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Tag: Petrol Price

  • EXCLUSIVE: NEC Recommends N302 Per Litre Petrol Price By February

    EXCLUSIVE: NEC Recommends N302 Per Litre Petrol Price By February

     

    The Federal Government may increase the price of Premium Motor Spirit (PMS), better known as petrol, to N302 per litre in February 2022 as part of the recommendation of the National Economic Council (NEC) in November 2021.

     

    TheCable understands that this is part of the government’s plan to fully deregulate the PMS prices, eliminating monthly subsidy payments with provisions to ensure fair competition in the market.

     

    Petrol price is currently between N162 and N165 per litre in Nigeria.

     

    The recommendations were put forward by the NEC ad-hoc committee interfacing with the Nigerian National Petroleum Corporation (NNPC) on the appropriate pricing of PMS in Nigeria. The report was presented by Nasir El-Rufai, governor of Kaduna state and head of the committee.

     

    The committee was established last year by NEC headed by Vice-President Yemi Osinbajo to look into the dwindling revenues of states.

     

    Other members of the committee include Godwin Obaseki, Kayode Fayemi, and David Umahi, governors of Edo, Ekiti and Ebonyi states respectively; as well as Godwin Emefiele, governor of the Central Bank of Nigeria (CBN); and Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC); Zainab Ahmed, minister of finance, budget and national planning.

     

    In May 2021, the Nigeria Governors’ Forum (NGF) had also recommended N385 per litre — but stakeholders, including the federal government, rejected the recommendation.

     

    The recommendation has since been reconsidered and dropped by the committee.

     

    According to the new report, the committee recommended full deregulation of PMS prices by February 2022 — raising the price by about N130/140 per litre.

     

    It also recommended that all retailers should post PMS prices at all times on a designated website and smartphone app — and they are expected to post price changes no earlier than within 15 minutes of the price change.

     

    With the recommendations, the committee added that the federal government would save N250 billion per month on petrol subsidy removal.

     

    “At current rates, the PMS subsidy is reducing transfers into the federation by about NGN 250 billion per month, and could, if PMS subsidies are not eliminated, result in deductions of NGN 3 trillion in 2022,” the committee’s resolution reads in part.

     

    “The large-scale time-limited (6-months) cash transfer proposed as a way of transferring the subsidy “directly to the people” would cost N600 billion but would by paving the way for the elimination of PMS subsidies, enable the federation to recover N3 trillion in revenues that would otherwise go to PMS subsidies.

     

    “If PMS subsidies are eliminated by February 2022, N250 billion in deductions would have been incurred, but the remaining N195 billion in anticipated PMS subsidy deductions could be redirected towards FGN funding of the cash-transfer programme.”

     

    The NEC committee also recommended a market-based pricing mechanism, as another option, that would ensure petrol price ceilings at least once a month.

     

    Meanwhile, the federation account allocation committee (FAAC) will meet on Wednesday (today) for the monthly meeting to distribute revenues between federal, state, and local governments.

     

    At the last FAAC meeting, NNPC had said it would deduct some funds as value shortfall incurred due to differentials between the current PMS retail price and actual open market price in January 2022.

     

    Most states are presently experiencing fiscal stress and kicking against deductions of the shortfall from FAAC remittances.

     

    The committee further noted that NNPC has failed to keep its commitment of N120 billion per month for value shortfall at N162 per litre for petrol.

     

    Currently, around N250 billion, it added that the development continued to shrink remittances to the FAAC and described the deductions as “arbitrarily”.

     

  • Petrol Price May Hit N190 As Oil Nears $60

    Petrol Price May Hit N190 As Oil Nears $60

    Marketers have said with the current realities in the global crude oil markets, the price of Premium Motor Spirit (petrol) in Nigeria should be between N185 and N200 per litre, unless the government wants to subsidise the product.

     

    The upturn in global oil prices last week 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 for more than two months.

     

    Top officials of two major marketers’ associations who spoke with our correspondents on Saturday said the continued increase in oil prices had brought back petrol subsidy.

     

    The PUNCH had reported on January 11 that the 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 on Friday.

     

    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.

     

    Crude oil price accounts for a large 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.

     

    According to the marketers, the pump price of petrol should be between N185 and N200 per litre.

     

    The product is currently sold at between N160 and N165 per litre at many filling stations in Lagos.

     

    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, adding that the security of supply had been threatened.

     

    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.”

     

    The Nigerian National Petroleum Corporation, 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.

     

    The PUNCH reported on Friday that the Federal Government had announced the commencement of discussions with representatives of the labour movement on how to raise the freight rate from N7.51 per litre to N9.11 per litre.

     

    Freight is one of the elements that make up the landing cost of the petrol imported into the country.

     

    The National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, told our correspondent 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.

     

    The Minister of State for Petroleum Resources, Timipre Sylva, had said in September last year that the Federal Government had stepped back in fixing the price of petrol, adding that market forces and crude oil price would determine the cost of the product.

     

    The Federal Government removed petrol subsidy in March 2020 after reducing the pump price of the product to N125 per litre from N145 on the back of the sharp drop in crude oil prices. The price reduction lasted till June.

     

    Nigerians saw increases in the pump prices of petrol in four months, rising 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.

     

    Apart from the increase in global oil prices, the devaluation of the naira last year also led to a significant rise in the cost of imported petrol.

     

    If the pump price of petrol is left unchanged amid the rise in oil prices, it means the NNPC would again bear the latest subsidy cost on behalf of the government as it did for several years before its removal last year.

     

    In July 2020, Sylva said in a statement that the Federal Government had reached a conclusion that it could no longer bear the burden of petrol subsidy.

     

    “After a thorough examination of the economics of subsidising PMS for domestic consumption, the Federal 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 this subsidy was benefiting in large part the rich, rather than the poor and ordinary Nigerians,” he said.

     

    According to him, deregulation means that the government will no longer continue to be the main supplier of petroleum products but will encourage the private sector to take over the role of supplier of the products.