NPA Responds to ACEP over Price Floor

The National Petroleum Authority (NPA) has issued a statement in  response to concerns raised by the Africa Centre for Energy Policy (ACEP) regarding the Authority’s recent decision to implement a price floor for petroleum products, effective April 16, 2024.

The Authority has noted ACEP’s main concerns about the price floors is that it “discourages competition and punishes consumers at the pump”.

ACEP’s concerns stem from not having enough information about why the price floors were set and how they were decided.

In a press release, dated Monday April 8, the NPA clarified that the introduction of the price floor is aimed at tackling issues associated with unhealthy price competition among Petroleum Service Providers (PSPs) and ensuring the long-term sustainability of the petroleum downstream industry.

According to the NPA, the decision to establish price floors followed a comprehensive assessment and consultations with various stakeholders within the industry.

The primary objective is to safeguard the interests of both consumers and PSPs by ensuring that essential costs such as fixed costs, taxes, levies, and statutory margins are adequately covered.

Contrary to concerns raised by ACEP, the NPA emphasized that the implementation of price floors will not impede competition among PSPs nor lead to inflated prices for consumers.

PSPs will retain the autonomy to determine their profit margins, in line with the existing price deregulation policy. The NPA assured that price fluctuations will continue to reflect the competitive dynamics of the industry.

In a bid to enhance transparency, the NPA pledged to publish the price floors before each pricing window for public reference.

Additionally, the Authority underscored existing measures such as the Petroleum Product Marking Scheme and Electronic Cargo Tracking System to combat challenges like the proliferation of illicit products and tax evasion.

The introduction of the price floor is part of the NPA’s Amended Pricing Guidelines, which were rolled out on April 1, 2024.

Despite concerns expressed by industry stakeholders like the Chamber of Bulk Oil Distributors and the Chamber of Petroleum Consumers, the NPA maintains confidence that the policy will align with industry expectations and bolster the sustainability of the petroleum downstream sector.

As the implementation date approaches, the NPA reiterated its commitment to addressing any outstanding concerns and ensuring a seamless transition for all stakeholders involved.