As part of the transition towards a deregulated market structure for Premium Motor Spirit (PMS), the federal government has authorised petroleum product marketers to purchase PMS directly from local refineries.
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This was announced on Friday in a statement signed by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, and shared on the ministry’s X page.
This new direct purchase model marks a departure from the previous arrangement where the Nigerian National Petroleum Corporation (NNPCL) was the only purchaser and distributor of PMS from the refineries.
FEDERAL MINISTRY OF FINANCE ABUJA
PRESS STATEMENT
UPDATE ON DIRECT PURCHASE OF PMS BY PETROLEUM PRODUCT MARKETERS
Following the directive of the Federal Executive Council (FEC) and the implementation of the new Naira-based sales mechanism, the Implementation Committee on the… pic.twitter.com/sTg7oI8xWf
— Federal Ministry of Finance (@FinMinNigeria) October 11, 2024
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As this direct purchasing mechanism will allow marketers to negotiate commercial terms directly with the refineries, the government says it will enable a more competitive market environment and a smoother supply chain for petroleum products.
“Local Production of PMS: With the commencement of local PMS production, the market is better equipped to support these direct transactions. This transition is expected to enhance efficiency in product availability and stabilise market conditions for the benefit of all Nigerians,” it stated.
Touted as an avenue to boost PMS product availability and stabilise market conditions for Nigerians, what impact will it have on the fuel price hike?
An energy consultant, who does not want to be named, told FIJ that the price of fuel is influenced by multiple factors, but it has nothing to do with the loading of fuel from refineries or direct purchases.
She hinted that in addition to the fundamentals of petrol production, the prices of petrol, diesel and other fuels are tied to international market prices.
There have been claims that the NNPC, as the sole purchaser and distributor of PMS added some cost before the fuel reached retailers. According to this energy consultant, the deregulation would essentially remove the NNPC as the middleman.
“By the complete deregulation, anybody can go and buy from Dangote. Anybody can import, and anybody can sell at the price they wish to sell. Until that happens, we will not know what will happen to prices whether they will go higher or lower, but most likely, this will have no effect because prices of fuel are not determined by who is giving it to you but by market prices,” she said.
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Also speaking with FIJ, Bala Zakka, a public affairs expert and oil and gas analyst, criticised the current leaders as morally bankrupt and accused them of leading the country toward economic ruin.
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He also disapproved of the deregulation, believing it has been poorly understood by its supporters.
“The kind of leaders we have today in Nigeria are morally bankrupt and are suffering from moral insolvency. If we continue with these kinds of leaders, they will lead Nigeria’s economy to economic Golgotha,” he said.
“They don’t even know the meaning of subsidy. They have politicised it. They are only talking about petrol. They are not even bothered about what happens to those who use kerosene and diesel, which is crippling everything about strategic industrial, commercial and domestic sectors.
“The fake economic praise singers who supported deregulation cannot differentiate it from privatisation and commercialisation.”
On Thursday, the Concerned Energy Consumers In Nigeria (CECIN) advocated for the full deregulation of the petroleum sector, stating that it would attract more foreign investors, end shortages of refined petroleum products and stop the smuggling of petroleum commodities to neighbouring countries.
The group said it would also protect customers’ rights, reduce monopoly and put price-fixing rules in place.
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