With increasing local refining, we need transparent PMS pricing, stronger regulation – Expert

Amidst the springing up of new refineries and the trajectory of deregulation in the oil and gas industry, there is urgent need for fair pricing and stronger quality control, according Jide Pratt, Country Manager and Chief Operating Officer (COO) of Trad Grid. Grid, an energy expert with over 20 years of experience in West Africa’s […]

Amidst the springing up of new refineries and the trajectory of deregulation in the oil and gas industry, there is urgent need for fair pricing and stronger quality control, according Jide Pratt, Country Manager and Chief Operating Officer (COO) of Trad Grid.

Grid, an energy expert with over 20 years of experience in West Africa’s oil and gas sector shared his views on the development in the sector. For years, experts predicted that local refining would transform Nigeria’s petroleum sector in this interview.

With new refineries now coming on stream, have we really achieved the transformation projected?

There was a misconception that refining oil locally would be a silver bullet. That was incorrect, and we can see that now. Let’s backtrack—four to five years ago, we had no refining capacity. Today, the Dangote refinery has come on stream, closing some of the gaps in local refining. Conversations are ongoing about Warri and Port Harcourt refineries, but while they may be operational, they need to ramp up production. These are old refineries, and efficiency may be a challenge.

Once refining begins, the conversation shifts to energy security, which involves affordability, accessibility, availability, and adaptability—the four A’s of energy security. Regulation plays a crucial role here. In a deregulated economy, competition must be encouraged to drive efficiency. The more competition there is, the more likely it is that consumers will benefit from fair pricing. However, while competition should be promoted, there must also be regulation to ensure that only capable players participate in the industry.

Now, where do we stand? We’ve seen fuel prices fluctuate—rising and falling unpredictably. The question remains: what should regulate these price movements? There’s no definitive answer yet.

Do you suggest that regulators step in to cap fuel prices in a bid to protect consumers?

No, the regulator can’t dictate fixed prices. Instead, we need fair pricing. Two things must happen: consumers shouldn’t be overburdened with excessive costs, but at the same time, investors—depot owners and refiners—need to see returns on their investments. The regulator’s job is to guide the market through transparent pricing methodologies.

There should be a price discovery model. This model would analyze various factors—supply, demand, distribution costs—to determine a reasonable price range. In the past, during the PPRA era, Nigeria had a price template that guided pricing. Countries like Ghana, Kenya, and Chile follow similar models, where the National Petroleum Authority (NPA) provides transparent pricing guidelines for bulk distributors. Nigeria should adopt a similar approach.

But don’t we already have a pricing guide?

That’s debatable. If you visit the regulator’s website, there isn’t a clear pricing guide available. Ideally, this should be the regulator’s responsibility. A transparent pricing template ensures that there is a logical basis for pump prices. If you ask the average consumer, they’ll say they want cheaper fuel. But from a business perspective, depot owners and retailers have made investments—they own depots, trucks, and retail stations. They need to recover costs while keeping prices fair.

For the average business owner and investor, profitability is a major concern in Nigeria’s fuel industry. However, there’s also the issue of excessive profit margins. How can we balance the two?

That’s a valid concern. This is where regulation is key. We have two main regulators—the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and the Federal Competition and Consumer Protection Commission (FCCPC).

The FCCPC plays a role in ensuring fair pricing by preventing excessive charges. Meanwhile, the NMDPRA must decide between cost-reflective tariffs and value-based tariffs. Should pricing be dynamic, adjusting based on time of use, like in some electricity pricing models? These are important considerations. Ultimately, the pricing system should protect both investors and consumers through a structured, transparent pricing model.

Currently, consumers bear the brunt of rising costs. What steps should regulators take to reduce this burden on them?

The key issue is transparency. Regulators must ensure that industry players justify their pricing. Without data, players could arbitrarily inflate prices for excessive profit. The NMDPRA should continuously engage industry players, scrutinizing price structures to ensure fairness.

Transparency means the regulator should publish pricing templates regularly. If industry players are charging higher than necessary, the regulator must challenge them based on verifiable data. Without this, discussions about fuel prices remain speculative and unresolved.

There’s been a lot of debate about fuel quality. On social media, people argue about which fuel is better. Some also mention sulfur content. How do we ensure quality for consumers?

Again, it comes down to regulation. The NMDPRA sets quality standards for petroleum products. They have a specification sheet that outlines acceptable sulfur content, specific gravity, and research octane numbers. These standards apply to both imported and locally refined products.

By nature, petrol is clear and bright, but refiners add color for safety reasons—such as identifying different liquid types. Ultimately, quality control falls under the regulator’s responsibility, and they must ensure compliance with these standards.

Can we say that Nigeria has maintained fuel quality over the years?

Generally, yes. However, fuel quality depends on factors like sulfur content and ethanol levels. Lower sulfur levels make fuel more expensive but also cleaner. Meanwhile, too much ethanol can cause engine problems. There needs to be a balance. The key is maintaining strict adherence to regulatory standards.

As we navigate the industry in this New Year, what needs to change to bring more stability and fairness to the industry?

We need to put in place several critical things. First, transparency must improve. We need clear data on pricing and industry operations. Second, competition must increase. The more players we have—whether in local refining or importation—the more efficient the market becomes. Increased competition reduces costs for the public.

Regulators must also refine their pricing mechanisms. We need models that consider factors like the weighted average cost of capital. Finally, fair pricing must be enforced to ensure that both consumers and investors are protected. If we achieve these goals, the industry will become more stable and efficient moving forward.