Regular Tariff Increase May Hinder Oil Subsidy Removal, IPMAN Warns

IPMAN says the constant increase in tariffs on petroleum products might adversely hinder the success of oil subsidy removal.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) says the constant increase in tariffs on petroleum products by the Nigerian Midstream and Downstream Petroleum Regulatory(NMDPRA) might adversely hinder the success of oil subsidy removal.

Debo Ahmed, IPMAN national president, made the observation in a statement he issued to journalists on Tuesday in Lagos.

Mr Ahmed said the increase could also adversely affect the overall business environment of the downstream sector.

He said the arbitrary and excessive nature of the increment not only discourages potential investors but creates barriers for fresh investors to enter and burdens existing businesses.

According to him, the resultant cost is transferred to the consumers.

“Those that are already in the business will pass the burden to the consuming public and definitely this affects the cost of products. I think NMDPRA, as an agent to the federal government, should advise them on the way to succeed on this removal of oil subsidy,” he said.

Mr Ahmed noted that the recent spike in diesel pricing and the mounting unpaid bills emanating from the old Petroleum Equalisation Funds demonstrate the tangible impact on stakeholders in the downstream sector.

“In economics, payment of internal debts increases the economic activities of a country and lessens the attention given to the dollar. When internal economic activities boom, it generates employment and spurs up the value of the local currency,” Mr Ahmed added.

He added, “IPMAN, as an association, will advise the authorities to critically look into the tariff increase, which will not help the oil subsidy removal. Between 2020 and 2023, NMDPRA had increased some, if not all, of its operational tariffs to over 600 per cent and added other unnecessary tariffs, generating lines to the already existing ones.”

He cited an example that calibration per tank, which hitherto charged N20,000 per tank, had been increased to N150,000 per tank, representing 650 per cent.

He said the pressure testing, which cost N20,000 per tank, had also increased to N150,000 per tank, respectively.

Mr Ahmed pointed out that the cumulative effect of these tariff increases was imposing considerable financial burdens on existing and new stations.

According to him, renewing a license for an existing station could amount to over N2 million, while new stations might face expenses exceeding N4 million.

Mr Ahmed expressed concerns about a new five per cent tax on the sales or acquisition of a filling station, which he believed could discourage sales, mergers, and acquisitions within the industry.

He explained that these tariff increases were counter-productive to the goal of deregulation, intended to attract more investors, open the market, ensure product availability, and offer consumers choices.