The federal government yesterday indicated that it was reviewing the current pricing template for petrol, which was last adjusted four years ago, in order to reduce the alleged exploitation of Nigerians by the operators in the downstream sector.
The government stated that it was finalising the re-adjustment of cost elements and profit margins on the pricing template for marketers to reflect the current market-driven pricing regime and ensure that consumers are not overcharged.
A statement by the Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Mr. Saidu Abdulkadir, stated that the agency was also collaborating with the Ministry of Petroleum Resources and Ministry of Justice, which have put in place a regulation on petrol market-based pricing regime.
On questions over the sustainability of the pricing regime without a regulatory or legal framework, Abdulkadir said extant laws such as the PPPRA Act No. 8 of 2003 and the Petroleum Act gave the agency the legislative backing to formulate policy initiatives on pricing regime.
He said it also empowered the PPPRA to limit price gouging, create a level playing field for operators and protect consumers.
"In accordance with the above, the development of guidelines for petroleum products commercial framework has been concluded and code of conducts for operators is currently being prepared to reflect the present price regime.
"The agency, in collaboration with the office of the Honourable Minister of State for Petroleum Resources and the office of the Attorney-General of the Federation has put in place, a regulation on the petrol market-based pricing regime," he said.
The PPPRA added that transitioning to a fully deregulated market has come with its pains, including holding stock of products bought at higher prices, non-availability of foreign exchange for importation of petroleum products and slow depletion of stock due to the COVID-19 pandemic.
"These challenges are currently being managed. On a positive note, the PPPRA is currently finalising the review of cost elements and profit margins on the pricing template for marketers to reflect the current market-driven pricing regime, which was last reviewed in 2016 while ensuring that consumers are not overcharged," it said.
The agency said the most recurring issues now border around the new pricing policy, why Nigerians are not paying considerably less, given the relatively low crude oil price and how deregulation will affect petrol pump price when crude oil price inevitably rebounds.
It said its pricing template would take into consideration some factors which include amongst others: petroleum product cost, foreign exchange (forex) rate at which oil marketing companies (OMCs) import petroleum products.
Other associated cost components, it said, included freight rate, transshipment cost, statutory charges, terminal charges (storage and jetty throughput), financing and distribution margins (wholesalers/marketers, transporters, retailers, bridging fund and administrative charges.
While stressing that the agency does not fix prices, the PPPRA said it rather provided a guiding price band by monitoring petroleum products prices daily; using the average price of the previous month to determine prices for the following month, for appropriate cost-reflective pricing that ensures reasonable returns for marketers.
On why it was not possible for the government to fully hands off pricing, despite deregulation, PPPRA said the enforcement of appropriate laws by strong regulatory agencies was needed in the downstream.
"Different fully deregulated sectors of the polity operate under the guidance of national regulators. The NBC regulates broadcasting, NCC regulates telecommunications; NERC regulates the power sector; the banking sector is being regulated by the CBN and the same exists for operators in Nigeria's downstream petroleum sector," it explained.
The agency emphasised that the new pricing regime is a market-reflective pricing system where it advises marketers on guiding price, stressing that although crude oil price and petroleum products prices are positively correlated, the prices of petroleum products do not increase or reduce correspondingly with changes in crude oil price.
"The pump price we expect to see will be a reflection of the international market prices of petroleum products that are also rising," it added.