The federal government’s obsession with controlling the price of refined petroleum products has nothing to do with protecting Nigerians from exploitation but furthering a rentier system that sees billions of naira awarded to government agencies for managing the sale of products.
Checks show that every year two federal government parastatals, the Petroleum Equalisation Fund management, and the Petroleum Products Pricing Regulatory Agency (PPPRA), cart home over N90 billion as administrative charges for managing various aspects of the sale of products in a supposedly deregulated downstream sector.
The management of PEF, a parastatal, under the Ministry of Petroleum Resources, established to administer uniform prices of petroleum products throughout the country, will earn about N66 billion this year from the sale of refined petroleum products.
In the distribution margins for July the total amount for PEF to be used to pay transporters is N11.55 made up of: Bridging N7.5, National Transportation an Average 3.89 and Marine Transportation Average N0.15. Out of this, PEF management administration cost amounts to N2.50.
The volumes reported daily for products are 56 million for petrol, 14 million for diesel and 3 million for kerosine daily. At N2.50 levy per litre, PEF makes on average N51 billion on petrol, N12.7 billion on diesel and N2.7 billion on kerosene every year though it bears no cost and assumes no risk in importing refined products into the country. In effect, the PEF keeps about N66.4 billion every year as administrative charges to ensure a uniform pricing for petroleum products across Nigeria.
This is the same situation with the PPPRA who earn a staggering N30.5 billion annually from the administrative fee it levies on every litre of petrol and diesel sold in Nigeria while marketers who sell the petrol are struggling with their own margin.
Until now, the PPPRA charged 30 kobo per litre of petrol sold and ten kobo for diesel but weeks ago, the regulatory agency quietly raised the levy on petrol and diesel to N1.23 per litre, representing a 310percent hike for petrol and 1130 percent increase for diesel.
Using the NNPC’s volumes reported daily for products at 56 million for petrol, 14 million for diesel and 3 million for kerosine daily. At N1.23 levy per litre, PPPRA will make 23.2 billion from petrol yearly, N5 billion from diesel and almost N2 billion from kerosine sold.
These two federal government agencies make over N90 billion yearly as administration charges for the sale of petroleum products even though they are not importing or selling petrol. They have these charges tucked into the litre price of petrol and they extract it from every litre sold.
Operators are understandably unhappy with this development. The Depot & Petroleum Products Marketers Association (DAPPMAN) is protesting the outrageous fee charged by the regulator and is now asking the government to ensure “an urgent and immediate reversal of this increase.”
The depot owners and marketers said in their August 14 letter to the minister of state for petroleum Timipre Silva that they continue to incur regular losses in their operations with the PPPRA paying deaf ears to their demand for a more realistic margin.
This pattern of charges places a burden also on consumers who have to cover the cost and allows corruption to fester in the marketing of Nigeria’s petroleum products especially petrol as it is doubtful these monies are properly accounted for.
So while Nigerians are fed the tripe that government agencies are keeping a tight rein on petrol prices to protect them from exploitation, in reality, their cost for supposedly safeguarding us, represents our biggest threat. Though PEF has been around since the 1970s, prices of petrol have never been uniformed across Nigeria, questioning the relevance of the organisation.
We call on the federal government as we have done severally, to fully deregulate the petroleum downstream sector. The government’s role should be limited to certifying the quality of products and ensure fair market practices are in play.
The false claim that the downstream sector has been deregulated continues to sound ridiculous as the federal government maintains an expansive infrastructure to sustain a regulated space. As more modular refineries begin production and the Dangote Refinery comes online, this lie will be harder to tell with a straight face.
Now is the time to get out and allow the private sector to manage the distribution of refined petroleum products.
