Jan. 23, 2024

…Says incessant tariff increase may adversely hinder oil subsidy removal

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has expressed concerns about a new 5 per cent tax on the sales or acquisition of a filling station, which it believes could discourage sales, mergers, and acquisitions within the industry.

Alhaji Debo Ahmed, National President, IPMAN made the observation in a statement he issued to newsmen on Tuesday in Lagos.

Ahmed said the incessant increase in tariff of petroleum products by the Nigerian Midstream and Downstream Petroleum Regulatory(NMDPRA) might adversely hinder the success of oil subsidy removal.

He said arbitrary and excessive nature of the increment not only discourage potential investors, but create barriers for fresh investors to enter and place burden on existing businesses.

According to him, the resultant cost is transferred to the consumers and the general public.

“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 agent to the Federal Government, should advise them on the way to succeed on this removal of oil subsidy,” he said.

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 increase the economic activities of a country and lessen the attention given to the dollar.

“When internal economic activities boom, it generates employment and spurs up the value of the local currency,” Ahmed 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 said.

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

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.

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.