The Evolution Of Petroleum Products Pricing Regulatory Agency
(PPPRA)
The Evolution Of Petroleum Products Pricing Regulatory Agency
(PPPRA)
The Government on the 14th August 2000 set up a 34 member
Special Committee on the Review of Petroleum Products Supply and
Distribution (SCRPPSD) drawn from various stakeholders and other
interest groups to look into the problems of the downstream
petroleum sector.
Prior to the setting up of the Committee, the downstream sector
was characterized by the following problems:
- Scarcity of petroleum products leading to long queues at the
service stations.
- Low capacity utilisation and refining activities at the
nation’s refineries (poor state of the refineries).
- Rampant fire accidents as a result of mishandling of products-
products adulteration.
- Pipelines vandalisation.
- Large scale smuggling due to unfavourable economic products
borders’ prices with the neighbouring countries.
- Low investment opportunities in the sector.
In October 2000, the Committee submitted its reports and the
Government meticulously studied the recommendations and made its
views as published in the Government white paper. Some of the
far-reaching recommendations of the committee accepted by the
Government in its white paper are as follows:
- Stakeholders (marketers, transporters, dealers, industrial
converters and others) are unhappy because of the shortages and
the prevailing cost and price structure which lead to low
returns on capital investment and encourage malpractices, which
in turn hamper an efficient supply and distribution system.
- Operational facilities at the depots and the pipelines should
immediately be repaired.
- To prevent further malpractices, all coastal supplies of AGO
through nominated company vessels should be stopped as subsidies
to the target group (NEPA, Rigs operators) were not justified.
- Restructuring of the NNPC and its subsidiaries with the
setting up of the committee on that in the first quarter of
2001.
- Dualisation of all roads leading to the refineries and depots
to allow easy access and improve efficiency of operations.
- Current efforts to resuscitate the Nigeria Railway system by
Government should be sustained.
- Government should deregulate and liberalise the import of
petroleum products by other parties and that prices of products
should be based on import parity to enhance and encourage the
participation of other players other than the NNPC.
- Privatisation of all four government refineries and
encouragement for the establishment of private refineries.
• Expansion of loading capability of all marined-fed depots.
- Establishment of a pipeline management authority for the
management of pipelines and depots, which will charge both
private and public users a tariff per throughput litre of
products.
- Downward review of NPA ports charges to a comparable level
with other ports in the world.
- Immediate setting up of a Petroleum Products Pricing
Regulatory Agency with sufficient autonomy to superintend the
various phases of the proposal embodied in the report (SCRPPSD)
especially the liberalisation of the downstream sector of the
petroleum industry.
With the acceptance of most of the recommendations of the report
of SCRPPSD as contained in the Government white paper, a
Presidential Technical Campaign Committee on liberalisation of
the downstream sector of the petroleum industry, headed by the
then Special Assistant to the President on Petroleum and Energy
matters now GMD (NNPC) Engr. Funsho. Kupolokun went into action
to sensitise the Nigerian public on the need for deregulation
and liberalisation of the downstream sector. The result of that
campaign which saw the Committee visiting State Governors,
traditional rulers, various interest groups including labour was
that deregulation and liberalisation were the only viable
options the Government could adopt to attract investments into
the sector and to remove the recurrent and endemic problem
plaguing the sector.
Overwhelmed with the success of the campaign on liberalisation
of the downstream sector, the Government on march 8th 2001, set
up the Petroleum Products Pricing Regulatory Committee (PPPRC)
as an interim measure to carry out the functions of the PPPRA as
recommended by the SCRPPSD while waiting for the enactment of
the Act of the National Assembly for the setting up of the
Petroleum Products Pricing Regulatory Agency (PPPRA) as required
in a democratic set up.
The Committee (PPPRC) was inaugurated by the Secretary to the
Government of the Federation.
After series of meetings with the stakeholders and the interest
groups, the PPPRC recognised that pricing is a condition
precedent for deregulation and liberalisation. It therefore,
commenced a phased liberalisation of the downstream sector by
announcing the selling prices for PMS, AGO and HHK at N 26, N26
and N 24 per litre respectively on January 1st 2001. The
consumption tax N 3.00 per litre of product was abolished while
the import duty of N 1.50 per litre was introduced. The sale of
crude to NNPC at $9.50 per barrel was raised to $18.00 per
barrel.
On 2nd July 2003, the import tax of N 1.50 per litre of products
was removed to stabilise the selling prices earlier announced to
encourage importation of products by other marketers.
The bill for the establishment of the Petroleum Products Pricing
Regulatory Agency submitted by Mr. President on March 2001 to
the National Assembly was finally passed by the Senate and the
House of Representative on February 5th 2003 and May 22nd 2003
respectively. The President accented to the bill in May 2003 and
inaugurated the board of the Agency on 19th June 2003.
With the law establishing the PPPRA, the road to full
deregulation and liberalisation of the downstream sector became
open for all the stakeholders in the sector to play their parts
according to the rules and guidelines as would be unfolded by
PPPRA based on its functions.
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