The National Petroleum Authority (NPA) has issued a response to concerns raised by the Africa Centre for Energy Policy (ACEP) regarding its recent decision to implement a price floor for petroleum products, effective from April 16, 2024.
The Authority has noted ACEP’s main concerns about the
price floors is that it “discourages competition and punishes consumers at the
pump”.
ACEP's concerns stem from not having enough
information about why the price floors were set and how they were decided.
In a press release, the NPA clarified that the
introduction of the price floor is aimed at tackling issues associated with
unhealthy price competition among Petroleum Service Providers (PSPs) and
ensuring the long-term sustainability of the petroleum downstream industry.
According to the NPA, the decision to establish price
floors followed a comprehensive assessment and consultations with various
stakeholders within the industry.
The primary
objective is to safeguard the interests of both consumers and PSPs by ensuring
that essential costs such as fixed costs, taxes, levies, and statutory margins
are adequately covered.
Contrary to concerns raised by ACEP, the NPA
emphasized that the implementation of price floors will not impede competition
among PSPs nor lead to inflated prices for consumers.
PSPs will
retain the autonomy to determine their profit margins, in line with the
existing price deregulation policy. The NPA assured that price fluctuations
will continue to reflect the competitive dynamics of the industry.
In a bid to enhance transparency, the NPA pledged to
publish the price floors before each pricing window for public reference.
Additionally,
the Authority underscored existing measures such as the Petroleum Product
Marking Scheme and Electronic Cargo Tracking System to combat challenges like
the proliferation of illicit products and tax evasion.
The introduction of the price floor is part of the
NPA’s Amended Pricing Guidelines, which were rolled out on April 1, 2024.
Despite concerns expressed by industry stakeholders
like the Chamber of Bulk Oil Distributors and the Chamber of Petroleum
Consumers, the NPA maintains confidence that the policy will align with industry
expectations and bolster the sustainability of the petroleum downstream sector.
As the implementation date approaches, the NPA
reiterated its commitment to addressing any outstanding concerns and ensuring a
seamless transition for all stakeholders involved.
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