Oil marketers have said that the price of premium motor spirit, otherwise known as petrol, should be between N185 and N200 per litre, based on the current realities in the global crude oil market, unless the Federal Government wants to go back to subsidizing the product.
This disclosure is coming as the global oil price nears $60 per barrel as OPEC and its allies pledge to continue to cut down on crude oil inventories and expected increase in global demand due to the roll-out of Covid-19 vaccine in some major economies.
The marketers have expressed their concerns over the non-implementation of the full deregulation of the downstream petroleum sector as the pump prices of petrol have remained unchanged for over 2 months, despite the recent increase in global oil prices.
According to a report by Punch, top officials of 2 major marketers’ associations said the continued increase in oil prices had brought back petrol subsidy.
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The oil marketers had expected another upward adjustment of petrol prices since the increase of Brent crude from $41.51 per barrel as of November 13, 2020, to the current price of $59.84 per barrel, reflecting a 44% increase.
They were, however, surprised with the N5 reduction announced by the Federal Government in December, in the wake of their negotiations with organized labour, a development that left them surprised and raised questions over government’s deregulation policy.
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Crude oil price accounts for a major chunk of the final cost of petrol, and the country has continued to spend so much on petrol imports for many years amid low domestic refining capacity.
The marketers said that the current price of between N160 and N165 per litre at many filling stations in Lagos is not sustainable as the pump price should be between N185 and N200 per litre.
What the Marketers are saying
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. For as long as we continue to sell the product at what we are currently selling it, then somebody 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, with threats to security of supply as smuggling might have resumed following the opening up of the borders and significant price differences across neighbouring countries.
He said, “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.”
It can be recalled that the Federal Government had earlier announced the commencement of discussions with representatives of organized labour on how to raise the freight charges, one of the components that make up landing cost of imported petrol, from N7.51 per litre to N9.11 per litre.
The National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, said 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 N1.8bn 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 fuel is going.
“Government cannot afford subsidy, and there is no subsidy in the budget. So, the market fundamentals have to come to force now.
“Based on $56 per barrel of crude oil, our pump price should be about N186 to N190. But now that oil price has even gone to $59, then pump price should not be less than N200 per litre. There is no way Nigerians can avoid petrol price increase.”
Osatuyi said the increase in oil prices had already pushed up the pump prices of diesel and kerosene in the country.
What you should know
- The Federal Government had in September 2020, announced full deregulation of the downstream sector of the petroleum industry, saying that it will step back from fixing the price of petrol and allow market forces and crude oil price to determine the cost of the product.
- The government removed petrol subsidy in March 2020 after reducing the pump price of the product to N125 per litre from N145 due to the crash in crude oil prices.
- This was later increased from N121.50-N123.50 per litre in June to N140.80-N143.80 in July, N148-N150 in August, N158-N162 in September and N163-N170 in November.
- The marketers still rely heavily on the Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, for their petrol supply despite the deregulation of the downstream petroleum sector.
- This is due to the inability of the private oil marketing companies to access foreign exchange at the official rates, which has hampered their efforts to resume petrol importation.