The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has said that the Nigerian National Petroleum Company Limited (NNPCL) has not usurped its powers in determining the price of petrol in the country.
The Chief Executive Officer of NMDPRA, Engr. Farouk Ahmed, spoke in the wake of insinuations that the NNPCL had taken over one of the agency’s key functions.
He told the Daily Trust yesterday that market forces are strictly responsible for determining the price of petrol, in line with the provisions of the Petroleum Industry Act (PIA), 2021.
He also said that interested parties in the oil and gas sector have every right to order, supply and sell petrol in Nigeria, saying part of the role of the NMDPRA is not to allow anyone to go overboard by exploiting the market or the final consumers.
Ahmed said since the scrapping of the Petroleum Products Pricing Regulatory Agency (PPPRA) and its replacement, the government or any of its agencies ceased to fix the prices of petroleum products, adding that determining the cost of products is expected to thrive under the forces of demand and supply.
Before it was scrapped, PPPRA was the agency of the government, established in 2003 to, among other responsibilities, monitor and regulate the supply and distribution, and also determine the prices of petroleum products in Nigeria.
Daily Trust reports that controversies have continued to trail the recent release of pricing template for the sale of petrol across the 36 states of the federation by the NNPCL.
The template indicates N950.22 as the average price of a litre in Lagos State, which is NNPCL’s shortest route, and N1, 019.22 per litre for Borno State, the longest and extreme end of the supply route.
NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye said the new price template reflected the provisions of the PIA 2021, under which petrol prices are negotiated by parties “on an arm’s-length” rather than by government’s fiat.
According to Soneye, the estimated prices are based on negotiated terms between the NNPCL and the Dangote Refinery, which recognise the current international petrol prices and the prevailing foreign exchange rate, in line with the provisions of the PIA.
He had said: “The NNPC Ltd., is paying Dangote Refinery in USD for September 2024 PMS off take, as naira transactions will only commence on 1 October 2024”.
‘Our role is to provide for healthy competition’
Some sources in the petroleum industry have insisted that the NNPCL had usurped the role of the NMDPRA.
Speaking to Daily Trust, Ahmed said many people are still living in the past.
“We try to restrain ourselves from needless controversy”, he said.
“But to put the record straight, the recent transaction between NNPCL and Dangote Refinery is strictly based on a willing buyer and a willing seller.
“But I know you will ask me that the supply is not sufficient in Nigeria, hence the high price. Of course, things would work fine when we have more players in the sector.
“But in a situation whereby some Nigerians expect us to regulate the price, it then means that the sector has not been deregulated; and it means we would continue to have problems”, he said.
Ahmed said the pump price announced by the NNPCL was meant for its numerous outlets across the country, and is not incumbent on other competitors to abide by it.
‘Different opinion over pricing’
An expert in the oil and gas industry, who does not want his name mentioned for fear of being targeted, said: “Under the PIA, Sections 32 and 33 give the NMDPRA the authority to promote competition and ensure transparency in the pricing of petroleum products.
“NNPC Ltd.,’s role as the sole off-taker has created market imbalances, and the regulator’s silence only intensifies public concerns regarding impartiality”, he said.
Another player, who asked to be simply called Yusuf, said it will be difficult for the fuel scarcity situation in the country to be addressed.
“There was initial hope that the refining of the petroleum products in Nigeria will end the decade-long hiatus, but then, here we are.
“All the relevant laws are being turned upside and down in order to satisfy the interests of some people. This is happening at the detriment of the majority, who are the poor Nigerians.
“And most importantly, it appears NMDPRA is increasingly becoming weak by the day, and this is not good for the polity”, he said.
A credible source close to the NNPCL said the price template of October will most likely bring the pump price of petrol down.
“It will be difficult to blame Dangote or NNPCL over prices rolled out recently. This is because, Dangote actually imported the crude oil he refined and sold to the NNPCL. He bought it in dollar; and I want to tell you that at the time he bought it, it was around $80 per barrel.
“It was based on those dynamics that he sold the petrol to the NNPCL, who in turn also paid him in dollar.
“But now that the federal government agreed to sell crude to him in naira, there is the likelihood that the price of petrol will come down in October, considering that the price of crude has also reduced to around $70 to a barrel. Above all, it is the international oil market price that will determine what happens here in Nigeria”, he said.
