their pumps to sell at between N140 and N145 per litre, while the six-month-old queues have disappeared. This, according to the some stakeholders, is an indication that deregulation would completely eradicate fuel queues and create a market force pricing in the long run.

National President of independent marketers under the aegis of Odu’a Petrol Station Owners and Dealers Association of Nigeria (OPSODAN), Kolawole Adewoyin, enjoined the Federal Government to progress with the liberalization of the sector and allow full participation of all marketers who have the capacity to import and distribute petroleum products effectively.

Adewoyin who doubles as the Vice Chairman, Lagos Private Depot Operators, said: “It is a welcome development. With time, prices of premium motor spirit (PMS) otherwise called petrol will come down just like diesel. We believe that if the sector is liberalized, every competent marketer will be able to import and sell the product. This can only happen under liberalization policy.

“When liberalized, government won’t have to fix pump price of petrol because it is not its business. The government should only ensure effective supervision and regulatory framework to ensure Nigerians are not cheated during the process.”

He further enjoined the Department of Petroleum Resources (DPR) to live up to its responsibility by ensuring effective regulation of the sector to avoid sharp practices, under-dispensing and hoarding.

He stated further that the government should also provide some incentives for small and indigenous marketers, through waivers on import duties, to compete favourably with the majors.

“By so doing, participation of indigenous marketers in product importation will be promoted,” he said.

Moreover, he urged the Nigerian National Petroleum Corporation (NNPC) to allow his members to lift products based on old rate, “because they have collected over N50billion from us for 20,000 tickets but we are yet to load for over three months when we have made the payment. I think it will be unfair on our part to pay the additional money they are demanding for in order to reflect this new rate.”

The Petroleum Products Pricing Regulatory Agency (PPPRA) had noted that the new regime will permanently eliminate subsidy payments which was estimated at N1 trillion in 2015 and about N16.5 billion between April and now. The sum which government would have sincerely invested in other critical areas of the economy such as education, power, health and infrastructure development.

Apart from reducing hoarding, smuggling and diversion substantially and stabilize price at the actual product price, the agency said deregulation is expected to stabilize economic fundamentals and allow access to development loans.

It maintained that the fuel subsidy is not sustainable in the face of flagrant disregard of the set ceiling price of N86.50k per litre by the marketers.

Survey by Nigerian Bureau of Statistics indicated that apart from Abuja and Lagos, citizens in other states were paying an average price of N150 per litre which is still above the benchmark of N145 per litre.

The survey further established that the subsidy benefits only a few (urban – metropolitan / few higher income groups) at the expense of the larger citizenry.

Expectedly market trend indicates that the former pump price of N86.50/litre does not assure marketers of over-recovery if crude oil price continues to trade above $40 barrel, making it an unrealistic price in view of market realities.

An Energy Expert, Meka Olowola, said: “Fortunately, we have started on a long awaited path to rescue the Nigerian economy – and its citizens – from a head-on collision with disaster. It is no lie that this change will at first come with a pinch, but we must think further ahead; after all, that is the crux of the sustainability we so desire.”



2 Comments
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  • emmanuel kalu

    one of the problem is the complete failure of the government to send people out there to educate Nigerian’s on what is going on. This is huge national shift in policy and the president should be making the round explaining this to Nigeria. where is the president and his team?