In the midst of the heated debate over the National Petroleum Authority’s (NPA) price floor policy, the Africa Centre for Energy Policy (ACEP) has sharply criticised the NPA’s decision to introduce a price floor in the downstream petroleum market.
ACEP believes that the NPA regulation is a weak and misguided response to deeper problems in the downstream sector.
In a strongly worded reaction, ACEP argues that the policy does little to protect consumers or promote efficiency. Instead, it says the price floor shields struggling players, discourages healthy competition, and ultimately forces consumers to pay more at the pump.
A Policy Outside NPA’s Functional Mandate
ACEP’s first concern is the legality of the price floor directive. The energy think tank insists that setting price floors falls outside the functions assigned to the NPA under its founding law, Act 691 of 2005.
According to ACEP, many of the NPA’s current activities are relics of a regulated era and no longer fit a market that has officially been deregulated.
Despite this, ACEP says these outdated roles continue largely because they allow levies and charges to be imposed on petroleum consumers and industry players with little resistance.
“The directive is expressly outside the plethora of functional activities prescribed by the NPA Act (Act 691), 2005. ACEP asserts that most of the legally mandated functions of NPA are outdated in the current deregulated market context, yet sustained by political settlement to levy petroleum consumers and the industry unnecessarily,” the statement emphasized.
Deeper Problems of the Sector Left Untouched
Rather than tackling the core challenges facing the downstream sector, ACEP argues that the NPA is avoiding the hard work.
The organisation lists a range of persistent issues that remain unresolved, including the influx of illicit fuel through both approved and unapproved routes, the growing presence of substandard petroleum products, and revenue losses through tax evasion by some oil marketing companies.
Consumers, ACEP adds, are already burdened by multiple levies and charges built into fuel prices. Yet, instead of confronting these problems head-on, the regulator has chosen what it describes as an easier path.
A Lazy Policy that Rewards Inefficiency
ACEP describes the price floor as a “lazy solution” that protects inefficient businesses at the expense of those that operate competitively.
In its view, the policy mainly benefits oil marketing companies and bulk oil importers with weaker market presence, who struggle to sell fuel at competitive prices.
By preventing stronger players from pricing aggressively, ACEP says the policy removes incentives for innovation, efficiency, and smart business strategies. Over time, this could dull competition across the sector.
“Rather than addressing the aforementioned challenges, the NPA is opting for a “lazy” solution that rewards inefficiency, discourages competition and punishes the consumer at the pump,” ACEP stressed.
It adds that, “Setting price floors creates a system that benefits OMCs and Bulk Oil Import, Distribution, and Export Companies (BIDECs), which have weaker market presence and are struggling to sell volumes at competitive rates. This protectionist policy is detrimental to creativity and competitive business strategy and ultimately harms consumer welfare.”
Consumers at the Receiving End
ACEP maintains that the biggest loser in the price floor debate is the consumer. In a market where competition should naturally drive prices down, setting a minimum price does the opposite.
The think tank argues that instead of protecting consumers, the price floor punishes consumers at the pump. It is therefore a warning that the policy could lock in higher prices even when global or local conditions would otherwise allow reductions.
The Bottomline
For ACEP, the price floor policy is not a substitute for effective regulation. If the NPA is worried about price undercutting or unfair competition, the solution, ACEP says, is better enforcement of existing rules, stronger oversight, and targeted action against illegal and unethical practices.
Moreover, until those deeper issues are addressed, ACEP warns, consumers will continue to bear the cost of policies that protect inefficiency rather than promote fairness and value.
