Page 4 - DMEA Week 23

DMEA COMMENTARY DMEA

Nigeria pushes ahead with

deregulating fuel industry

Nigeria has been seeking to do away with fuel subsidies for years, and sees

current low oil prices as an opportunity to do this

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international fuel prices its main refineries are too outdated to operate it cut the price by 10% to NGN130 in March and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

P4 www. NEWSBASE .com Week 23 11•June•2020