THE Major Oil Marketers Association of Nigeria (MOMAN) and the Petroleum Marketers Association of Nigeria (DAPPMAN) are drumming up advocacy against petroleum import licence restrictions to only two entities as spelt out by the proposed Petroleum Industry Bill (PIB).
The two marketing unions said the decision of the proposed bill was against the principle of fair play for a major resource that the country largely depended on, noting that it was dangerous.
While the bill removes price controls on petroleum products in Section 205, the Senate version of the bill has a clause that constrains market competition by restricting the importation of products to only players with local refining capacity such as Dangote ( whose refinery will come on board in 2022-2024) and the Nigerian National Petroleum Corporation (NNPC).
Specifically, the clause restricts the license to import all refined products into the country to a very small number of local refiners.
This restriction extends to products that have long been deregulated such as diesel, kerosene (HHK and ATK), LPG and base oils.
Analysts say this development stirs controversy and counters the provision of 205 (1) which says, “Subject to the provisions of this section, from the effective date, wholesale and retail prices of petroleum products shall be based on unrestricted free-market pricing conditions.”
Speaking on the controversy, the two major marketing unions in a jointly signed statement by Clement Isong and Olufemi Adewole said: “Our members wish to strongly advise caution with this provision that allows only refiners to hold import licences for refined products for the following reasons.”
They said it posed a monopoly risk that must be avoided, noting that it was imperative that a level-playing field be set for all operators across the value chain.
“Any provision that does not guarantee a free and open market will give room to price inefficiencies and eventually kill off small businesses in the downstream sector.”
The marketing unions insisted that the provision would stifle competition and leave pricing to be solely dictated by a few local refiners.
“If Nigerians are to pay higher international prices at the pump, we should also benefit when the prices go down internationally. This is not guaranteed unless there is a healthy competition,” they said.
Raising further concern on the development, an oil sector governance expert Henry Ademola Adigun told The ICIR that Dangote Refinery would be ready till 2022.
“I don’t know, what is the basis for that Section 317? I believe it is a wrong clause,” Ademola said.
“The independent marketers should drum up the advocacy more. On the harmonisation, we need the committee to look at this. There are other refineries in Nigeria. I think the man gets many concessions, and I think it is very unfair to others in a competitive market,” he said.
“All parties must keep up the advocacy before harmonisation and final presidential assent.”
Notably, Nigeria’s fuel importation has been marred by controversies, with the NNPC being the sole importer. The president, last month, directed the NNPC to cut down on crude oil theft due to spiking fuel consumption figures and N120bn subsidy payment.
The president, in a recent media chat, alluded to crude oil theft, stating that Nigeria subsidised PMS for some of its West African neighbours because of rising subsidy payments.
Analysts are worried that the opacity that characterises NNPC importation, visible in not releasing actual details of import through direct sales and direct purchase agreement deals, could rear its ugly head again when the corporation gets the exclusive importation license with Dangote, whom it has bought a 20 per cent stake in his yet-to-be completed refinery.
“When we think of reforms, we also think of people who have made investment commitments into this market so they are not muscled out of the market. Why are they going through this route when they say they are rehabilitating the refineries?” a former Member of the Board of NEITI Faith Nwadishi told The ICIR
“We have raised this concern when the NNPC said it will buy shares in Dangote Refinery to further shore up his capacity to import fuel. These are some of the issues in the bill that needs to be thoroughly addressed, going forward,” she said.
The inserted Section 317 (8) in the Senate bill, which has been raising the dust of controversy states:
“(1) The Authority shall apply the Backward Integration Policy in the downstream petroleum sector to encourage investment in local refining.
“(2) To support this, licence to import any product shortfalls shall be assigned only to companies with active local refining licences.
“(3) Import volume to be allocated between participants based on their respective products in the preceding quarter.
“(4) Such import to be done under NNPC Limited Direct Sale/Direct Purchase (DSDP) scheme.”
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.