Despite paying billions for equalisation, petrol sold at unequal prices

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Nigerians who bought petrol across the country paid over N180 billion in the belief that it would be sold at equal prices nationwide.

Despite this huge amount paid, official data reveals that the products are not sold at equal prices throughout the year across the country.

This calls into question the relevance of Petroleum Equalisation Fund (PEF), put in place with the mandate of ensuring that petroleum products are sold at equal prices across the country.

According to the Petroleum Prices Products Regulatory Agency (PPPRA) pricing template, for every litre of petrol bought by across the country, a total of N10.71 that represents ‘equalisation margin’ is paid into a fund managed by PEF to ensure petrol prices are equal nationwide. This is to erase the suffering encountered by Nigerians as a result of fuel scarcity.

The payment feeds into a subsidy mechanism that is supposed to ensure that petrol is sold at regulated price throughout Nigeria. The fund is earmarked for paying bridging claims and reimburse transportation costs incurred by petrol marketers.

In addition to this margin, the federal government appropriates public funds to run PEF’s operations and cover its financial shortfalls when equalisation claims exceed PEF’s income from marketers.

Investigation based on exclusive analysis of data on petrol prices in 2017 as published by the National Bureau of Statistics (NBS) show that prices Nigerians paid for petrol in 2017 were mostly unequal across the country. Given the existing price differentials across the country, it is clear that the N10.71K paid by every Nigerian on every litre of PMS is not achieving its stated purpose of ensuring that petrol is sold at equal prices across the country.

Goddy Nnadi, spokesperson of PEF, however, 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 the system and needs to be applauded as one of the pro-active, service-oriented and utility organisations in the country.

“PEF makes it possible for all Nigerians: from Sokoto to Ikorodu, from Owerri to Calabar to Jos to Maiduguri to buy petrol at the same price. It has eliminated leakages and diversion and is doing more to save money for the country and propel economic development.”

This claim, however, was proven untrue from findings by this newspaper.

Over N180bn paid by Nigerians in 2017

Investigation shows that in 2017, a total of N183 billion was paid by Nigerians who bought petrol from different parts of the country. Details were analysed based on data published by the Petroleum Products Pricing Regulatory Agency, PPPRA, an agency charged with pricing of petroleum products nationwide.

According to the 2017 PPPRA annual report, the national supply of PMS for 2017, which includes local production and import, was 18.86 billion litres. Of that figure, local production accounted for 1.02 billion litres, representing about 8.2 per cent. The report added that the annual average daily national supply of PMS for the same year was 51.7 million litres.

Meanwhile, throughout 2017, Nigerians on average bought 50.17 million litres of petrol each day, according to PPPRA data. Over the course of 2017, therefore, Nigerians consumed 18,312 billion litres. On each litre, the Nigerian authorities charged N10.71k to ensure prices are sold equally nationwide.

For the litres bought by every Nigerian who consumed petrol in 2017, Nigerians were made to pay N183 billion from the N10.71k per litre.

According to PPPRA pricing template,  the N10.71 covers Bridging Allowance, National Transportation Average and Marine Transportation Average.

The PPPRA template was unveiled and took effect from May 11, 2016 to reflect the new pump price of N145. Prior to the date, the agency operated a template that reflected the hitherto N86.50 petrol pump price.

The review followed the announcement in 2016 by the government about the formal take-off of ‘full deregulation’ of the downstream sector of the petroleum industry which pushed petrol price from N86.50 to N145 per litre.

PPPRA had explained that the review of the fuel price became necessary in view of the difficulties petroleum products marketers usually encountered in sourcing for foreign exchange to import products.

The new pricing template featured several adjustments to most of the components, including various cost items as well as marketers’ and distributors’ margins, including increased littering expenses and charges for the Nigerian Ports Authority.

The only component that remained unchanged is the charge for Marine Transport Average, MTA, which would still be getting N0.15k per litre.

The three items on the template which go to PEF include the NTA, MTA and the bridging allowances put at N3.36, N0.15 and N7.20, respectively, the sum of which is N10.71k.

Unequal prices

Contrary to the mandate of PEF which explains the reasons the N10.71 amount is paid on every litre of petrol, investigation reveals that prices of petrol were never equal in the 12 months of 2017.

Residents of states across Nigeria paid grossly unequal prices for petrol at different periods in 2017, according to NBS data.

In February, for instance, data showed that some states paid as high as N200 for a litre of petrol even when official price remained N145. NBS said states with the highest average price of petrol were Plateau (N206.82), Osun (N201.29) and Edo (N200.83). Meanwhile, in the same months, states with the lowest average price of premium motor spirit (petrol) were Katsina (N145.00), Abuja (N145.00) and Kogi (N147.06).

In March of the same year, the NBS figures showed that residents of Yobe, Bayelsa and Enugu paid N161.7, N161.3 and N154.5 for petrol, respectively. The inequality also persisted as states like Oyo, Osun, Kwara, Kano, Gombe, Ekiti, Delta and others paid between N144 and N145 on same petrol product in the same month.

The trend of wide disparity in prices Nigerians bought petrol persisted through the months of April, May, June and July, with little changes in the price movements across states. The same applied in August, September and October.

For November, the states with the highest average price of according to NBS were Bayelsa (N150.5), Akwa Ibom, (N 150.33) and Ebonyi (N148.57). States with the lowest average price, however, were Plateau (N143.6), Nasarawa (N144) and Katsina (N144.08).

Beginning gradually in November through December, the nation was hit by a fuel scarcity crisis that shot up the prices of petrol in the few gas stations that sold to buyers across the country. Although NBS quoted official figures for the two yuletide months, however, reports for the periods showed that petrol was sold at far higher prices as most buyers could only buy from ‘black market’ vendors.

Has PEF fulfilled its mandate?
Analysts have expressed diverse opinions on whether PEF should be scrapped and what needs to be done about the arrangement. According to reports, PEF arrangement, as it currently operates, does not fulfil its mandate of ensuring equalisation in prices of petrol as Nigerians still buy petrol at grossly unequal prices, despite the arrangement.

Mr Garba explained that if the nation must get its act together in the downstream sector of its petroleum industry, the PEF arrangement must be abolished. He added that revelations contained in the probe reports by various committees and panels set up by the government after the January 2012 nationwide subsidy protests suggest that serious steps should be taken to fix the nation’s oil, but this has not been the case.

“The retention of PEF in the Petroleum Industry Governance Bill (PIGB) is a clear indication that subsidy, in whatever name it is couched is going to be with us for a long time,” he explained.

PEF spokesperson, Mr Nnadi, on his part, does not think the arrangement is doing poorly and should be abolished. He explained some of the development engendered by the operation of PEF and what it plans to do to tackle future challenges.

“PEF is contributing immensely to the socio-economic development of the nation by ensuring the availability of petroleum products in all parts of the country at same prices,” he said.

“By so doing we help accelerate microeconomic development of all parts of the country, narrow disparities in economic indices and propel national growth.”

Sourced from Premium Times

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