The Cost of Governance: Petroleum Products Pricing Regulatory Agency



In December last year, the National Assembly Joint Committee on Petroleum (Downstream) asked the Petroleum Products Pricing and Regulatory Agency (PPPRA) to justify the N5.7bn budget for overheads and personnel for its staff of 249 for 2012. Out of the N5.7bn, a total of N4.95bn had been released. Analysis of the PPPRA budget further showed that N2.1bn was earmarked for regular allowances, and had been released and utilized even before the end of the fiscal year. What kind of work is the PPPRA doing to justify paying 249 people nearly N6bn in just one year? Why should government pay each staff an average of a lavish N23m annually?

While it is true that the political leadership makes policies, the bureaucracy and agencies of government are tasked with implementing those policies, and in certain instances, also initiate policies in public interest. Considering the poor level of implementation and recurrent reversals of public policies in the country, it is little surprise that Nigerians have been left with the short end of the stick. Yet while the quality of governance is abysmally low, the running cost of our MDAs remains one of the highest in the world.

Since the beginning of the examination of government by this column, we have focused on specific policy areas. The message, if anything is that save for a handful of exceptional CEOs not of MDAs, this president, nor his coterie of advisers have done a decent job of formulating sound policies and focused implementation.  Indeed, what seems to come across very clearly is that the Yar'Adua-Jonathan administrations have systematically destroyed organizations, systems and processes in order to expedite the unmatched plunder of resources that is going on with impunity. Whatever the truth may be, it would be worth our while to examine some government agencies to see what Nigerians pay for the personnel, policies and processes that have only led to growing poverty, ballooning unemployment, division, hatred and general decay. It is actually a fair question to ask if Nigeria still has a functional government.

Lets consider the facts. It is a fact that unemployment in Nigeria is at an alarming 29.3%, a figure which has risen steadily since the Jonathan government started administering Nigeria some three years back. With government neglect and non-implementation of policies and budgets, Nigerias life expectancy of between 47 and 52 years, shows no signs of improving anytime soon. About 43% of our adult population is illiterate in all languages and do not have access to adult education.  The countrys minimum wage is a paltry N18,000 and at nearly N7trn, Nigerias debt stock is going out of control.  In an economy with all these ills, it is also a fact that a few public servants earn a monthly salary of N1.8m or an annual salary of about N23m that our legislature approved for PPPRA in 2012.

The PPPRA is an offshoot of the Petroleum Products Pricing Committee, which came into existence through the recommendations of the Special Committee on the Review of Petroleum Products Supply and Distribution in 2000. However, it was not until February 2003 that the Bill for its establishment was passed into law and assented to by former President Olusegun Obasanjo in May the same year.

Dr Oluwole Oluleye was the agencys pioneer Executive Secretary and served for six years (June 2003 - July 2009), Mr Abiodun Ibikunle succeeded him and served from July 2009 to February 2011. Most recent are Engr. Goody Chike Egbuji (February - November), and Mr. Reginald Chika Stanley (November 2011 to date).

Among other functions, its prime responsibilities were to moderate volatility in petroleum products prices, while ensuring reasonable returns to operators; determine the pricing policy of petroleum products; regulate the supply and distribution of petroleum products; establish a data bank through liaison with all relevant agencies to facilitate their making of informed and realistic decisions on pricing policies and establish parameters and codes of conduct for all operators in the downstream petroleum sector.

Nearly a decade since its establishment, would we say long queues have disappeared from our fuel stations? With the very volatile fuel pricing situation, are things not even worse off now? How has the regulatory agency contributed to better pricing of petroleum products for Nigerians? Can it be sadly concluded that the PPPRA Act itself creates as many problems as it solves?

There is some serious limitation regarding the membership structure of the PPPRA. While the Act itself provides for membership of the top operational level of the agency amongst special interest groups like NACCIMA, MAN, NLC, PENGASSAN, Transport owners, Nigerian Media, NIM, NNPC etc. There does not appear to be a direct representation of the proverbial common man whose good the regulatory agency should be serving.

Another lacuna is that the Act neither mentions nor addresses the existing powers of the Minister of Petroleum Resources and NNPC to regulate the downstream sector. This is in spite of the fact that the NNPC Act 1977 contains provisions empowering the minister, through the department of Petroleum resources to regulate the sector, including fixing petroleum product prices. Furthermore, the MPR/DPR has sole regulatory authority over technical standards, refining, and logistics in the sector under the NNPC Act. The conclusion therefore is that Nigeria currently has at least two regulatory authorities for petroleum products with responsibilities overlapping.

We may then ask what parameters or codes of conduct has the agency established for downstream operators? None. Except you choose to consider the stunning revelation before a Lagos High court in January last year by Mr Zamani, Assistant General Manager at the PPPRA Lagos zonal office, that the PPPRA only receives photocopies of documents required for processing subsidy claims and the fact that their relationship with marketers is based on trust. Is it not also under this regulatory body that worse cases of trillion Naira subsidy fraud in 2011 and 2012 have been found? Does this not all point to the ineffectiveness and lack of capacity of the PPPRA?

In 2012, the agency was allocated some N5.7bn which was 9.8% of the Petroleum Ministrys total allocation of N59bn. Its entire allocation was for recurrent expenditure, with N76m for overheads and N5.7bn for personnel cost. One would notice the same trend in the 2013 budget; the Petroleum Ministry is allocated some N60.8bn and with a budget of N6.2bn, the PPPRA alone took about 10% of the entire sum.

In 2013, the cost of running this agency would increase by some 7% over 2012 figures. 98% of the Agencys N6.2bn budget would cover personnel costs; plainly put, maintaining the staff of PPPRA in 2013 would cost a hefty N6.1bn representing an increase of 7% over the N5.7bn 2012 provision that the Legislature queried. Overhead expenditure is allocated some N69m and capital expenditure allocated a very pitiable N100m which would be used simply for the purchase of office furniture and fittings.

Is it not evident from these figures that this agency is only concerned with paying and receiving extravagant salaries at the expense of over 112 million Nigerians who live on less than a dollar a day? One would even wonder what good comes of all these Senate committee hearings if they cannot bring about desperately needed change like cutting recurrent costs and raising capital expenditure in MDAs.

The PPPRA as regulator has failed the oil industry and Nigeria woefully.  It has become a major participant in all corruption cases plaguing the industry from price fixing based on questionable templates to its involvement and indictment in the trillions of Naira lost to oil subsidy scams.

Incidentally, the Orosanye Committee which was instituted by the Federal Government in August 2011 to amongst other things review previous reports on the restructuring of parastatals and advice on their relevance since observed that the 26-member board of the PPPRA is very unwieldy and should be reduced to a more manageable size of 7. It also observed that with the ultimate enactment of the Petroleum Industry Bill, (presently in the National Assembly) and/or removal of the subsidy on petroleum products, the PPPRA would cease to exist. Considering this, the report recommended that the PPPRA and Petroleum Equalization Fund be merged into a single department in the Ministry of Petroleum Resources; and the bridging process of distribution of petroleum products be fully automated in order to eliminate abuses.

There is certainly a need for a regulator in the downstream sector, but this regulator must bring together the strands of regulatory authority that presently reside in the MPR, DPR, NNPC, PPPRA and create a single new regulatory authority that incorporates the institutional know-how of both the PPPRA and DPR within an empowered and more credible organizational and statutory framework.  Can the Petroleum Industry Bill when passed provide that? Only time will tell.