The source added there are other ways the federal government could bring down the price of petrol quietly.
“Beyond the cost of petrol per litre, there are other charges like inspection fee per barrel of crude, royalties and other charges being accrued to various agencies, including the ministry of petroleum resources.
“All these are deducted in percentages and I believe that if President Bola Tinubu can give a directive that some of these charges should be reduced, or waived for a certain period in order to ease the pains being faced by Nigerians, I believe Nigerians would have some relief”, he said.
Shift from uniform pricing to deregulated market dynamics
Historically, Nigeria operated under a uniform pricing system regulated by the Petroleum Equalisation Fund (PEF), which ensured price consistency across the country, regardless of transportation costs.
The PIA 2021, however, abrogated the PEF, leading to regionally varied fuel prices that now reflect transportation costs.
This policy shift has resulted in price disparities across Nigeria, with regions farther from refineries facing higher prices.
One of the experts that spoke to Daily Trust said that NNPC Ltd.’s pricing template reflects these variations, but the absence of an overarching pricing guide from NMDPRA has exacerbated the problem, leading to increased consumer frustration, particularly in regions with higher transportation costs.
Another source, contended that a position where the NNPCL speaks more on matters of pricing contrasted with best practices in other deregulated markets worldwide, where regulators still provide indicative benchmark prices to prevent profiteering and ensure that competition remains fair.
For example, Australia and South Africa both publish regular benchmark prices to protect consumers from excessive pricing and regional disparities. In Europe, many deregulated markets follow a similar model, issuing benchmark prices to prevent predatory pricing and ensure transparency.
Similarly, the UK energy regulator Ofgem, does provide indicative benchmark prices for energy products through its Energy Price Cap.
The price cap sets a maximum price per unit that energy suppliers can charge customers on standard variable tariffs, ensuring prices are fair and reflect actual costs, particularly in volatile market conditions.
This cap is reviewed and updated quarterly, providing guidance that helps prevent profiteering by suppliers in a deregulated market.
Ofgem’s price cap serves a similar purpose to indicative benchmarks in other sectors, including petrol in deregulated fuel markets. It ensures that while suppliers can set their prices based on market dynamics, they do so within a framework that protects consumers from excessive charge.
In the Nigerian context, the expert said similar approach could help mitigate price disparities and prevent predatory pricing practices, especially after the abolition of the Petroleum Equalisation Fund under the PIA.
“By failing to issue benchmark prices, the regulator risks enabling price exploitation, particularly in regions where competition is limited”, the experts said.
He called on the NMDPRA to facilitate access to refined products from Dangote Refinery for other marketers to ensure that competition is not stifled.
“By allowing NNPC Ltd., to be the sole off-taker, NMDPRA has created a monopolistic environment, which is a direct violation of Section 32 of the PIA”, One of them said.
NNPC has no regulatory powers and cannot fix prices- EVC
Speaking on the pricing of petrol, the Executive Vice President, Downstream, NNPCL, Mr. Dapo Olusegun said the NNPC is not a regulator.
“The NNPC has no regulatory powers and cannot fix prices. That is why citizens must study the PIA to understand that things have changed.
“I have seen that there is so much misinformation out there, even within government settings, understanding the new NNPC.
“What we have done in this specific case with Dangote Refineries is that we went into the room and we negotiated like every other business would do. Dangote comes into the room and says ‘I want this much for my petrol,’ and we say, ‘No, we are paying this amount,’ and we negotiate to come to some agreements, and that is what has happened. So it’s neither we (NNPC) nor Dangote that sets the price. It’s basically the market forces that set the price.
“The price is indexed to Brent. If Brent moves up, the price moves up and if Brent moves down the price moves down. We don’t determine Brent’s price, they don’t determine Brent, it is the market that does”, he added.
IPMAN looks out for official notification
Members of the Independent Petroleum Marketers Association of Nigeria (IPMAN) yesterday said they were on the lookout for an official notification on the pricing for Dangote petrol.
IPMAN’s National President Abubakar Maigandi said members of the union were awaiting NNPCL’s response for the official communication on the pricing.
IPMAN National Welfare Officer, John Kekeocha, said it did not make sense for the NNPCL to sell petrol lifted from the Dangote Refinery higher than imported ones.
