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PMS: Nigeria’s unique price deregulation

While data from marketers shows N230 per litre as the appropriate market price for petrol, the Nigerian National Petroleum Corporation (NNPC), through an embargo on prices, directed that the product be sold at N162 per litre amidst fuel crisis, with the question of who pays for the N68 shortfall on every litre consumed remaining unanswered, ADEOLA YUSUF reports

 

Last week, fuel crisis reared its head across Nigeria, Africa’s biggest crude oil exporter. Queues, last seen many years ago, resurfa ced at filling stations in Abuja and Lagos.

 

This, caused, according to Nigerian National Petroleum Corporation (NNPC), by panic buying, lasted for days in Abuja, while the Corporation made frantic efforts to address the situation.

 

In the midst of these, however, is a price imbalance, which showed a contemporary definition for deregulation in the Nigerian context.

 

The crisis and price shortfall

 

A shortfall of about N68 is suffered on every liter of premium motor spirit (PMS) also known as petrol consumed in Nigeria as at last Monday, the day that long queues for petrol persisted in more stations in Lagos and Abuja. The number of filling stations that shut their gates to motorists in the two cities also increased on the said day, stirring panic buying among motorists. Though the product’s price was still relatively stable, according to a survey conducted by New Telegraph across stations in the state, the gates of all filling stations, including NNPC retail stations and all independent stations along the Agege-Jungle- Fagba road, Lagos State, were under lock and key when this newspaper visited them around 4:15 pm on Monday. Only Conoil among all the stations including the NNPC retail station, on the Ogba-College road, was selling the product.

 

Long queues of motorists were, however, noticed in this station, while customers who could not endure the queues were buying the product inside different sizes of containers to refill their fuel tanks.

 

The situation was the same at the ExxonMobil station in Odo Eran are of Ogba where the queue stretched for over 500 meters, causing traffic as at 3:18 pm. All filling stations around the  including Total on ACMEWEMPCO link road shut their gates for motorists.

 

All independent filling stations in Ikeja followed suit as their gates were also shut around 2:22pm on the said day. ExxonMobil on Agidingbi Road as well as Total along Ikeja- Ojota road were, however, dispensing fuel with long queues of motorists.

NNPC’s warning on panic buying

 

Further checks by this newspaper showed that the queues were as a result of panic buying caused by hoarding in many stations that were not dispensing fuel. NNPC had warned against hoarding and panic buying in a statement it issued, in which it announced another embargo on hike in the price of the product.

 

“Contrary to speculations of imminent increase in the price of petrol in the country, the Nigerian National Petroleum Corporation (NNPC) has ruled out any increment in the ex-depot price of petrol in March, 2021,” a press statement by the Group General Manager, Group Public Affairs Division, Dr. Kennie Obateru, read.

 

The Corporation, the statement continued, “was not contemplating any raise in the price of petrol in March in order not to jeopardise on-going engagements with organised labour and other stakeholders on an acceptable framework that will not expose the ordinary Nigerian to any hardship.

 

“NNPC also cautioned petroleum products marketers not to engage in arbitrary price increase or hoarding of petrol in order not to create artificial scarcity and unnecessary hardship for Nigerians.”

 

The Corporation “stated that it has enough stock of petrol to keep the nation well supplied for over 40 days and urged motorists to avoid panic buying,” calling “on relevant regulatory authorities to step up monitoring of the activities of marketers with a view to sanctioning those involved in products hoarding or arbitrary increase of pump price.”

 

Ministry’s position

 

Before this new position by NNPC, Minister of State for Petroleum Resources, Timipre Syl   va, said that it was unrealistic for government to continue with the subsidy regime. Sylva said this in a press statement on Thursday, July 9, 2020, in Abuja,

 

maintaining that it was unrealistic for government to still continue with the subsidy regime, especially with petrol, as it had no economic value. He asked Nigerians to ignore the misinformation and misguided comments that have been in the public space on the issue.

 

According to the minster, ‘’it has become expedient for the Ministry of Petroleum to explain misconceptions around the issue of petroleum product deregulation. After a thorough examination of the economics of subsidising PMS for domestic consumption, government concluded that it was unrealistic to continue with the burden of subsidising PMS to the tune of trillions of naira every year.

 

“More so, when the subsidy was benefiting, in large part the rich, rather than the poor and ordinary Nigerians.

 

“Deregulation means that government will no longer continue to be the main supplier of petroleum products, but will encourage private sector to take over the role of supplying petroleum products.”

 

He pointed out that in line with global best practices, the price of petroleum products will be determined by market forces. He, however, added that government would continue to play its traditional role of regulation and ensure that it was not priced arbitrarily by private sector suppliers.

 

The shortfall

 

This embargo on petrol price, which was as a result of the ongoing negotiation between the Federal Government and labour unions, however, created a shortfall of about N68 on every single liter of petrol consumed in Nigeria since March 1. Price data given by the National Operations Controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mike Osatuyi, using $67 per barrel crude oil price and other variables, showed that the  petrol  price should go for N230 per litre, starting from March 1.

 

And with the freezing of the price at N162 per litre by NNPC, the shortfall on every litre amounted to N68 per litre. NNPC has about 40-day stocks of the product, which it bought at the stable price, the N68 per litre gap created by the price freezing will be burn to replenish the stock. NNPC ended fuel subsidy in March 2020, exactly one year ago.

 

Though the Corporation embargoed hike in prices of petroleum products in February and March, the market is still tensed based on expectation and speculations of higher prices.

 

Gospel according to marketers

 

Speaking to New Telegraph, Osatuyi declared that the whole nation had “crossed the bridge” and that there was no hiding place for hike in fuel price. According to him, “I have just returned from a meeting in Abuja.

 

What I have observed is that many stations have closed down and there are queues in many places in both Lagos and Abuja.” Nigeria, according to Osatuyi, has “crossed the bridge, there is no hiding place, the N1.2 trillion, which was hitherto an annual spending on subsidy, will be borne by the market.

“As it is, the prices of crude oil have gone up to $67 per barrel and, with this, the price of PMS will be between N220 per litre and N230 per litre. I was told by someone that the Group Managing Director of NNPC told them that the official price will likely be N206 per litre.

 

“As it is now, all the stations that have shut their gates must have heard information before they took that action. I want us all to wait; by tomorrow we will all see clearly what will happen. “There has been annual spending of N1.2 trillion on fuel subsidy and now that the subsidy has said to be abolished, that money must come from somewhere.

 

“The money must be coming from somewhere. NNPC is not an NGO (non-governmental organisation), there is no budgetary provision for subsidy again and instead of wasting it on subsidy, it should be deployed to other sectors.”

 

Way forward

 

Asked what can be done to cushion the negative effects of higher fuel price, Osatuyi said: “This plan to cushion the negative effects of higher fuel price should be the next important thing. “Government can do free conversion of vehicle from fuel to gas. This should be done to help Nigerians who will definitely be affected by this fuel price hike.”

 

Last line

 

The labour unions appear to be the clogs in the wheel of the smooth sail into deregulation, therefore, government should fast track its engagement with them. Failure to do this will amount to taking a step forward and two steps backward on deregulation

 

 

 

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