ABUJA, Nigeria (VOICE OF NAIJA)-The Federal Competition and Consumer Protection Commission has expressed concern over what it described as possible exploitation of consumers in Nigeria’s downstream petroleum sector, citing the failure of fuel prices to drop substantially despite the sharp decline in global crude oil prices.
The commission said findings from its ongoing market surveillance indicated that local refiners, depot operators, marketers and filling station owners had made only slight reductions in fuel prices, which it said did not reflect the significant fall in international crude oil prices.
In a statement issued on Sunday by the FCCPC’s Director of Corporate Affairs, Ondaje Ijagwu, the commission said its review of current gantry and retail prices showed that consumers had yet to fully benefit from the downward trend in global oil prices.
The statement read, “The Federal Competition and Consumer Protection Commission has expressed concern over findings from an ongoing surveillance of the downstream petroleum market suggesting undue exploitation of consumers.
“A review of the gantry prices of local refiners, marketers, depot operators and retail outlet operators revealed token reductions in prices that are not commensurate with the steep fall in crude prices in the global market.”
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The Executive Vice Chairman and Chief Executive Officer of the FCCPC, Tunji Bello, said the commission was disturbed by what appeared to be an uneven response to fluctuations in crude oil prices.
According to him, operators in the downstream petroleum sector are quick to increase pump prices whenever global crude prices rise but are slow to transfer the benefits to consumers when prices decline.
Bello said, “To be clear, the Commission does not regulate or approve petroleum prices in a deregulated downstream market. Our responsibility under the Federal Competition and Consumer Protection Act, 2018, is to promote competitive markets, prevent anti-competitive conduct, and protect consumers from unfair, deceptive and exploitative business practices.
“We are concerned that while dealers often respond swiftly by hiking pump prices whenever crude prices rise, it is curious that it is taking forever for consumers to benefit significantly when crude prices fall. Competitive markets must work fairly in both directions.”
The commission’s concerns follow a sharp drop in global crude oil prices after the ceasefire agreement between the United States and Iran and the reopening of the Strait of Hormuz, a key global oil shipping route.
Last week, petrol prices remained elevated even as crude oil prices declined to about $73 per barrel on Wednesday, their lowest level since the US-Iran conflict began in February.
Crude oil prices, which had risen to about $120 per barrel in April amid concerns over supply disruptions linked to the Middle East crisis, have since dropped to around $73 per barrel, returning to levels last recorded in February.
The earlier increase in crude prices led to an immediate rise in domestic fuel prices, with petrol selling for between N1,350 and N1,500 per litre in many parts of the country, while diesel climbed to about N2,000 per litre.
In February, however, petrol sold for between N800 and N900 per litre.
Despite the substantial decline in crude oil prices, the FCCPC noted that petrol continues to sell at an average of about N1,200 per litre nationwide, while some local refiners currently have gantry prices ranging between N1,025 and N1,075 per litre.
Although the commission acknowledged that domestic fuel prices are influenced by factors such as exchange rate movements, logistics costs, financing expenses, refining costs and distribution charges, it maintained that normal competitive market forces should have resulted in more significant reductions in pump prices.
Bello said, “Market liberalisation does not diminish businesses’ obligations to compete fairly or consumers’ right to fair treatment. Where credible evidence indicates conduct that undermines competition, exploits consumers or otherwise contravenes the Federal Competition and Consumer Protection Act, the Commission will investigate and take appropriate enforcement action.”
He urged Nigerians to continue reporting suspected cases of anti-competitive conduct, price manipulation and other unfair market practices through the commission’s complaint channels.
The FCCPC said its concerns are likely to reignite debate over the effectiveness of the deregulated petroleum market, as consumers and industry stakeholders continue to question why the decline in international crude oil prices has not resulted in corresponding reductions in pump prices.
Since the removal of fuel subsidy and the full deregulation of the downstream petroleum sector, fuel prices in Nigeria have become increasingly linked to global crude oil prices and exchange rate movements.
However, consumer groups have consistently accused marketers of implementing price increases almost immediately while delaying reductions when market conditions become more favourable.
The commission said its warning signals possible regulatory scrutiny of pricing practices in the downstream petroleum sector as pressure grows on operators to ensure that the benefits of lower global crude oil prices are passed on to consumers.