Speech by
His Excellency President Olusegun Obasanjo
At the Inauguration of the Petroleum Products Pricing Regulatory Agency (PPPRA) Abuja, June 19, 2003
I am pleased today to inaugurate the Governing Board of the Petroleum Products Pricing Regulatory Agency. You will all recall that the Bill of the PPPRA was one of the last Bills passed by the last National Assembly, and I have since signed it into law,
We were all witnesses to the enormous problems that our nation faced in the downstream sector of the oil industry when we assumed office in May, 1999.During that period, the nation experienced acute petroleum product scarcity with its attendant negative features such as long queues at fuel stations, mishandling of products which often caused fire accidents, hoarding, diversion and indiscriminate peddling of products on the streets and highways.
In the attempt to put an end to these difficulties in the downstream sector, our Administration had to set up the Special Committee on the Review of Petroleum Products Supply and Distribution in 2000. Arising from the far reaching and positive recommendations of that Committee, I set up the Petroleum Products Pricing Regulatory Committee (PPPRC) in March, 2001. This Committee which comprised 34 eminent Nigerian professionals, labour leaders, stakeholders in the oil industry and other sectors of the economy, recommended that, as a permanent solution to the problems of petroleum shortage and for stability in downstream sector of the nation's oil industry, the sector should be liberalized. By Liberalization, the Committee meant that the downstream oil industry would be opened up to competition through comprehensive reforms of the industry. Part of the recommendation of the Committee was that our Administration should also increase the tempo of regular maintenance of facilities such as the Refineries, Pipelines and Depots as well as Import Reception Facilities.
We accepted the Committee's recommendation that the downstream sector should be liberalized based on the enormous benefits which a liberalized downstream sector could afford Nigerians. These benefits include:-
Provision of uninterrupted petroleum products supply thereby buoying economic and
commercial activities in the country;
Encouraging the new refiners to set up refineries, some of which will in turn make
Nigeria the hub of petroleum products supply in the west coast of Africa;
Engendering competitive prices that will be consumer-friendly as guaranteed by more
participants entering the business;
Promoting investments leading to creation of several jobs;
Ensuring macro economic growth through stability in fuel supply and above all;
Reducing the use of government funds in the downstream sector by reinvigorating
private investment in the sector.
The establishment of the Petroleum Products Pricing Regulatory Agency as a permanent and legal institutional framework to help the nation to reap the above stated benefits was also part of the recommendation of the Special Committee. It is regrettable to note that the non-completion of the liberalization process which commenced early 2002, was what led to the excruciating effects of products shortages during the first quarter of 2003 as only the NNPC remained the only refiner and importer of all petroleum products in the country. With the enactment of the Petroleum Products Pricing Regulatory Agency (Establishment) Act 2003, however, the stage is now set for a diligent prosecution of the various recommendations that were made to usher in a new era of improved management of the downstream petroleum sector for the benefit of the nation. This Administration, the legislature and, indeed, the organized private sector, and many Nigerians are not in doubt as to the benefits of liberalization in the sector, and we will leave no stone unturned to make it work in order to stimulate the much needed private sector investments in the downstream petroleum industry.
The Petroleum Products Pricing Regulatory Agency has its membership drawn from all the Stakeholders in the downstream sector of the industry and other interest groups. This broad membership is to ensure that the issues in the sector become less of price fixing but more of the actual moderation of volatility in products prices and wider acceptance of reforms in the sector, thus instituting a modicum of order in the supply and distribution chain.
Accordingly, the functions of the Agency are primarily:-
to determine the pricing policy of petroleum products;
to regulate the supply and distribution of petroleum products;
to moderate volatility in petroleum products prices, while ensuring reasonable returns to
operators;
to maintain constant surveillance over all key indices relevant to pricing policy and periodically approve benchmark prices for all products;
to establish an information and data bank through liaison with all relevant agencies to facilitate the making of informed and realistic decisions on pricing policies;
to identify macro-economic factors with relationship to prices of petroleum products and advise Government on all appropriate strategies for dealing with them;
to oversee the implementation of the White Paper on the Report of the Special Committee on the Review of Petroleum Products Supply and distribution as they relate to its functions, taking cognizance of the phasing of the specific proposals;
to establish parameters and codes of conduct for all operators in the downstream sector of the petroleum industry;
to establish firm linkages with the key segments of the society and ensuring that your decisions enjoy the widest possible understanding and support.
In addition to the above, you must prevent collusion and restrictive trade practices harmful to this sector and you must sharpen your skills at exercising a mediatory role among the stakeholders.
Government hereby affirms its commitment to the establishment of a petroleum products supply and distribution system that is self-financing and sustainable. This system should be characterized by the absence of monopoly and the freedom of several competing marketers to import and export products while ensuring private ownership of refineries. Let me assure you that Government will provide the Agency the necessary assistance to enable it to carry out its functions. In return, I look forward to a time very soon, when prices of petroleum products of same quality would reflect the competitiveness we envisage among service stations on the same street, so that the consumers would, once again, be king.
I wish the Chairman and members of the Petroleum Products Pricing Regulatory Agency the best in this onerous assignment. The PPPRA is now formally inaugurated.
I thank you.