Introduction to the Suspension of Import Duty on Fuel
Marketers and stakeholders in the downstream oil and gas sector have welcomed the suspension of the 15% ad-valorem import duty on imported Premium Motor Spirit (PMS) and Automotive Gas Oil (AGO), commonly known as petrol and diesel. The move has been seen as a response to concerns about the feasibility of the levy until Nigeria achieves local refining sufficiency.
According to reports, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced the suspension of the import duty in a statement signed by George Ene-Ita, Director of the Public Affairs Department. The statement emphasized that there is adequate supply of petroleum products across the country, with volumes within the acceptable national sufficiency threshold during this peak demand period.
The introduction of the 15% import duty had generated mixed reactions in the downstream industry. Some viewed it as a measure to protect local refineries, while others feared it could lead to fuel price increases, placing a burden on Nigerians. The NMDPRA assured the public that there is robust domestic availability of petroleum products, including PMS, AGO, and Liquefied Petroleum Gas (LPG), sourced from both local refineries and imports.
Reactions from Industry Stakeholders
Major and independent marketers were divided over the desirability of the levy. The Major Energies Marketers’ Association of Nigeria (MEMAN) argued that the 15% import duty would trigger an upward rise in prices of the products. Executive Secretary of MEMAN, Mr. Clement Isong, stated that the tariff would significantly impact pump prices of PMS and diesel, potentially increasing them to about N1,100 and N1,200 per litre respectively.
The duty was initially announced in a letter titled “Re: introduction of a market-responsive import tariff framework on Premium Motor Spirit (PMS) and Diesel,” signed by Damilotun Aderemi, the Private Secretary to the President. The president’s approval followed a request by FIRS Chairman, Zacch Adedeji, for the government to apply the tariff to align import costs with domestic realities.
However, MEMAN insisted that the 15% tariff is too high and could effectively ban fuel import, which is not good for energy security. According to Isong, based on current market trends and landed costs, a 15% tariff would add N122.46 to PMS, pushing pump prices to about N998/L in Lagos and N1,028/L in many upcountry markets; diesel would rise to roughly N1,164-N1,194/L depending on margins.
Dangote Refinery’s Role
Despite these concerns, the Dangote Refinery, the largest single train refinery in Nigeria, has boasted of its ability to meet daily consumption by Nigerians. The facility delivers 45 million litres of premium motor spirit (PMS) and 25 million litres of diesel on a daily basis, reaffirming its commitment to ensuring a steady and uninterrupted supply of the products nationwide.
However, despite assurances from Dangote, the opposition to the import duty continued until yesterday when the proposal was suspended. A major marketer and CEO of 11PLC, Otunba Adetunji Oyebanji, noted that there was significant pushback from various quarters, as well as support for the measure.
Expert Opinions on Policy Decisions
A renowned professor of petroleum economics, Prof. Wumi Iledare, described the reversal as typical Nigerian politics. He highlighted that politicians often prioritize short-term political interests over sound economic reasoning, leading to long-term consequences for the nation.
Economist Dr. Paul Alaje emphasized the importance of evidence-based research before introducing any policy. He stated that the government should support local producers to achieve sufficiency rather than hastily imposing taxes. He warned that rushing into such policies without thorough research could lead to negative outcomes similar to those seen in other countries.
Economic expert Samuel Caulcrick warned that the import duty could have triggered trade wars, leading to increased consumer prices, reduced innovation, and limited product choices. He urged the Federal Government to learn from China’s industrial growth model, which combined protectionist measures with foreign investment incentives and export-oriented policies.
Implications of the Suspension
The suspension of the 15% import duty is expected to ensure adequate supply and moderate prices since no single entity will have a monopoly of supply. It also highlights the need for transparency, sequencing, and accountability in policy decisions.
Overall, the decision underscores the complex interplay between economic policy, political considerations, and the need for sustainable development in the oil and gas sector. As Nigeria continues to navigate these challenges, the focus remains on achieving energy security and fostering a competitive downstream market.
