The Nigerian National Petroleum Corporation (NNPC) is in trouble. Its landing cost of petrol has climbed to an all-time high following the recent surge in global oil price. The global price of crude has hit a three-year high from last week rising to $70 per barrel for the first time since December 2014.
(NNPC) had in December 2017 hinted that there would be a hike in cost, Insurance and Freight (CIF) price of PMS which was then $620 per metric tonne. It had said that at N305 to a dollar, PMS landing cost translated to N171 per liter at the time, oil price traded below $65 per barrel mark.
But analysts estimate that with the recent rise in oil price and based on the Petroleum Product Pricing Regulatory Authority (PPPRA) template, the cost of imported petrol now hovers at between N175-N180/per liter.
Hinting at the probable price increase the Head, Investor Relations at United Bank for Africa (UBA) Mr. Abiola Razaq, said “You will agree with me that today, based on my own estimate, the naira landing cost of petrol in Nigeria is actually somewhere between N175-N180/per litre which means that if the government should fully deregulate the oil sector, there would be higher price for petroleum product. He further said, “If you look at the PPPRA template and where crude oil prices are in addition to shipping cost and using the official CBN exchange rate, you would have an idea of what the cost of refined products is”.
Another analyst Mr. Dolapo Oni,t Head of Energy Research at Ecobank, said of the impact of a jump in oil price on petroleum products. hat “It is a fact that PMS prices will go up and the fact that our refineries are not functioning means we are vulnerable to shocks,” Supporting the argument the Chief Executive Officer (CEO) of the International Institute for Petroleum, Energy Law, and Policy (IIPELP), Dr. Timothy Okon, further said it was not unusual for PMS prices to escalate when oil prices rise.
Reports say that at the landing cost of N171 per litre, NNPC records an under-recovery of N26 to every a litre of fuel. However, with the prices hovering between N175-N180, industry experts’ predict, that the NNPC loses N33 on every litre of petrol to sell fuel at the pump price of N145. NNPC had to clarify a statement wrongly attributed to Managing Director of Petroleum Products Marketing Company (PPMC), Mr. Umar Ajiya at the weekend. They explained that there was under-recovery in the importation and sale of PMS by NNPC, but the burden is categorized as business losses which the Act establishing NNPC recognizes.