As of March 2020, the federal government (FG) decided it was deregulating the oil sector. Mixed reactions and scepticism followed this announcement, and rightly so as the June template from the Petroleum Products Pricing Regulatory Agency (PPPRA) still shows allocation to the Bridging Fund. And the icing on the cake, Mr Sylva’s explanation of deregulation to mean marketers, still could not determine prices. Counterintuitive, some might say, which begs the question, did the government truly deregulate oil and gas? If yes, why then is the PPPRA still functioning under the same mandate?
Government may cost Nigerians over ₦130bn by December
Meanwhile, Dataphyte’s analysis shows the steep money cost for this pseudo deregulation. By year end, December 31st, Nigerians would have paid an additional N130.9 billion from the official pump price.
The payments which serve as cross-subsidy (a practice of charging higher prices to one type of consumers to lower prices for another group) to the Petroleum Equalisation Fund (PEF) ensures uniform pricing of fuel across the country for consumers.
Dataphyte got the N130 billion estimate by multiplying the Federal Government average charge of N7.51 per litre with the average daily consumption of 57 million litres in 2019, to the number of days since March this year.
We are already down 121 days, and between March and June, consumers paid N51.1 billion. By August 31st, which is 184 days, Nigerians would have paid N78.7 billion, all to ensure prices across the country stayed constant; a revelation that calls into question Timipre Sylva’s remarks. Recall the Minister of State on Petroleum Resources insisted that the government no longer subsidised fuel having deregulated the sector.
Mele Kyari, the group managing director of the Nigerian National Petroleum Corporation (NNPC) also supported Sylva’s statement that the government was abolishing petrol subsidy.
How does the PEF work?
To answer this question, we first have to understand the Petroleum Equalisation Fund (PEF). This government task force has the mandate of ensuring a uniformity in the price of petroleum products across the country; although, since its establishment, prices of petrol have not been the same across the country.
So back to the subject, payments from petrol consumers go to the Petroleum Equalisation Fund (PEF).The payments then feed into a subsidy mechanism that is supposed to ensure that petrol is sold at a regulated price throughout Nigeria. The fund is earmarked for paying bridging claims and reimbursing transportation costs incurred by petrol marketers.
Goddy Nnadi, spokesperson of PEF, last year had argued that the scheme still serves its purpose, even amidst calls for its abolition. “The Board provides an organised way of taking care of a cost element that will always be there in view of the geographical nature of our country,” Mr Nnadi said.
He added that the PEF arrangement has been a veritable vehicle for solving an inherent challenge in our system, and needs to be applauded as one of the pro-active, service-oriented and utility organisations in the country. Yet, these claims remain to be seen.
The big question: Why must Nigerians continue to pay?
What is the role of PEF? A pertinent question we need answered, given the trends of wide disparity in prices across the country, albeit established to combat such situations.
The recently published average Petrol/ Premium Motor Spirit prices across the country by the National Bureau of Statistics (NBS) showed that through the months from January to the last updated figure in July, the fund has failed to ensure price equality.
In March, for instance, Niger state consumers paid close to N146 for a litre of petrol, even when the official price remained N145.
The inequality which persisted to July, the latest figure, saw Nigerians in Adamawa paying up to 145 when pump price was at N121.50 per litre by the petroleum Products Marketing Company.
From the preceding, it is clear the inefficacy of the petroleum equalisation fund; so why does it still exist?