End of Fuel Subsidy: Groups asks Buhari to speak up

President Muhammadu Buhari, who is the Minister of Petroleum Resources, must issue an official statement to affirm that the recent declaration by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, on the end of fuel subsidy payment in Nigeria is not government gimmick, civil society groups have said.

At an online meeting by a consortium of civil society groups advocating for reforms in the downstream sector of the oil & gas industry on Thursday in Abuja, participants noted that Nigerians were not convinced the deregulation policy has taken off with only the NNPC GMD making statements about it.

Some participants at the meeting included CISLAC, BUDGIT, Spaces for Change, NNF, Youth Forum of EITI, CSEA, Centre LSD, NNRC, CSSC, Media Initiative for Transparency in Extractive Industries, Order Paper, WiE, PWYP, CODE, ANEEJ.

On Wednesday, March 18, 2020, Mr Kyari announced the downward adjustment of the retail price of premium motor spirit (PMS), popularly called petrole, from N145 per litre to N125.

The Petroleum Products Pricing Regulatory Agency (PPPRA) later further reduced the price to N123.50 per litre.

It was the first time the price would be adjusted since it was reviewed in 2016, from N86 per litre to N145 by President Buhari on assumption of office.

Mr Kyari said the adjustment was in compliance with the directive of the Minister of State for Petroleum Resources, Timipreye Sylva, to reflect the declining trend in crude oil prices at the international market as a result of the impact of the Coronavirus pandemic.

End of fuel subsidy

On April 6, 2020, Mr Kyari clarified that the latest adjustment to the retail price of petrol was indeed an indication that fuel subsidy, which has cost the country multi-billion Naira in losses over the year, was gone forever.

“There would be no resort to either fuel subsidy or under-recovery of any nature. NNPC will play in the petroleum marketplace, just like another marketer in the space. But we (NNPC) will be there for the country to sustain the security of supply at market price,” he said.

Since the pronouncements by the NNPC GMD, Nigerians have been asking questions about whether that could translate to mean the take-off of the policy of deregulation of the downstream stream sector of the petroleum industry.

“The deregulation of the downstream sector of the Nigerian oil and gas industry, and indeed the removal of fuel subsidy from the pricing template of the petroleum products, are too crucial for the country’s economy to be left for NNPC alone,” the CSOs said.

“President Muhammadu Buhari, who is also the Minister of Petroleum Resources must issue a public statement to confirm to Nigerians that the NNPC GMD is not acting on his own. Such presidential statement will give the policy an official seal of affirmation and assurance to Nigerians that we are not in for another false expedition,” the group said in a communique on Sunday.

Recommendations

The meeting noted that although the Minister of State for Petroleum Resources, Timipreye Sylva, disclosed the federal government’s decision to adopt a modulation mechanism to regulate petroleum products prices, it remained unclear how the interplay of market forces moderate would dictate price.

While acknowledging the government’s decision to reduce the pump price of petrol initially from N145 per litre to N125 and later to N123.50 per as a step in a positive direction, the group expressed concern that the government is yet to make an official pronouncement on how the policy would be sustained.

“While these difficult policy decisions align completely with our vision and advocacy for the reform of the downstream sector of the petroleum industry, we wish to draw the attention of the government to the important point that more still needs to be done to effectively lead the industry on a path of sustainable regulation based on globally accepted standards and practices,” they said.

Consequently, participants expressed support for the call for the privatisation of the country’s four refineries in their present condition to avoid further revenue losses, while adopting favourable fiscal terms to renew investors’ confidence in the 29+ private refineries.

Also, they called on the government to lay out defined processes and regulatory guidelines to support the announced removal of fuel subsidy, while calling on the government to commit to the sustainability of the no-subsidy regime by enacting either stand-alone legislation, or appropriate clauses integrated into the Petroleum Industry Bill (PIB).

Besides, the group wants the government to clarify the role of the Petroleum Support Fund (PSF) in the new no-subsidy regime, whether the over-recoveries would be deposited there and how they are expected to be spent.

Post-price regulation era

Other demands included the need for the government to prepare for a post-price regulation era by prioritizing consumer protection to ensure that when the downstream sector of the petroleum industry is liberalized, the interests of the people would not suffer exploitation in the hands of profiteering marketers.

“We suggest that the NNPC as the National Oil Company should not be given any advantage over other marketers in terms of access to foreign exchange to handle their products importation activities to create a level playing field for all players.

“If the NNPC must remain a player in the market, it must strive to operate under the same conditions and rules as other players in the sector regulated only by the prevailing market forces and competition.

“While we await the conclusion of work on the PIB, we urge the government to take steps to delineate the roles of policy formulation, regulation and enforcement as well as operation in the industry.