The Independent Petroleum Marketers Association of Nigeria (IPMAN) celebrated the withdrawal of fuel subsidy by the federal government with assurances that the price of petrol would crash like the price of diesel.
Last week, the marketers showed their profiteering fangs and leisurely pushed the price of diesel above the open market price of petrol. Diesel was N110 per litre in Lagos when Ibe Kachikwu, the minister of state for petroleum and group managing director of the Nigerian National Petroleum Corporation (NNPC) announced what amounted to a deregulation of the downstream sector of Nigeria’s oil industry.
Many were planning to switch to diesel-engine cars and generators as the price of diesel was pocket-friendly. Now, diesel sells for N150 per litre. There is abundant supply of diesel and nothing has changed in its price structure. Marketers are always cheating. When the open market price of diesel was N101, the pump price was N115 per litre. The marketers were only cheating by a scant N14 per litre. Now they have raised their profit margin by N36 per litre. The marketers are reading the body language of the Department of Petroleum Resources (DPR). DPR, the regulator of the industry does not enforce the open market price of deregulated products. One wonders why the Petroleum Products Pricing Regulatory Agency (PPPRA) bothers to fix open market prices for deregulated products if no one cares to enforce them.
The fear is that the price of petrol as a deregulated product would soon go the way of diesel. The DPR has never cared to monitor what happens in the deregulated products market.
Even as PPPRA regularly publishes the price structure of diesel and aviation fuel on its website, the DPR looks away as marketers overshoot their recommended open market price by at least N14.
The case of aviation fuel is even more deplorable. The commodity which is marketed by a cabal has never sold at less than N120 per litre, even as the open market price hovers around N90. The cabal decides how much of the commodity enters the market at a given time and could even conjure artificial scarcities to justify price hikes.
That explains why airfares in Nigeria remain high when fares are tumbling in all parts of the world. Nigeria has one of the highest airfares in the world.
Everyone is worried that with the total deregulation of the downstream sector of the oil industry, marketers could strangle hapless consumers if the DPR’s intrinsic lack-lustre attitude to open market price enforcement is extended to the deregulated petrol market.
The withdrawal of subsidy and the consequent hike in the price of petrol is a common phenomenon in the face of dwindling oil income. It is a hard but inevitable decision that everyone knew would have to be taken one day if Nigeria has to address its decaying infrastructure. At N145 per litre Nigeria still maintains one of the lowest pump prices of petrol in Africa.
With the criminals in the Niger Delta taking out essential pipelines and other oil facilities wantonly, Angola has beaten Nigeria to the position of Africa’s largest crude oil exporter. Yet the pump price of petrol in Angola remains at N151.39 per litre. Ghana joined the club of oil producing nation’s a couple of years ago, but the pump price of petrol in Ghana is the equivalent of N211.15. The standard of living in Angola and Ghana are clearly lower than what obtains in Nigeria.
South Africa is the most industrialized country in Africa. Yet it maintains one of the highest pump prices of petrol in the continent. A litre of petrol sells for the equivalent of N237.05 in South Africa. Kenya, a country clearly poorer than Nigeria has one of the highest pump prices of petrol in the continent. The standard of living in Kenya is lower than that of Nigeria, yet petrol sells for N241.03 per litre.
The problem with the deregulation of fuel price is profiteering that would crawl into the system and make marketers richer than the federal government, if DPR fails to be a pro-active regulator. Petrol consumption in Nigeria is higher than diesel and aviation fuel. If marketers are allowed to exploit the huge patronage of the commodity without a measure of control, they would simply take the pump price to what obtains in Ghana or Kenya. In those countries the respective governments benefit from the high pump price of petrol by imposing a percentage as tax which is remitted religiously to government for use in funding public infrastructure.
In Nigeria the huge profit margin is enjoyed only by marketers. Consumers are fleeced by heartless profiteers who pay little or no tax. It would be calamitous to allow marketers to determine the pump price of petrol even under deregulation. They simply do not believe in the interplay of market forces in the price mechanism. The experience in diesel and aviation fuel markets is a clear pointer to what would happen in the larger petrol market if marketers are the sole determinants of price. That calamity could only be averted if DPR ensures compliance with the open market price of petrol. DPR should publish toll-free numbers that could be called, when marketers cheat consumers.
