Subsidy removal: Regulators, players move to arrest fuel scarcity

Sopuruchi Onwuka

The declaration of President Bola Tinubu that the subsidy on the retail price of premium motor spirit popularly called petrol is gone has sparked a new round of confusion in the domestic fuel market, prompting the commercial players and government agencies in the industry to collaborate in arresting the prevailing scarcity.

Key market players including the Major Oil Marketers Association of Nigerian (MOMAN) and the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) reached accord with the Nigerian National Petroleum Company (NNPC) Limited and Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to work out a smooth transition into a new market regime while keeping supply flowing.

With total loss of coordination in the market ahead of the presidential inauguration, President Tinubu’s declaration of subsidy removal has thrown the market into confusion. While most marketers have shut down retail operations out of caution, regulators who sat on deregulation of the market as provided by the Petroleum Industry Act of 2021 have suddenly seen the need to activate the dormant law.

At stake in the swing of development is the continued role of the Nigerian National Petroleum Company (NNPC) Limited as sole supplier of petrol and sole beneficiary of the huge subsidy funds.  

Tuesday morning, the market regulator, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), which supervises activities in the market, stated that the president’s declaration was in line with the Petroleum Industry Act 2021.

General Manager in charge of Corporate Communications, Kimchi Apollo, stated that the act provides for total deregulation of the petroleum downstream sector to drive investment and growth.

The authority refrained from addressing the immediate scarcity of products at filling stations which our investigations have linked to deliberate hoarding of products by marketers. Some of those who opened sold at the envisaged new price which hovers between N300 and N400 per liter.

The Oracle Today reports that it is customary for regulators to step in and instil discipline in the market at times of price changes to forestall hoarding of products for short term profits by the marketers who have blamed the Nigerian National Petroleum Company (NNPC) Limited for supply monopoly and low margins in the market.

The biggest contention in the market, The Oracle Today reports, is the capture of all profit lines by the NNPC Limited which is also accused of seizing sole control and appropriation of the trillion of subsidy provisions for the market since the inception of the Buhari administration.

It would be recalled that the past government of former President Goodluck Jonathan had cut fuel subsidy in the country to mere N800 billion per annum before leaving office, but the Buhari government has since then closed import opportunities and subsidy benefits against marketers.

Despite weeding out other marketers, subsidy claims by the NNPC Limited which has assumed the role of sole market supplier have ballooned to N4.2 trillion in 2022. And marketers and the Organized Private Sector (OPS) have vehemently disputed the import figures with which the NNPC Limited has regularly claimed incremental subsidy funds even at times of low oil prices.

All marketing groups in the country have regularly called on the national oil company to share its market data on supply figures and other import templates upon which it determines subsidy claims.

Their calls on the NMDPRA to also deregulate petrol retail prices and liberalize the market have also fallen on deaf ears. The authority, just like the NNPC Limited, has also refused to publish verified import figures as in the days of the previous administrations, keeping the industry and the country at the mercy of NNPC Limited.

In the last webinar on global market trends, delegates from Argus Media which provides market intelligence to players in the oil market declared that every country except Nigeria has a digital dashboard for supply movements and price trends.

With lack of coordination in the Nigerian downstream petroleum industry, The Oracle Today reports, marketing companies read signals from public statements and respond to take cautious responses to changes in government.

A statement from the marketing groups on Tuesday indicated that communication with the NNPC Limited and the NMDPRA on ways to transition the market after President Tinubu declared removal of subsidy in his inaugural address.

“We are working closely with NNPC Limited and other key stakeholders to guarantee a smooth transition, avoid any disruptions in supply as well as ensure that consumers are not short-changed in any form,” the NMDPRA said in response of acute scarcity which followed declaration of subsidy withdrawal.

Whereas the authority insists that there is ample supply of PMS to meet demand in the domestic market, the retail outlets are closed to customers as marketers respond to uncertainty.

 “We have taken necessary steps to ensure distribution channels remain uninterrupted and fuel is readily available at all filling stations across the country,” the authority assured.

It stated: “We therefore call on Nigerians to remain calm and resist the urge to stockpile as it poses significant safety hazard.”

The Oracle Today reports that all marketing groups have mounted strong advocacy for the implementation of provisions of the PIA concerning price deregulation. The marketers have blamed the NNPC and NMDPRA for the non-activation of relevant sections of the PIA for downstream deregulation and liberalization.

With the position of the new president, However, the NMDPRA has suddenly reassured that the removal of subsidy on PMS would be step towards building a more sustainable and prosperous future for our nation.

“We will continue to monitor activities and implement necessary measures to enhance transparency and accountability in the petroleum downstream sector,” the agency stated.

In a separate statement, MOMAN and DAPPMAN endorsed the pronouncement by President Tinubu on the phase-out of the petrol subsidy regime.

“We appreciate the clarity of policy from the Tinubu administration, a direction that signals a courageous and pragmatic shift in our nation’s economic trajectory,” the twin groups jointly stated..

They joined the regulators in cautioning Nigerians against panic buying, saying that “the NNPCL has assured Nigerians of adequate fuel supply and the NMDPRA is working closely with stakeholders to ensure a seamless transition. They are ensuring distribution channels remain uninterrupted, thereby making fuel readily available at all filling stations across the country.”

In echoing the voice of the regulator, the groups stated that the decision to phase out this fuel subsidy is not merely a fiscal reform but a significant stride toward social justice.

“We are heartened that the administration plans to redirect these substantial funds towards essential public goods such as infrastructure, education, and healthcare. These investments symbolize our shared future, promising considerable, long-term benefits for all Nigerians.

“We understand the concerns regarding potential price increases. However, we expect marketers to maintain reasonable pricing, as NNPCL remains the sole supplier of the product currently. We anticipate minimal changes regarding distribution costs, considering the cost of the product constitutes 80% of the pump price. We pledge, in collaboration with the Nigerian Association of Road Transport Owners (NARTO) and other crucial stakeholders, to manage these distribution costs diligently to minimize their impact on the pump price.

“Considering this clarity of policy, we ask our suppliers to continue supplying products to all legitimate marketers. We also urge all stations to remain open and avoid hoarding products. We eagerly await the day when the Dangote Petroleum Refinery, as well as other licensed importers, join the current supplier in a bid to diversify the source of petroleum products and enhance market competition.

“MOMAN and DAPPMAN will maintain open dialogue with the Federal Government, advocating for stability in the oil sector during this transitional period. We are prepared to support any measures from the Government that would help cushion the impact on the populace.

“We once again laud President Tinubu for his bold vision and stand ready to collaborate with his administration in its effort to promote greater economic equality and prosperity for all Nigerians,” the statement reads in part.