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Petroleum products pricing riddled with corruption – Group

By BusinessNews Staff on September 24, 2014

The country’s current petroleum products pricing model, which is based on import parity and the Petroleum Support Fund, is riddled with corruption, a new report produced under the project, Transparency and Accountability in the Oil and Gas Sector in Nigeria, has stated.

The report by the African Centre for Leadership and the Strategy and Development, with support from the Open Society Initiative for West Africa, stated that a mechanism that would endure needed to be more transparent and less prone to abuse.

The geographical variations in the prices of products, including Premium Motor Spirit or petrol, diesel and kerosene, even with the operations of the PEF, remain one of the major challenges facing petroleum products supply in the country, the report said.

Diesel pricing in the country is completely deregulated, with marketers free to charge whatever price they choose, while the pricing of PMS and domestic kerosene is determined from time to time by the government.

The government-approved retail price for PMS is N97 per litre, while that of kerosene is N50 per litre.

The report noted that the subsidy on PMS and kerosene was being financed through budgetary provision under the head of the Petroleum Support Fund, which was formally introduced into the federal budget in 2006.

“Several years after its inception, it has become clear that the fund has been severely abused and the process of subsidy administration has become riddled by corruption,” the report stated, adding that the revelations of the House Ad hoc Committee on the Management of the Subsidy Scheme had clearly shown the monumental sleaze, which had characterised the operation of the fund.

It stated that despite the subsidy claims by importers and in spite of the inclusion of a bridging fund on the pricing template, prices of products continued to deviate from the set prices in different parts of the country.

The report stated that according to a spot survey, prices in the rural areas were higher than those in the urban areas, adding that the national per litre price range for PMS was N97 to N200; the range for diesel was N135 to N185; and the range for kerosene was N55 to N175.

“The higher prices in the rural areas can be explained in part by the lower level of competition in comparison to the urban areas. In the urban areas, particularly the state capitals, there are competing petrol filling stations operated by both major marketers and independent marketers. This competition fizzles out in moving into the rural areas in which stand-alone stations serve large groups of communities,” the report added.

In its recommendations, the report stressed the need for a revival of domestic refining through existing refineries and promotion of new ones, saying Nigeria stood out among OPEC members as the one that exported virtually all her crude and imported the bulk of refined products for domestic consumption.

[Punch]

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