The government’s involvement in petrol product pricing, specifically Premium Motor Spirit (PMS), remains a contentious issue in Nigeria.
In a reaction by Mr. Emeka Onuchukwu, COO Alkanes Petroleum and Gas Limited, government’s continued involvement in pricing of PMS is partly responsible for the petrol supply crisis in the country.
He said, “Despite deregulating other refined products like Automotive Gas Oil (AGO), Aviation Turbine Kerosene (ATK), Dual Purpose Kerosene (DPK), Liquefied Petroleum Gas (LPG), and Compressed Natural Gas (CNG), PMS pricing is still controlled by the government”.
Onuchukwu believes that this continued interference results in distortions that neither benefit the consumer nor the economy in the long term.
Most times, the rationale for keeping PMS under government control is often framed as protecting the masses from price hikes and inflationary pressure.
However, recent trends suggest that price control is ineffective in shielding Nigerians from the reality of market-driven forces. As global oil prices fluctuate, so do the costs of refining, importing, and distributing PMS.
Yet, when the government tries to artificially lower PMS prices, it creates a subsidy burden, misallocation of resources, and encourages corruption.
He further added that “The disparity between PMS prices and other deregulated fuels—where AGO goes for N1,100 per litre and ATK at N1,120 per litre, illustrates how PMS is being treated differently for reasons that are no longer valid.”
The energy expert further asked: “If the government is not controlling the prices of these other fuels, what purpose does continued control of PMS serve?”
The Real Beneficiaries
Far from helping the common Nigerian, price controls benefit a few well-connected individuals and entities involved in the importation and distribution of PMS. These middlemen exploit the subsidy system while the larger population bears the brunt of poor supply management, fuel scarcity, and eventual price increases when the government can no longer afford to maintain subsidies.
In his view, Akande Rilwan said government’s meddling “is confusing, and even becoming unpredictable.”
Rilwan is however, optimistic that the pricing projections for PMS in October may offer some hope, especially considering the negotiation between “Dangote Refinery and the Federal Government”
To break free from this logjam, the Nigerian government must fully deregulate PMS. This means removing all forms of subsidies and price controls, allowing market forces to dictate prices. While this may cause short-term pain due to price hikes, it would stabilise the sector in the long run. Deregulation has worked in the case of AGO, ATK, LPG, and CNG. Consumers have adjusted, and the market has stabilised without the government’s heavy hand.
The government should double up on its drive for local refining capacity, to reduce dependence on imports, with view to eliminate it.
It should provide targeted palliatives or subsidies to vulnerable populations rather than blanket fuel subsidies.
The use of alternative fuels like CNG and electric vehicles to diversify energy consumption is also key.
The government will eliminate artificial price controls and the associated inefficiencies by withdrawing from PMS pricing. This would allow Nigeria’s downstream sector to grow competitively.
Why the Nigerian Government Must Step Away from PMS Pricing
The government’s involvement in petrol product pricing, specifically Premium Motor Spirit (PMS), remains a contentious issue in Nigeria.
In response to this, Mr. Emeka Onuchukwu, COO of Alkanes Petroleum and Gas Limited, stated that the government’s continued involvement in PMS pricing is partly responsible for the petrol supply crisis in the country.
He said, “Despite deregulating other refined products like Automotive Gas Oil (AGO), Aviation Turbine Kerosene (ATK), Dual Purpose Kerosene (DPK), Liquefied Petroleum Gas (LPG), and Compressed Natural Gas (CNG), PMS pricing is still controlled by the government.”
Onuchukwu believes that this ongoing interference results in distortions that neither benefit the consumer nor the economy in the long term.
Most often, the rationale for keeping PMS under government control is framed as protecting the masses from price hikes and inflationary pressure.
However, recent trends suggest that price control is ineffective in shielding Nigerians from the realities of market-driven forces. As global oil prices fluctuate, so do the costs of refining, importing, and distributing PMS.
Yet, when the government artificially lowers PMS prices, it creates a subsidy burden, misallocates resources, and encourages corruption.
He further added, “The disparity between PMS prices and other deregulated fuels—where AGO goes for N1,100 per litre and ATK at N1,120 per litre—illustrates how PMS is being treated differently for reasons that are no longer valid.”
The energy expert further asked: “If the government is not controlling the prices of these other fuels, what purpose does continued control of PMS serve?”
The Real Beneficiaries
Far from helping the common Nigerian, price controls benefit a few well-connected individuals and entities involved in the importation and distribution of PMS. These middlemen exploit the subsidy system, while the larger population bears the brunt of poor supply management, fuel scarcity, and eventual price increases when the government can no longer afford to maintain subsidies.
In his view, Ridwan Akande said the government’s meddling “is confusing and even becoming unpredictable.”
Akande, however, is optimistic that the pricing projections for PMS in October may offer some hope, especially considering the negotiations between the “Dangote Refinery and the Federal Government.”
To break free from this logjam, the Nigerian government must fully deregulate PMS. This means removing all forms of subsidies and price controls, allowing market forces to dictate prices. While this may cause short-term pain due to price hikes, it would stabilise the sector in the long run. Deregulation has worked for AGO, ATK, LPG, and CNG. Consumers have adjusted, and the market has stabilised without the government’s heavy hand.
The government should double down on its drive to boost local refining capacity to reduce and eventually eliminate dependence on imports.
It should also provide targeted palliatives or subsidies to vulnerable populations rather than blanket fuel subsidies.
Promoting the use of alternative fuels like CNG and electric vehicles to diversify energy consumption is also key.
These measures would help the government eliminate artificial price controls and the associated inefficiencies. It would also allow Nigeria’s downstream sector to grow competitively.
