LCCI, NECA caution against petrol price deregulation without competition

By Chikodi Okereocha and Okwy Iroegbu-Chikezie

The Lagos Chamber of Commerce and Industry (LCCI) and the Nigerian Employers Consultative Association (NECA) have called for a level-playing field in the downstream oil sector.

They were reacting to weekend’s increase which takes petrol price to between N168 and N170 per litre at the pump.

A Petroleum Pricing Marketing Company (PPMC) circular dated November 11 informed petrol marketers of the changes in wholesale price, otherwise called ex-depot price. The letter, with reference number PPMC/C/MKT/003 and signed by Ali Tijani, was approved by the management on November 12.

Maintaining a steady rise since the federal government opted for full deregulation of the downstream segment of the petroleum industry earlier this year, the price of PMS has risen from about N121 in June to N170 this month.

The LCCI said the way out of pricing and deregulation conundrum is to accelerate the process of domestic refining of petroleum products and creating a competitive market framework.

LCCI Director-General Muda Yusuf maintained that a deregulated pricing regime is typically volatile, oscillating with global oil price.

Dr. Yusuf said: “However, deregulation without competition would not give desired outcomes. We are still immersed in a monopolistic structure even as we claim to have deregulated the petroleum downstream sector, he told The Nation in a chat.

He argued that the economy and the citizens cannot get the benefits of deregulation under the current arrangement where the NNPC is still a monopoly in the supply of petrol.”

Yusuf expressed regret that private sector players have no access to forex to import petrol while the refineries are still comatose.

The LCCI chief canvassed the need for the government to urgently put appropriate structures in place for the deregulation regime to achieve its objectives. He also stressed the need to have a level playing field for all actors in the sector.

Read Also: Anger as petrol pump price hits N170 per litre

Yusuf observed that if otherwise, the deregulation policy would face a major risk of being derailed.

“We would be back to the subsidy regime with all the attendant inefficiencies and corruption,” he said.

The LCCI chief also advised on the need to scale up investments in mass transit transportation systems to cushion the effects of petrol price increases on domestic prices.

According to him, the power sector recovery programme should also be accelerated to reduce the dependence of Micro, Small and Medium Enterprises (MSMEs) on petrol powered electricity generators.

He argued that these two areas of intervention would reduce the adverse impact of petrol price volatility on small businesses and the welfare of the citizens.

NECA’s Director-General Timothy Olawale said the increase called for transparency in the deregulation process, as it has generated concerns among Nigerians.

He wondered how the price should go up at a time there was a decline at the global market, which ordinarily should necessitate a downward review in the pump price.

Dr. Olawale said the increase in the ex-depot price implied that PMS would now sell for up to N175 per litre, urging total deregulation of the downstream oil sector, with market forces determining the price of PMS.

According to the NECA boss, it was imperative for the government to demonstrate a high level of transparency in the deregulation process.

Olawale said: “A deregulation system that inspires confidence among Nigerians will go a long way in assuaging the concerns being expressed by Nigerians.

“We implore the government to, as a matter of urgency, fast-track the implementation of all pro-poor policies to cushion the effects of COVID-19 and #EndSARS protest on businesses and the generality of Nigerians.”

He also said the expected savings from deregulation should be ploughed into infrastructural development that would quicken economic recovery and elevate millions of Nigerians from the poverty line.

Although, MAN as a body is yet to come out with a position on the matter, one of its members, who declined to be mentioned, said the price hike would worsen the already rising inflation and make businesses incur a lot of costs.