History

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:

1. Scarcity of petroleum products leading to long queues at the service stations.
2. Low capacity utilization and refining activities at the nation’s refineries (poor state of the refineries).
3. Rampant fire accidents as a result of mishandling of products- products adulteration.
4. Pipelines vandalization.
5. Large scale smuggling due to unfavorable economic products borders’ prices with the neighboring countries.
6. Low investment opportunities in the sector.

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:

1. Stakeholders (marketers, transporters, dealers, industrial converters and others) are unhappy because of the shortages and the prevailing cost and price structure which lead to low returns on capital investment and encourage malpractices, which in turn hamper an efficient supply and distribution system.
2. Operational facilities at the depots and the pipelines should immediately be repaired.
3. To prevent further malpractices, all coastal supplies of AGO through nominated company vessels should be stopped as subsidies to the target group (NEPA, Rigs operators) were not justified.
4. Restructuring of the NNPC and its subsidiaries with the setting up of the committee on that in the first quarter of 2001.
5. Dualization of all roads leading to the refineries and depots to allow easy access and improve efficiency of operations.
6. Current efforts to resuscitate the Nigeria Railway system by Government should be sustained.
7. Government should deregulate and liberalize the import of petroleum products by other parties and that prices of products should be based on import parity to enhance and encourage the participation of other players other than the NNPC.
8. Privatization of all four government refineries and encouragement for the establishment of private refineries.
   • Expansion of loading capability of all marined-fed depots.
9. Establishment of a pipeline management authority for the management of pipelines and depots, which will charge both private and public users a tariff per throughput litre of products.
10. Downward review of NPA ports charges to a comparable level with other ports in the world.
11. Immediate setting up of a Petroleum Products Pricing Regulatory Agency with sufficient autonomy to superintend the various phases of the proposal embodied in the report (SCRPPSD) especially the liberalization of the downstream sector of the petroleum industry.

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.