Gentlemen of the Press,
I am delighted to address you this morning on the issue of the newly introduced Petroleum Support Fund (PSF). Prior to the introduction of the deregulation policy, Nigerians have had to contend with intermittent products shortages that gave rise to perennial queues at the petrol stations nationwide. In the last two years, the upward movement in the international prices of Crude and Petroleum Products has added to the continuous upward pressure on the prices of domestic petroleum products thereby making it difficult for Marketers to procure additional supplies to complement PPMC/NNPC efforts thus the competitiveness among all petroleum product suppliers envisaged under the deregulation process
has not yet fully materialised. Also, the level playing field anticipated in the sector is still a long way off.
Please recall that the 2001 report of the Special Review Committee on Petroleum
Supply and Distribution canvassed, among others the option of setting up the
Petroleum Stabilization Fund. A lot of water has flowed under the bridge since
then. Mr. President in his wisdom, and clearly in answer to the unabating upward
pressure on petroleum products prices, has graciously adopted the concept of the
Petroleum Support Fund and made it a cardinal policy decision for inclusion in
budget 2006. Thus Mr. President in his October 2005 Independence Day broadcast
directed us at the PPPRA to liaise with other Stakeholders to work out the
modalities for the fund.
Gentlemen of the press, I am happy to inform you that extensive consultations
have been held with the relevant Stakeholders after which the methodology and
the set of guidelines for the smooth administration of the Petroleum Support
Fund is now ready for implementation.
THE PETROLEUM SUPPORT FUND (PSF)
The Petroleum Support Fund (PSF) is a pool of funds from the national budget to
apply for the stabilization of the domestic prices of petroleum products so that
volatility in international crude and products prices would not altogether
translate to wild swings of prices at the pump.
The PSF shall be financed from two sources, namely:
- All tiers of Government Ė Federal, States and Local.
- Accruals realized during the period of over recovery (over recovery here
refers to the period when the PPPRA recommended price is higher than the market
A budget of one hundred and fifty billion naira (N150 billion) has been included
in the 2006 Appropriation for this purpose. In order to ensure transparency,
accountability and a level playing field, all the various stakeholders will
participate actively in its implementation.
The methodology and guidelines for the smooth administration of the Petroleum
Support Fund subscribed to by all the relevant Stakeholders have addressed
issues such as:
- Eligibility for Oil Marketing Companies drawing
from the Fund
- Responsibilities of Stakeholders/Operators
Role of the Regulatory Authority - PPPRA
- Institutional Linkages
- Relevant guidelines from other Organizations/Agencies concerning products
procurement, storage and distribution.
Consequently, the role of subsidy in price stabilization in response to the
imperative of a human face anytime there is inordinate volatility in
international prices of products has been adopted and is now practically
reinforced. However, the import parity principle of deregulation will be upheld
in the pricing of products so that the spirit of deregulation is not totally
expunged in the scheme of things. That way the signal for would-be investors in
additional refining capacity both local and foreign is not compromised and it is
indeed being emphasized.
Payment by the Marketers on over-recovery into the Fund will apply when the
landing cost of products based on import parity principle is below the approved
PPPRA ex-depot benchmark. The Central Bank of Nigeria (CBN) is the custodian of
the Fund, while the PPPRA is vested with the responsibility to administer it as
spelt out in the guidelines. Claims from/payment into the Fund will be based on
the duly verified volume of products lifted out of the depots, particularly
those belonging to NNPC/PPMC, DAPPMA, Major Marketers and IPMAN by the PPPRA to
approved retail outlets and sold in line with approved ceiling prices.
The PPPRA after consultation with operators shall determine the volume required
for imports based on national demand/supply divergence, taking cognisance of
local production. The Regulatory Authority will constantly liaise with the Oil
Marketing Companies and other relevant Stakeholders for the purpose of data
collection, verification, certification and updating of the downstream
information data bank. All payments relating to over/under recovery would be
made through the Fundís account with the CBN All claims from/payment into the
Fund must conform with the objectives of the PSF. The ex-depot price shall be
applicable to all bulk purchase Operators (NNPC, OMCís and DAPPMA).Other guidelines for the Fund include:
- An Importer should be an Oil Marketing Company registered with the
Corporate Affairs Commission (CAC).
- A Claimant/Beneficiary are expected to possess the following:
Claimant/Beneficiary should notify PPPRA within a minimum of 45-Days ahead of
cargo arrival in the country and furnish the Agency with the relevant documents
including copies of invoices, bills of lading, sources of funding and expected
date of arrival for documentation/verification.
- Proof of Ownership of storage facilities with a minimum storage capacity of
5,000 metric tonnes for the particular product as well as dispensing facilities
(retail outlet network).
- Department of Petroleum Resources (DPR) import permit.
- Ability to finance a minimum cargo size of 5000 mt of products under the Fund
The products are expected to arrive the country on schedule and should
conform with products specification based on requirements set by the Department
of Petroleum Resources (DPR) / Standards Organization of Nigeria (SON).
All approvals for importation are valid for a minimum of three months based
on the current DPR guidelines.Deliveries should be made to the invoiced location(s) and approved facilities
by the DPR.
The modalities for the Fund have also adequately addressed other issues such as
responsibilities of the Stakeholders as well as institutional linkages and
guidelines from other Organizations/Agencies concerned with products
procurement, storage and distribution.CONCLUSION
Gentlemen of the press, let me hasten to remind you of the significance
of Mr. Presidentís decision to introduce the Petroleum Support Fund. First, it
bears repetition to state that pump prices of petroleum products will be stable
in the country in 2006 irrespective of fluctuations in International prices.
Secondly, for the first time in the history of the country, deliberate attempt
has been made to actually capture the provision for petroleum subsidy in the
appropriation bill. This will not only ensure transparency and accountability
but also make the common man the direct beneficiary of the deregulation policy.
As we look into the months ahead when the programme would have effectively taken
off, it is our hope that the Fund will achieve the aim for which it was set up,
which is taming the monster of the negative consequences of volatility in the
international oil market on domestic product prices.
I thank you all for your attention.