The Major Oil Marketers Association of Nigeria (MOMAN) yesterday rejected the Federal Government’s recently introduced price modulation model for Premium Motor Spirit (PMS), popularly called petrol.
MOMAN Chairman, Mr. Tunji Oyebanji , said oil marketers would rather opt for deregulation as against price modulation as the former would bring about long term stability in the downstream sector. This was even on the heels of the association’s recommendation that the price equalization mechanism managed by the Petroleum Equalisation Fund (PEF) should be discontinued and its law repealed as the cost of administration of equalization has become too high and the unequal application of payments by marketers distorts the market and creates market inequities and unfair competition.
The association added that internal equalization has been the practice with diesel distribution and sales since 2010 when diesel was fully deregulated.
On March 18, 2020, President Muhammadu Buhari, approved the reduction in the petrol price from N145 to N125, and another drop in April to N123.50 per litre, following the crash of crude oil price at the international market.
“Also, the PPPRA shall subsequently issue a monthly guide to NNPC and marketers on the appropriate pricing regime.
“The agency is further directed to modulate pricing in accordance with prevailing market dynamics and respond appropriately to any further oil market development.’’
Oyebanji said that it had become necessary for the association to state its position, adding that recently, the Minister of State for Petroleum Resources, Chief Timipre Sylva, had in a statement said that the government would implement a policy of price modulation, meaning that it will give effect to existing legislation enabling it to set prices in line with market realities through the Petroleum Products Pricing Regulatory Agency (PPPRA) as provided in its Act.
He warned that the clear and obvious risk is that the country has never been able to increase pump prices under this law, leading to high and unsustainable subsidies, depriving other key sectors of the economy of required funds.
According to the MOMAN Chairman, operators want the market to determine the price with a level playing field, adding that every investor should have access to foreign exchange to be able to import and sell petrol at a pump price taking its landing and distribution costs into consideration.
He advised that government should no longer fix petroleum product prices, insisting that the health and educational sectors should be given higher priority than paying for petroleum subsidy on petroleum, stating that the association supports the pronouncement of the NNPC GMD, Mallam Mele Kyari, that subsidy or under recovery must be things of the past
The downstream sector operators also advocated a market-based philosophy hinged on sustainability of the petroleum industry which encompasses free market competition where access to foreign exchange at competitive rates to all market players are equally guaranteed.