Floating of Naira, Subsidy Removal, Will Lead To Price War Among Oil Marketers


Following the floating of the Naira by the Central Bank of Nigeria couple with the removal of subsidy, oil marketers will now engage in price war to outsmart one another in the Nigerian downstream sector of the petroleum industry.

In addition to these important steps taken by the federal Government, the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on Wednesday disclosed that it had begun the process of licencing additional oil marketers to begin importation of petrol.

This would remove the burden of being the only company saddled with the responsibility of being the sole importer of  Petrol  by the Nigerian National Petroleum Company Limited (NNPC).

The Chief Executive of the NMDPRA, Farouk Ahmed, while addressing marketers in Abuja on Wednesday, warned that the industry regulator would not allow businessmen operating in the downstream exploit Nigerians even in a deregulated market.

He noted that as the NNPC starts slowing down on importation in deference to the Federal Competition and Consumer Protection Council (FCCPC) regulation which prohibits one entity or individual from controlling more than 30 per cent of the market, there was need to fill the gap being created by the new development.

“Like I said, the market is open already. We have to follow the regulation. So we will put out policies that are user-friendly. Some of them (oil marketers) have already started putting their applications in because we don’t want to create a gap.

He stated that the NNPC is slowing down its importation,  and there is the need  have someone closing up the gap so that we don’t have a shortage in the country.

“But NNPC being a responsible organisation, is also monitoring what other replacements they have, so we agree that NNPC will continue to import until such a time when we have a critical mass of other importers.

“The licences, we are processing them. Some or about two to three marketers already came to us last week to say that they have already booked cargoes to come in July. So, these are some of the very interesting things that we have received propositions for, which are very interesting and we are fast-tracking the licenses to make sure they import.

“We are interacting with the NNPC every day to ensure that the market is well supplied and there’s no gap in importation,” he stated.

On the availability of foreign exchange (FX) for importation, Ahmed stated that since the market had been deregulated, marketers could begin to source for FX where it is available without resort to the government.

“For FX, the market is deregulated, so, I don’t believe we should subsidise our FX or that they should go to the Central Bank of Nigeria (CBN). The price that NNPC rolled out which they sell now, took cognisance of the exchange rate, not at the NNPC rate.

“So, if exchange rate is N650 to a dollar, if the naira improves, the price will change, so it can go either way,” he argued.

President Bola Tinubu had during his inauguration on May 29, announced that fuel subsidy had been removed, with the NNPC thereafter rolling out its projected prices in several locations in the country ranging from N488 to N557.

Ahmed maintained that the issue of standardisation of products had become imperative in order to avoid situations where consumers will be short-changed when products that are of lower quality are imported into the country.

He also said that during the meeting, the oil marketers agreed to improve their level of collaboration with security agencies to ensure the smooth movement of petroleum products.

“We called for this engagement so that we can align and also roll out our policies in terms of requirements for importation of Petroleum Motor Spirit (PMS). Of course, we have been engaging and directing all through, but we thought it was necessary to meet again for more clarity regarding the way forward,” he added.

He noted that the NMDPRA was giving priority to transparency in the importation of petrol, both by oil marketers and the national oil company to ensure that consumers get value for money.

“We discussed the issue of quality of products importation, which is a very important aspect as well. So we deliberated on how products distributed locally meet the requirements so that the consumer is not negatively affected,” he said.

Due to logistics reasons, Ahmed noted that the prices of petrol would not be the same nationwide, explaining that bridging or equalisation fund has now been expunged. He added that there would be no price capping by NMDPRA to ensure that the price is reflective of the market, but that blatant exploitative tendencies will be frowned upon.

“Prices will not be the same all across the country because of local transportation logistics. For example, the price in Lagos being the main receiving location for imports will not be the same thing, the same price in Ibadan, Sokoto or Maiduguri,” he pointed out.

Besides, he said that a small team will also be raised to look at the PIA amendment which currently screens out certain entities from bringing in the product into the country.

Other things being equal, as the market expands and more entities are allowed to import products, Nigerians are expected to be the ultimate winners as prices of petrol would likely fall due to competition, given that operations do not engage in price fixing.



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