NPA clarifies decision on Petroleum Price Floor implementation; insists move will not affect competition among OMCs

The National Petroleum Authority (NPA) has responded to concerns raised by the Africa Centre for Energy Policy (ACEP) regarding its decision to implement a price floor for petroleum products starting from April 16, 2024.

The NPA had previously announced this decision as part of its New Pricing Guidelines for Oil Marketing Companies (OMCs) and other stakeholders in the petroleum industry.

ACEP had raised objections, arguing that the NPA’s decision to set a price floor exceeded its mandate and was therefore illegal.

The NPA in a recent press release has, however, clarified its position, stating that the introduction of the price floor would not hinder competition among OMCs and other players in the energy sector. The NPA also assured that the price floor would not lead to excessively high prices for consumers, addressing the concerns raised by ACEP and other stakeholders.

“NPA is mandated by its Act to protect the interest of consumers and Petroleum Service Providers (PSPs) alike and uses its policies and regulations to achieve this mandate. A multi-stakeholder committee was established in 2021 with representation from all key stakeholders in the industry to assess the price deregulation policy which has been in operation since July 2015.”

“One of the major concerns that emerged from the committee’s work was the inability of PSPs to sometimes fully recover their costs due to unhealthy price competition that sometimes occurs amongst them. The proposed solution to the above concerns is to set “price floors for BIDECs and OMCS/LPGMCS which take into consideration only the fixed costs, taxes, levies, statutory and distribution margins in the Prescribed Petroleum Pricing Formula. These are costs that apply to all PSPs,” the NPA posited in the statement issued on Monday, April 8.

The Authority further asserted that it is mindful of the price deregulation policy and how it promotes competition amongst players in the petroleum downstream Industry, the price floors will exclude the margins of the PSPs.

The Authority noted that PSPs are at will to determine their margins just as they currently do and as is expected of them under the price deregulation policy.