The Federal Government has scrapped the Petroleum Equalisation Fund (PEF), as well as the national transport allowance for oil marketers.
Engr. Farouk Ahmed, the Authority Chief Executive (ACE) of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) disclose this on Friday.
The PEF was set up by Decree 9 of 1975 (as amended by Decree Number 32 of 1989 now chapter 352 of the Laws of the Federation). Its main function is to ensure price uniformity of petroleum products via the reimbursement of marketers for losses they incur in trucking products from depots to their filling stations anywhere in Nigeria.
However, Ahmed said it will no longer fix prices or release templates for petrol prices. He explained that under the liberalised market, the forces of demand and supply would dictate prices.
He also said that the NMDPRA and the Federal Competition and Consumer Protection Commission (FCCPC) will monitor activities in the downstream sector to prevent profiteering by petroleum marketers.
“We put the regulation in place, we make sure quality control is complied with, we make sure the product is there and we give licence to a prospective importer.
“The market is now open for everybody that wants to import as far as they meet all the requirements. So, it is not about the NNPC alone.
“For everybody in the sector, we make sure we guide their operations whether at the depot or wherever the product is, but we will not put a cap to say this is what the price must be.
“As far as we are concerned in the NMDPRA, this is not like before when the PPPRA fixes the price. In a deregulated market, it is the market force that dictates the price.
“In the case of the NNPC, the organisation is the sole importer at this point. We told the NNPC to recover its costs because they know how much it cost them to import the product and sell it.
“Of course, we also know how much shipping, offshore, ex-depot and ex-pump are. But we cannot tell them to sell at a price because the market is deregulated”, he said.
Ahmed further disclosed that marketers are now free to source their foreign exchange anywhere around the world to import petroleum products and then recover their costs without impediments.
On where the importers will source their forex from, Farouk said: “No. the CBN will not give dollar to anyone because it is an open market. Anyone willing to import should get the dollars from anywhere to import.
“Anyone willing to open a letter of credit from any part of the world can do that to import. That marketers can source their forex from anywhere is the beauty of the liberalised market that the NMDPRA has introduced based on the provision of the law.”
Though no template spells out the pricing components of petrol price, Ahmed hinted that the market will henceforth be modulated to allow the fluidity of prices.
“This means that the price will no longer be static. It will depend on the international price of the gasoline market. But this does not imply that marketers can sell at any price.
“If we find that certain prices are way above the expected profit margin, we and the FCCPC can move in to curb such excesses because that will be profiteering. The market structure will dictate the price swings at every point in time”, he added.
He maintained that Dangote will help the nation in two ways, adding, “The refinery will give Nigeria easy access to petroleum products on-land for security reasons because it is within the Nigerian territory.
“Secondly, it will increase employment for our professionals.”