The Government on the 14th August 2000 set up a 34 member Special Committee on the Review of Petroleum Products Supply and Distribution (SCRPPSD) drawn from various stakeholders and other interest groups to look into the problems of the downstream petroleum sector.
Prior to the setting up of the Committee, the downstream sector was characterized by the following problems:
In October 2000, the Committee submitted its reports and the Government meticulously studied the recommendations and made its views as published in the Government white paper. Some of the far-reaching recommendations of the committee accepted by the Government in its white paper are as follows:
With the acceptance of most of the recommendations of the report of SCRPPSD as contained in the Government white paper, a Presidential Technical Campaign Committee on liberalisation of the downstream sector of the petroleum industry, headed by the then Special Assistant to the President on Petroleum and Energy matters now GMD (NNPC) Engr. Funsho. Kupolokun went into action to sensitise the Nigerian public on the need for deregulation and liberalisation of the downstream sector. The result of that campaign which saw the Committee visiting State Governors, traditional rulers, various interest groups including labour was that deregulation and liberalisation were the only viable options the Government could adopt to attract investments into the sector and to remove the recurrent and endemic problem plaguing the sector.
Overwhelmed with the success of the campaign on liberalisation of the downstream sector, the Government on march 8th 2001, set up the Petroleum Products Pricing Regulatory Committee (PPPRC) as an interim measure to carry out the functions of the PPPRA as recommended by the SCRPPSD while waiting for the enactment of the Act of the National Assembly for the setting up of the Petroleum Products Pricing Regulatory Agency (PPPRA) as required in a democratic set up.
The Committee (PPPRC) was inaugurated by the Secretary to the Government of the Federation.
After series of meetings with the stakeholders and the interest groups, the PPPRC recognised that pricing is a condition precedent for deregulation and liberalisation. It therefore, commenced a phased liberalisation of the downstream sector by announcing the selling prices for PMS, AGO and HHK at N 26, N26 and N 24 per litre respectively on January 1st 2001. The consumption tax N 3.00 per litre of product was abolished while the import duty of N 1.50 per litre was introduced. The sale of crude to NNPC at $9.50 per barrel was raised to $18.00 per barrel.
On 2nd July 2003, the import tax of N 1.50 per litre of products was removed to stabilise the selling prices earlier announced to encourage importation of products by other marketers.
The bill for the establishment of the Petroleum Products Pricing Regulatory Agency submitted by Mr. President on March 2001 to the National Assembly was finally passed by the Senate and the House of Representative on February 5th 2003 and May 22nd 2003 respectively. The President accented to the bill in May 2003 and inaugurated the board of the Agency on 19th June 2003.
With the law establishing the PPPRA, the road to full deregulation and liberalization of the downstream sector became open for all the stakeholders in the sector to play their parts according to the rules and guidelines as would be unfolded by PPPRA based on its functions.
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