Before May 2016, the price of Premium Motor Spirit (PMS) stood at N87/liter. However, in May 2016, following the continued rise in the prices of oil across the globe, the Government increased PMS price to N145/liter. This price remained till March 2020, just before the pandemic lockdown.
At this point the world oil market had slumped to its lowest in many years, prompting regulators to take a second look at the price at which PMS was sold in the country. Towards ensuring a market reflective cost, the price of PMS slumped by as much as 16.2%, which meant that for the first time since May 2016, PMS sold below the N145/liter mark at N121.5/liter.
This was quite interesting as many players within the industry saw this as an opportunity for the regulators to put in place the right mechanisms towards deregulating the downstream petroleum sector of the industry. True to the words of the regulators, between March and September this year, prices of PMS have been adjusted about three more times culminating to a price of about N160/liter as at September 4, 2020.
In light of these happenings, many players and industry watchers are beginning to ponder as to the fact that maybe the Government has finally become brave enough to let the forces of demand and supply dictate the market, thereby creating the needed awareness for the players in the industry to start thinking about the future of the industry from a deregulated perspective and brace up to the challenges of delivering quality service in an almost moribund sector of the industry.
These new developments portend huge opportunities for players to start preparing for the needed investments in the full value chain of the downstream sector towards optimization of the marginal costs of managing their businesses towards increased marginal revenues that will bring about the continued investment in what is a multi-billion Naira business.
To this effect, the question now arises as to who will be the leaders in an industry with such huge potentials that have remained mostly untapped as a result of regulation. For us at Nairametrics, we see opportunities and believe that there are huge potential players who will help shape the narrative of this sector of the industry in a number of ways, which include but are not limited to the following.
- Managing supply chain inefficiencies through the right partnerships.
- Increased partnerships along the value chain, from procurement to customer end distribution as players will seek to harness the synergies and strengths of partners in the different segments of the value chain.
- Increased specialization by players in this sector of the industry, which lead to increased investments by players as well as other institutional investors towards optimizing the efficiencies with the value chain.
- (3) above for us would bring about huge reductions in the marginal costs of transacting along the value chain and huge increases in the marginal revenues across the value chain towards increased value and wealth creation.
However, we believe that to achieve all the above, major players within the sector must start to strategize on how to rebuild the downstream oil and gas sector in order to achieve the dividends of deregulation. As we continue to watch the goings-on with the industry, we wait to see who amongst the players will be the first to enlighten the public more about the dividends of deregulation.
Whoever is first to light the torch through that narrow path for all to understand how we can earn these dividends we believe will be the trailblazers of creating a more efficient Supply Chain Management System that would shape the narrative of how we do business in the Downstream Oil and Gas sector of the Industry.
In conclusion, we at Nairametrics believe that finally “PETROLEUM PRODUCT DEREGULATION FINALLY COME TO ROOST”. Our guess is probably as good as yours.
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Uade Ahimie is a chartered accountant and corporate governance implementation expert, with almost 3 decades of working experience in oil and gas downstream and upstream, banking and consulting.
He is also a member of the Nairametrics Editorial Board.