Page 6 - AfrElec Week 23

AfrElec COMMENTARY AfrElec

Nigeria pushes ahead with

deregulating fuel industry

The Petroleum Products Pricing Regulatory Agency
says gasoline prices will now follow the market

NIGERIA NIGERIA’S government on June 4 removed a company pipelines.
cap on gasoline pump prices, as it pushes ahead The previous cap on gasoline prices dis-
WHAT: with deregulation of its fuel industry. The move couraged legitimate private firms from getting
Nigeria has lifted a cap is aimed at encouraging private companies to involved in fuel supply, leading to state-owned
on gasoline pump prices, import and sell gasoline, helping to boost the Nigerian National Petroleum Corp. (NNPC)
taking advantage of low country’s supply security. dominating the market. But when international
crude prices to end a In a statement, Nigeria’s Petroleum Products fuel prices were high, this resulted in the com-
subsidy that has been in Pricing Regulatory Agency (PPPRA) said that pany incurring hefty losses.
place for decades from now on, gasoline prices would now be gov- Nigeria is now taking advantage of the col-
erned by market forces. lapse in oil prices to usher in a policy it has been
WHY: “The price cap per litre in respect to premium trying to introduce for decades – an end to fuel
The move is designed to motor spirit (PMS) is removed from the com- subsidies. The move will help ease the govern-
encourage more private mencement of these regulations,” the agency ment’s financial strain, saving it at least $2bn per
firms to import and sell said. “From the commencement of these regu- year, at a time when Nigeria is struggling to cope
gasoline while removing lations, a market-based pricing regime for pre- with the coronavirus (COVID-19) pandemic
a financial burden from mium motor spirit (PMS) shall take effect. The and a slump in oil revenues.
the state agency shall monitor market trends and advice Nigeria had capped the pump price of gaso-
the NNPC and oil marketing companies on the line at NGN145 ($0.40) per litre since 2016. But
WHAT NEXT: monthly guiding market-based price.” it cut the price by 10% to NGN130 in March and
The government could Nigeria is Africa’s biggest oil producer, but NGN108 in May, in response to falling interna-
backtrack on reforms as its main refineries are too outdated to operate tional prices and a drop in domestic demand.
international fuel prices properly and compete with imports, and have
rise. An IMF deal might been shut down. To meet its needs, the country Risk of backtracking
lock in the progress, therefore depends on supplies from overseas, Initially the deregulation is expected to cause
however as well fuel produced at illegal refineries in the prices to fall further. But they will rebound
Niger Delta that process crude stolen from oil as economies are reopened after COVID-19

P6 www. NEWSBASE .com Week 23 11•June•2020