The Lubricant Producers Association of Nigeria has asked the national government to prevent one of its agencies from imposing a new fee on base oil imports, claiming they will drive up finished lubricant prices.
The association addressed the Minister of State and Petroleum Resources in a Feb. 27 letter opposing administrative charges on base oil imports that the Petroleum Pricing Products Regulatory Authority has sought to implement since October 2016.
The regulatory authority notified Lupan in that month that it would implement a charge of 10 kobo (one-tenth of one Nigerian naira, which is currently valued at less than one cent in U.S. dollars) on each liter of base oil imported. The government agency, which is tasked to monitor and regulate the supply, distribution and prices of petroleum products in Nigeria, had previously tried to implement a 20 kobo per liter.
Then, in February 2017, PPPRA advised that the 10 Kobo charge had to be remitted no later than three working days after an applicable transaction.
Lupan has protested that the 2003 act establishing the regulatory authority does not empower it to levy charges. We maintain that such charging is tantamount to levying, which the agency, by the provisions of the Petroleum Act, is not authorized to demand, said Lupan Executive Secretary Emeka Obidike, in an August 2017 letter to PPPRA.
In its letter last month, Lupan appealed for the Ministry of Petroleum Resources to intervene between it and the regulatory authority. Imported base oils are mineral-based, crude oil derivatives classified as petroleum oils and oils obtained from bituminous minerals and are not obtained from chemical synthesis, Lupan wrote. The association contended that the countrys regulatory framework dictates that the Department of Petroleum Resources should be the primary regulator of the petroleum sector and sub-sectors.
Lupan also believes that base oils shouldnt be a regulated product in the first place. The admin charge with regards to base oil is not applicable to our members because we are not marketing regulated products, Obidike argued. Emmanuel Ekpenyong, head of operations for Puma Energy Nigeria, concurred, stressing that PPPRA should only be involved in regulated products and should distance itself from non-regulated products to allow for market forces to demand the price paid by the end user.
Speaking to Lube Report, Linus Ilozue, managing director of A-Z Oils, questioned why blenders should pay additional PPPRA administrative charges when they already pay taxes and duties on imported base oils in other forms.
Lube industry sources complained that domestic blenders are already plagued by the markets erratic pricing of base oils, which seems to fluctuate with availability of U.S. dollars, and they warned that new tariffs will ultimately be passed onto consumers.
However, PPPRA General Manager Victor Shidok told Lube Report that base oils do indeed fall within the agencys regulatory purview. As far as we are concerned, base oil is a petroleum product. If base oil is a petroleum product, then we are empowered to regulate it. You cannot import base oil unless you are a petroleum marketer. So we are not dealing with lubricant producers, but marketers who import base oils to Nigeria. The admin charge is very minimal, and importers of base oil should endeavor to pay it because that is the only avenue through which Nigeria can be developed.