While motorists groan under the weight of ever rising petrol price, the Petroleum Equalisation Fund, a parastatal, under the Ministry of Petroleum Resources, established to administer the so-called uniform prices of petroleum products throughout the country carts away the princely sum of N50billion yearly from the sale of refined petroleum products according to BusinessDay investigation.
The finding has sparked outrage among Nigerians in an era of rising inflation which means less disposable income for the people and questions are now being asked as to why Nigerians should be paying subsidy for an agency of government that should long have been scrapped.
Even in South African where the government has achieved a uniform pricing formula for petrol, there is no government age
Under the current system where the NNPC is almost importing all the country’s refining product needs, PEF’s cost is built into the pricing template captured under distribution margins.
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 56m for petrol, 14m for diesel and 3m for kerosine daily. At N2.50 levy per litre, PEF makes on average N51billion on petrol, N12.7billion on diesel and and N2.7billion 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 N66.4billion every year as administrative charges to ensure a uniform pricing for petroleum products across Nigeria.
This is similar to what obtains with the Petroleum Products Pricing Regulator Authority (PPPRA) who are earning over N30billion yearly as administrative charges regulating petrol prices.
These Two Federal government agencies make over N90bn yearly as administration charges for the sale of petroleum products even though they are not importing or selling petrol.
This pattern of charges places a burden on consumers who have to cover the cost and allows corruption to fester in the marketing of Nigeria’s petroleum products especially petrol.
Analysts say this is not what obtains in other climes. In South Africa for example, marketers achieve price uniformity without a government agency enforcing it because there is a clear standard to determine prices ( indexes to previous month crude prices) allowing for transparency in the process.
Yet, the presence of the agency that enforce uniform pricing has not even led to uniform pricing across the country. For instance, while the official pump price of petrol was N143 per litre in July, data from the National Bureau of Statistics (NBS) show that the country was unable to keep to uniform price as petrol was sold in Adamawa State for N145.00, Abia State for N144.93 and Enugu State for N144.80.
The development defeats the reasons for setting up PEF as NBS further disclosed that the products sold lower in states like Gombe for N142.57; Ogun for N140.30; and Gombe for N142.57.
“PEF’s price-setting is not compatible with a liberalised downstream petroleum sector,” according to an oil marketer.
According to him, “allowing a government body administer equalisation fund will create a rent-seeking opportunity for a gatekeeper which can easily lead to fraud.”
Former President, Nigerian Association for Energy Economists (NAEE), Wunmi Iledare, said the country could not pretend to deregulate and set the price at the same time, nor keep an equalisation agency.
“This is what we refer to as transfer payment syndrome. The way out is complex but doable,” Iledare said.
Luqman Agboola, head of energy and Infrastructure at Sofidam Capital said: “With prices now fully deregulated, PEF has been overtaken by the recent development, although it might require appropriate legislation to scrap the agency,”
The bridging cost was introduced as a temporary measure when Turnaround Maintenance (TAM) of the nation’s refineries was to be conducted. However, the scheme remained for decades as the state of the refineries has worsened.
The PEF management says it achieves its objective by reimbursing a marketer’s transportation differentials for petroleum products movement from depots to their sales outlets (filling station), in order to ensure that products are sold at uniform pump price throughout the country.
