…as NNPC pumps 70m litres daily, paying N1.8bn subsidy
Indications were rifed at the weekend that the pump price of petrol, otherwise known as premium motor spirit (PMS) is set rise to between N185 to N200 per liter as the landing cost of the product in Nigeria has being on the increase, consequent upon the rising prices of crude oil in the international market from about $43 per barrel in November 2020, the last time an increase was effected under the current deregulation regime, to current prices of about $59 per barrel.
This came as the Minister of State for Petroleum Resources, Mr. Timipre Sylva had at the official launch of the Nigerian Upstream Optimisation Programme in Abuja on Tuesday urged Nigerian to be ready for increase in the price of petrol.
He said since there is no provision in the 2021 budget for subsidy on petrol, the Nigerian National Petroleum Corporation (NNPC) cannot continue to bear the cost of under-recovery.
Marketers said with the current realities in the global crude oil market, the avarage price of petrol in Nigeria should be between N185 and N200 per litre, unless the government wants to subsidise the product.
Sunday Telegraph learnt that the upturn in global oil prices two weeks ago has again brought to the fore marketers’ concerns over the non-implementation of the full deregulation of the downstream petroleum sector as the pump prices of petrol have been left unchanged in about three months.
It was disclosed that sustained increase in global crude oil prices had pushed up the landing cost of imported petrol closer to the current pump prices of the product in Nigeria, and appeared to have triggered a return to petrol subsidy era.
Since November 13, 2020 when the pump prices of PMS were last increased in the country, the price of the international oil benchmark, Brent crude, has increased by 43 per cent, rising from $41.51 per barrel to $59.34 per barrel last week. Fuel marketers had in December expected another upward adjustment of PMS prices to reflect the further rise in crude oil prices, which closed at $51.22 per barrel on December 31.
However, a N5 reduction in petrol price, effective December 14, was announced by the Federal Government – a development that left them reeling in shock and questioning the deregulation of petrol price.
The Executive Secretary/Chief Executive Officer, Major Oil Marketers Association of Nigeria, Mr Clement Isong, said, “Members of my association are operating in Nigeria and care about the long-term sustainability of the industry as well as the country itself.
“So, we know that depending on what exchange rate you use, the pump price should be between N185 and N200 per litre. Isong said smuggling might have resumed because of the significantly different prices across the borders, which were recently opened.
“So, we need to completely restructure our entire supply chain. We need to reach a place where, if deregulation takes effect, refining will resume in Nigeria. We need to find a way of making sure that Nigerians benefit from deregulation.
That, I believe, is what the discussion must be.” NNPC, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.
Private oil marketing companies have continued to lament that their inability to access foreign exchange at the official rates has hampered efforts to resume petrol importation.
“For as long as we continue to sell the product at what we are currently selling it, then it meansmsomebody is bearing the cost of subsidy, and the country really cannot afford subsidy at this time.” He said the demand for petrol had increased significantly in the country, adding that the security of supply had been threatened.
The National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, disclosed that the implementation of the new freight rate would lead to petrol price increase.
He said: “Already, we are back to subsidy, and from the information I have which is confirmed, the Federal Government is subsidising about N1.8 billion per day because 70 million litres are being pumped out every day now because the borders have been opened; I don’t know where the petrol is going to.”
Speaking on whether an upward review of the pump price pf petrol is imminent, the Group General Manager, Group Public Affairs Division of the Corporation, Dr Kennie Obateru, said that whatever would be done regarding petrol pump price would be based on the advice from the Petroleum Products Pricing Regulatory Agency (PPPRA).
“The point is that NNPC is the only one importing the product (petrol) for now. We are looking forward to other marketers joining in the importation of the product, so that the burden will not just be on NNPC,” he said.
Asked if the NNPC had started bearing subsidy cost, he said, “I think it would be premature to say because it has to be based on whatever PPPRA works out as to the pricing. The market is already deregulated.” He added that the desire of government was to have a fully deregulated market