FCCPC to sanction petrol price profiteers

• We are compliant with price reduction, says IPMAN

• It’s pure business decision, says Dr. Yusuf

The Federal Competition and Consumer Protection Commission (FCCPC) may wield the big stick on oil marketers across the country following their reluctance to reduce petrol pump price in alignment with the falling global crude oil price.

The Commission, in a statement signed by its Director, Corporate Affairs, Ondaje Ijagwu, expressed concern over the outcome of its findings from surveillance of the downstream petroleum market suggesting undue exploitation of consumers.

The planned action, the Commission said, has become necessary after it observed that ins spite of a downward review of the gantry prices of petrol by domestic refiners, marketers, depot owners, and retail outlet operators only reflected the a negligible price reduction which are not commensurate with the steep fall in crude prices in the global market.

The FCCPC’s position may be right. This is because, following a ceasefire agreement between U.S. and Iran two weeks ago and the reopening of the Straits of Hormuz, crude oil prices have been on a steady decline, falling to $71.99 per barrel (Brent crude) and $69.23 per barrel (WTI) yesterday- a sharp drop from the peak of $120 per barrel in April, returning to the prices in the pre- US-Iran war era in February.

The global spike in crude prices led to local refiners and marketers raising pump prices swiftly across the country, with petrol price climbing to between N1,350 to N1,500 and diesel selling N2,000 as hostilities intensified in the gulf between April and May. In February, petrol averaged between N800 and N900 per litre at the retail pumps. Presently, notwithstanding the global price fall of crude oil, petrol is still sold at average of N1,200 while some local refiners fixed between N1,025 and N1,075 as their gantry prices.

The Executive Vice Chairman and Chief Executive Officer of the FCCPC, Tunji Bello, explained that while the Commission does not regulate or approve petroleum prices in a deregulated downstream market, however, it (the Commission) has a responsibility under the Federal Competition and Consumer Protection Act 2018, to promote competitive markets, prevent anti-competitive conduct and protect consumers from unfair, deceptive and exploitative business practices.

“We are concerned that while dealers often respond swiftly by hiking pump prices whenever crude prices rise, it is curious that it is taking forever for consumers to benefit significantly when crude prices fall. Competitive markets must work fairly in both directions.

“Though recognising that domestic prices are influenced by a range of commercial and market factors (including refining costs, foreign exchange movements, logistics, financing and distribution expenses), the Commission however expects competitive market dynamics to have eased the swift transmission of resulting cost efficiencies to consumers.

“Market liberalisation does not diminish businesses’ obligations to compete fairly or consumers’ right to fair treatment. Where credible evidence indicates conduct that undermines competition, exploits consumers or otherwise contravenes the Federal Competition and Consumer Protection Act, the Commission will investigate and take appropriate enforcement action,” Bello explained.

The National President, Independent Petroleum Marketers Association of Nigeria (IPMAN), Abubakar Maiganda, however said marketers were already complying with the price reduction. He explained that marketers are responded to the price cut by the same percentage cut in price from the refiners.

“You have to know that this price cut is in batches. So as they are reducing, we too are reducing. When Dangote Refinery reduced by N50 per litre, we reflected the same N50 reduction in our pump price; any amount of money that is reduced from the ex gantry price, that is the same amount money that we are reduce on our pump price,” Maigandi said.

He challenged the FCCPC to take a survey of IPMAN stations and verify the level of compliance of its members. “We must, the compliance is must because if you don’t comply, nobody will come and patronise your product. Nobody will see a cheaper product and go and buy it at a higher cost. Actually, all our marketers are complying. I have always insisted that we like the reduction because that reduction itself makes for more volume of petrol to be sold,” Maigandi explained.

Still, some top operators in the oil marketing segment accuse the FCCPC of double standard in the prevailing situation. Top officials of other marketing associations, when asked to comment on the Commission’s position and threats of sanction against erring marketers, said it smacks of double standard on the commission’s part to say it would sanction marketers.

The top officials, who pleaded to remain anonymous after being pressured to speak to the matter, said: “We await their sanctions. Where was the FCCPC when we were crying out that we were being demarketed by local refiners? The FCCPC didn’t see what the refiner was doing at that time as anti-competitive conduct for it to intervene but now it wants to intervene. Is that not double standards?” the official retorted.

The Chief Executive Officer, Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, agreed that the FCCPC may intervene irrespective of the sector being deregulated.

“Well, if there are obvious cases of corruption, for instance, or if people who have so strong market power are trying to be exploitative, the FCCPC can intervene because the competition commission has broad powers to address issues of price commotion, issues of abuse of monopoly powers, issues of abuse of market powers. That is their mandate.

“But they must establish that such situation exists before they can begin to intervene. You have many players in the downstream. So there is a framework that will allow competition to happen,” Yusuf argued.

But much as the FCCPC has the statutory power to prevent anti competition and protect consumers, Yusuf argued that it will be a difficult task to compel marketers on pricing because it is purely a business decision.

“If you have a stock and the price of that stock went up, even though you bought it at a lower price, you are going to price it at a replacement cost. That is normal business sense. If you finish selling it, at what price are you going to replace it? That is why you determine at what price you will sell it. So it is pure business sense. So it is a difficult thing to compel businesses on certain issues,” Dr. Yusuf said.

According to the CPPE boss, generally, prices are sticky downwards. This implies that when it’s time for price reduction, it comes very slowly and reluctantly.

“That is the general behaviour of many businesses. It will take some significant competitive pressure to bring down the price. But the flip side is that if it’s a case of increasing price, it will be instant. Yes, it will increase instantaneously. However, that is a typical business behaviour, because if they want to replenish, they are going to replace at a higher cost. So they are looking at replacement costs to determine the price.

“The business argument of many of these marketers is that they have an old stock, which they bought at a high price. Therefore, until they exhaust the old stock, they will not be able to reduce the price significantly. That it is when they now buy a new stock at a lower price, then they will sell at lower price,” he said.

Bello encouraged consumers to continue reporting suspected anti-competitive conduct, misleading pricing practices and other forms of unfair market behaviour through the Commission’s established complaint channels.