DETERMINING THE PRICE OF PMS FROM A LEGAL STANDPOINT: REGULATION OR DEREGULATION?

Abstract

Nigeria`s oil sector is divided into 3 main segments: Upstream, Midstream and Downstream. The upstream sector focuses on exploration, the midstream sector handles storage and transportation and the downstream sector refines oil products into finished goods and markets the refined products. Due to price volatility in the 70`s, Nigeria established regulatory agencies and frameworks to control the price of Premium Motor Spirit (PMS) and subsequently introduced fuel subsidies in 1973 as a response to price increment, fuel subsidies were to ensure a low and stable price for PMS. However, these regulatory strategies failed to attract competition and investment in the oil sector but brought about corruption and mismanagement. To address this, Nigeria has made efforts to deregulate the downstream sector. A significant step was the passage of the Petroleum Industry Act (PIA) 2021, which aimed to deregulate fuel prices and move towards a market-driven economy for PMS. The PIA introduced a system where PMS prices would be determined by dynamic market forces, rather than government regulations. However, the implementation of the PIA’s provisions has been weak. This article seeks to critically examine the PIA’s pricing system for PMS, investigate laws hindering deregulation, and provide recommendations to address existing loopholes. The study discovered corrupt practices in the oil industry, such as locally refined fuel being priced similarly to imported fuel.1 Ultimately, the article advocates for deregulation as the solution to Nigeria’s petroleum sector challenges.