SPECIAL REPORT: Nigerians pay billions as equalization yet fail to buy petrol at equal prices
Nigerians who bought petrol across the country paid over N180 billion under the belief that it would be sold at equal prices to Nigerians nationwide in 2017, an analysis by PREMIUM TIMES has revealed.
Despite this huge amount paid by each Nigerian who bought petrol, known as Premium Motor Spirit (PMS), official data analysed by this newspaper revealed that the products were not sold at equal prices throughout the year across the country.
The revelation calls into question the relevance of the multi-million naira Petroleum Equalisation Fund (PEF), the special intervention put in place by the Nigerian government with the mandate of ensuring that petroleum products are sold at equal prices across the country.
According to the PPPRA pricing template, for every litre of petrol bought by every Nigerian across the country, a total of N10.71 that represents ‘equalization margin’ is paid into a fund managed by the Petroleum Equalization Fund (PEF) Management Board to ensure petrol prices are equal nationwide. This is to erase the suffering encountered by Nigerians as a result of fuel scarcity, especially during the yuletide period.
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 reimbursing 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.
PREMIUM TIMES findings based on an 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 organized 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 our system, and needs to be applauded as one of the pro-active, service-oriented and utility organizations 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.
Petroleum Equalisation Fund (PEF)
The Petroleum Equalisation Fund (PEF) was established by Decree №9 of 1975 (as amended by Decree №32 of 1989). It came into being to address incidences of long queues experienced nationwide due to frequent shortages of petroleum products. Between 1974 and 1975, the nation had been rocked with incidences of queues and unavailability of petroleum products. The problem was compounded by the haphazard way marketers priced the product on the basis of transportation cost incurred by them.
The Nigerian government in an effort to solve the problem set up a committee which agreed that the only variable element in the provision and the sale of petroleum products at uniform price nationwide was the transportation cost.
Based on the recommendation of the committee, the government introduced the Uniform Pricing System. To address inequality in the transportation cost of distributing products throughout the country, the Petroleum Equalization Fund (Management) Board was established.
Mr Nnadi told PREMIUM TIMES the mandate was to ensure that Nigerians do not bear the burden of the extra cost incurred on the transport of petrol to different parts of Nigeria.
“Government takes out the cost of transportation so that you (marketers) don’t add it on top of the cost of the product,” he said. “Typically, if you buy fuel in Lagos and move it to Abuja, you have to rent a truck and you have to pay for diesel to move it to Abuja. And if you add the cost of transportation to the cost of the product, there’s a possibility you will not sell it within the bound. The bound, if you notice, is from N143 to N145.”
PEF was charged with the primary responsibility of reimbursing petroleum marketing companies for any losses suffered by them as a result of the sale of petroleum products at uniform prices throughout the nation.
Similarly, the board’s legislative charter as provided by Decree No 9 of 1975 was designed to ensure that the Uniform Pricing Mechanism works effectively throughout the country and equalise the transportation differentials in petroleum product marketing.
But Dauda Garuba, an oil and gas expert, told PREMIUM TIMES the scheme would have to be abolished before Nigeria finds a solution to the crises associated with petroleum prices in the country.
“If we are truly interested in dealing with the challenges of unequal prices of petroleum products in Nigeria, we will need to abolish PEF and the subsidy regime,” he said.
Over N180bn paid by Nigerians in 2017
A PREMIUM TIMES analysis 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 obtained by PREMIUM TIMES, 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 the PPPRA pricing template seen by PREMIUM TIMES, the N10.71 covers Bridging Allowance, National Transportation Average and Marine Transportation Average.
For the 18,312 billion litres consumed in 2017, therefore, a total of N183 billion (183,120,000,000 at N10 per litre) was paid by every Nigerian who bought petrol across the country to ensure that prices were equal.
Mr Garuba confirms that the unequal price regime thrives in spite of the PEF arrangement. He adds, however, that some independent marketers are responsible for the practice.
“It is true that prices of petroleum products have remained largely unequal across Nigeria, in spite of the PEF regime,” he said. “What we know is that prices of non-deregulated petroleum products have not changed. Most major marketers still sell products, especially PMS, at officially approved prices. Those who go outside the approved official prices are largely independent marketers, who adduce flimsy and diverse reasons to justify their actions.”
