History of Petroleum Equalisation in Nigeria

Petroleum Equalisation Fund (Management) Board PEF(M)B is the special intervention put in place by the Nigerian government with the mandate of ensuring that petroleum products are sold at approved prices across the country.

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Years of Fund Administration & Management

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Between 1974 and 1975, most petrol service stations nationwide were characterised by long queues due to frequent severe shortages of petroleum products.

The problem was compounded by the haphazard way Marketers priced the products on the basis of transportation cost incurred by them. In an effort to solve the problem, the Federal Government set up an inter-ministerial Committee comprising of the then Ministries of Mines and Power, and Transport, the Nigerian Ports Authority, the Nigerian Railway Corporation and the Petroleum Products’ Marketers to examine the situation and make appropriate recommendations.

The Committee observed that the only variable element in the sale of petroleum products at uniform price nationwide was the transportation cost. In addition to the transportation cost, other causes of price differentials were identified as the following: limited refining capacity and inadequate distribution facilities. In cognisance of the inequality in the transportation cost of distributing products throughout the country, the Petroleum Equalisation Fund (Management) Board was established. The Fund which was established by Decree 9 of 1975 (as amended by Decree No. 32 of 1989) was charged with the primary responsibility of reimbursing petroleum marketing companies for any losses suffered by them, solely and exclusively, as a result of sale of petroleum products at approved prices throughout the nation.

Equalisation is indeed a primary driver for socio-economic development, as energy is the leading hub for growth and social inclusion. Also, the Equalisation scheme has over the years served as a buffer to price exploitation and sustained development in remote places through the distribution of petroleum products. In addition, the equalisation principle deals with a strategic socio-economic and developmental stimulus that encourages and drives productivity in all sectors and regions of the country.

The legislative Charter of the Board as provided by Decree No 9 of 1975 as amended by Decree No. 32 of 1989 (now Chapter 352 of the Laws of the federation 1990) are: 

  • To ensure that the Uniform Pricing Mechanism works effectively throughout the country.
  • To apply the laws of the Federal Republic of Nigeria as they affect the Uniform Pricing System, vis-a-vis degree No. 9 of 1975 (as amended by Decree No. 32 of 1989), establishing the Fund and the Board, in ensuring that each existing marketing company complies with the laws regarding the management of the transportation equalisation process.
  • To equalise the transportation differentials in the white product marketing.
Results and Achievements

The impact of the PEF(M)B on the downstream petroleum sector dynamics includes:

  • Facilitating the availability of fuel supply in the country by the prompt payment of Marketers’ Claims in all parts of the country.
  • Ensuing new investments in tank farms, retail outlets and trucks with attendant increase in employment generation.
  • The first to implement the Electronic Payment (e-payment system) in the public sector.
  • PEF(M)B is the first organisation to successfully launch and implement an electronic loading and delivery system for petroleum products with the implementation of Project Aquila, a bespoke business operations application.
  • PEF(M)B’s Project Aquila has improved service delivery, enhanced transparency, and incentivised massive investment in the petroleum downstream, with a sustained economic growth in Nigeria’s rural areas.
  • Recognition of the PEFMB as a Fund Manager by the National Council for Hydrocarbon

The Management of PEF(M)B is constantly striving to improve its operational efficiency to enable it deliver optimal service to all stakeholders. The success recorded so far justifies the efforts put in, as the Board joins other Departments, Ministries and Agencies in the petroleum industry to serve the nation better.