The Petroleum Product Pricing Regulatory Agency (PPPRA) has announced that the Nigerian National Petroleum Corporations’ (NNPC) petrol stations will from January 1, 2016, sell premium motor spirit, (PMS) at N86 per litre, while other marketers will sell the commodity for N86.5 per litre. The agency also announced the approval of the first quarter 2016 petrol import allocation of three million metric tonnes to NNPC and other oil marketers.
Farouk Ahmed, Executive Secretary, PPPRA, stated that the reduction in the price of Premium Motor Spirit (PMS) or petrol was due to the revised components of the petroleum product pricing template for PMS and household kerosene and explained that the revised template would be reviewed on a quarterly basis, he also added that the template was geared towards ensuring an efficient and market-driven price of petroleum products, prices that would reflect current realities. Saying “Since 2007, while crude oil prices had been moving up and down, the template had remained the same.
This makes it necessary for us to introduce a mechanism whereby the template would be sensitive to the price of crude oil. However, the template is not static, as there will be quarterly reviews, and if there is any major shift, the Minister of State for Petroleum Resources will be expected to call for a review, either upward or downward. If there is no major shift, the price will continue from January to March 2016. In addition, there will be a Product Pricing Advisory Committee that will be set up to advise the PPPRA concerning movements in the price of crude oil”. Explaining why NNPC would sell petrol lower than other marketers, the executive secretary said that it was due to the fact that it was cheaper for the corporation to import products compared to the independent and major oil marketers.
Ahmed outlined the major components affected by the review in the pricing template to include traders’ margin, lightering expenses, Nigerian Ports Authority (NPA) charges, jetty throughput, storage charges and bridging fund. Others are retailers, transporters, and dealers’ margins. He gave a breakdown of the revised template and stated that the lightering expenses had been reduced from N4.07 to N2; NPA charges reduced from N0.77 to N0.36; while the jetty throughput and storage charges were reduced from N0.80 and N3 to N0.40 and N1.50, respectively. According to him, the retailers’ margin rose to N5 per litre from N4.60; transporters’ cost rose to N3.05 from N2.99; dealers’ margin was reviewed upward to N1.95 from N1.75, while the bridging fund dropped to N4 per litre from N5.85.
On the issue of PMS import allocation to the NNPC and other marketers, Ahmed stated that the PPPRA considered the issue of retail outlet ownership, marketers’ performance for the previous quarterly allocations, as well as the challenges in sourcing foreign exchange. He said, “Consequently, the NNPC was granted 78 per cent of the total allocated volume for the first quarter, while the balance is to be supplied by other oil marketing companies. Marketers are required to note that there shall be a mid-quarter review of performance, where volumes of non-performing marketers shall be withdrawn and reallocated to performing marketers…”
Meanwhile, the two major unions in the oil and gas sector, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Employees (NUPENG) differed on the marginal reduction in the pump price of petrol.
Emmanuel Ojugbana, National Public Relations Officer, PENGASSAN, said, “We don’t understand what that means, i.e. the reduction of fuel price from N87 to N86 and N86.5 per litre. Is it that subsidy has been removed? Or, has the price been reduced because of the fall of crude oil pricing in the international market? Will the reduction stop the sale of petrol at over N120 per litre in some places in this country? There are a lot of things that need to be made clear, not just to come out and announce that petrol price has been reduced…”
In his reaction, Tokunbo Korodo, South-west Chairman, NUPENG, noted that the government should be supported, but was quick to state that it must fashion out ways to ensure the sustainability of the reviewed petrol prices.