Suspension of the 15% import duty on petrol, by Simbo Olorunfemi

Glad to hear from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) that “the implementation of the 15% ad-valorem import duty on PMS and diesel is no longer in view.”

The Media has interpreted it differently as either a cancellation or suspension of the decision to start implementation of the policy from November 21st.

When last month reports came that the President had approved a proposal said to have been brought by the Executive Chairman of the Federal Inland Revenue Service, Zacch Adedeji, seeking the application of a 15 per cent duty on the CIF value of imported petrol and diesel ‘to align import costs with domestic market realities’, along with a few others, I was concerned.

Framed as a move to support the local refineries, many predictably applauded it, especially following its endorsement by the Dangote Refinery,

Unpopular and misconstrued as it usually is, I argued then that a policy with far-reaching consequences like this one ought not to come via executive fiat but through the process of legislation that will expose it to inputs from all stakeholders.

I am glad that even with the expressed desire by the government to push through with its ongoing fiscal and energy reform, with the objective of strengthening “the naira-based oil economy, ensure price stability, and accelerate the nation’s transition toward local refining capacity”, the need for caution at this point has been embraced.

I had proposed then, and I reproduce verbatim:

“There are too many things not clear about the state of the industry at the moment – current local production level, local cost of production, availability of feedstock, and terms under which such will be made available for local refining.

There are also issues around distribution of products, including roles for those in the pre-Dangote distribution structure.

There is also the place of the SOE in the chain, with concerns for energy security, dominance by a few or single operator needing to be addressed.

The hand and voice of the regulator(s) does need strengthening.

These, among others, are issues that are best addressed through an open and transparent process of legislation, in which all stakeholders will participate.

A timeline, with specific thresholds will then be designed, providing for when tariffs will kick in, if deemed fit.”

I stand by my concerns and proposition.

I believe that in our desire to protect the local refineries, the outstanding and opaque issues in the industry, as well as concerns about energy security must be addressed first before slamming the door.

Dangote Refinery assured us last month of its “commitment to ensuring steady and uninterrupted supply of Premium Motor Spirit (PMS) and Automotive Gas Oil (diesel) nationwide, with a daily production capacity exceeding the domestic demand,” citing capacity to deliver 45 million Litres of Petrol and 25 million Litres of Diesel Daily.

One can’t but wonder then why the NMDPRA deems it necessary to assure us that “there is robust domestic supply of petroleum products (AGO, PMS, LPG etc) sourced from BOTH local refineries and IMPORTATION to ensure timely replenishment of stocks at storage depots and retail stations during this period”, if it doesn’t know something that we do not know.

Whatever it is, I am glad that the regulator was not pressured into a situation that might have either forced upon us another jump in price of products or disruption in supply.

We need to tread with caution before we end up creating another problem in a bid to resolve one.