Fuel price hike through back door?

Many Nigerians pay more than N145 per litre official price for premium motor spirit (PMS) also known as petrol. Adeola Yusuf reports how the Federal Government’s hide-and-seek game on full deregulation brought price hike in through the back door.

 

 

The National Bureau of Statistics (NBS), in its latest petroleum products price watch for last February did not only show disparity in prices of petrol across the states, it also revealed how the question: “How much is petrol sold in Nigeria?” is difficult to answer.

Yobe, a state in North East Nigeria, the NBS data showed, recorded the highest average petrol price in February, with N177 per litre. Others with sky-rocketing average price were Sokoto, N162.1 and Taraba, N161.7, while Lagos, N144.9; Delta, N144.8 and Osun N144.7 recorded the lowest respectively.

This is despite the official price of N145 per litre displayed conspicuously on the website of Petroleum Products Pricing Regulatory Agecy (PPPRA). Nigeria is Africa’s biggest crude exporter with four government-owned refineries.

Sustainability of N145 per litre

Before the average high price of N149 per litre, Group General Manager, Crude Oil Marketing Department of the NNPC, Mr. Mele Kyari, had earlier hinted that the nation’s difficult business environment may make it difficult to sustain the current pump price of petrol.

He spoke at the 10th Oil Trading and Logistics Africa Downstream Week in Lagos, where he also said it was “impossible to import products at the current market price, at current fixed foreign exchange rate and recover one’s money.” Marketers that are currently selling below N145/ litre, he said, are doing so because they are not the importers of the fuel.

“Because we (NNPC) have taken the heat and you buy from us, you can afford to go to the market and then put a ridiculous price,” he said. However, Kyari ruled out the possibility of increasing the pump price by government due to the economic hardship in the country, saying: “it is impossible for this government to announce tomorrow that petrol is about N150. “This government cannot sustain it,” he said, maintaining that this “is the truth.

The people will not take that number. But that is why the suppliers now are not importing. It is not about the foreign exchange. “We are in subsidy regime absolutely, there is no way you bring product today and take it and sell at N145 and get back your money, and make profit. That is not possible. You can see some marketers saying that fuel is N138.It is because they did not import. Somebody has taken the heat of the price.”

A few weeks before Kyari’s submission, former and present group managing directors of the NNPC had also expressed fears that the current pump price of N145 per litre is no longer feasible.

They said the amount does not correspond with the pricedetermining components of the commodity and the fluctuations of the foreign exchange rate. The NNPC had, in its statement, said: “They (the GMDs) noted that the petrol price of N145/litre is not congruent with the liberalisation policy, especially with the foreign exchange rate and other price determining components such as crude cost, Nigerian Ports Authority charges, etc. remaining uncapped.”

Fixing forex rate issue

On the N145 per litre price, Kyari had said: “We have created a niche market for the forex. We have ring-fenced all forex from the upstream such that those forex will be available at a fixed price; a price that the CBN has agreed. I am part of the people who are involved in making sure that this forex is available.

“I am part of the committee allocating those forex and I know and I can see some of you here; we gave you forex, but you returned it. And the reason that was given was that the forex was not enough to import.

“But the truth is that if you go to the market today and buy products and land here, that you are required to sell it at N145 max. That is the main reason why people are not importing. It is not forex; we have addressed the forex issue.”

N141 to N145 per litre

In the build up to the disparity in prices across the counttry, the NNPC stations, during the last quarter of 2016, increased the pump price of petrol at its retail outlets by N4 from N141 to N145 per litre.

Though the new N145 price remains within the maximum price cap fixed by the Federal Government last May, this is the first time fuel at NNPC’s outlets will be sold at that price.

Hitherto, prices had been hovering between N141 and N143 per litre at NNPC and affiliate stations in major cities and even less at stations in the hinterlands. Group Public Affairs Division of NNPC, however, said in a statement that the N4 per litre price hike by NNPC was interplay of market forces.

He said: “Marketers can sell between N135 and N145 range price regime introduced in May. It is simply an interplay of market forces,” the then Group General in charge of the division, Garba Deen Muhammed, said.

The N145 per litre price at NNPC, a management staff of the corporation said, was to minimise the losses the NNPC will record by the end of the year through its monopoly of importation.”

Already, the revenue losses recorded by the corporation had hit N35.4 billion in two months, as profits woes rocking the corporation worsened. The monthly financial and operations report released on the corporation’s website last September showed that the losses were recorded in July and August. NNPC stated that the force majeure declared by SPDC as a result of vandalised 48-inch Forcados export line was a drag to NPDC, its subsidiary and the overall group performance.
High prices

Prices of petroleum products have remained high across the country. This is notwithstanding the efforts by the NNPC to crash prices through massive importation supported by output increase from the local refineries. The average price paid by consumers for petrol increased by 50.1 per cent year-on-year and 0.7 per cent month-on-month to N149.8 in February 2017 from N148.7 in January 2017.

Like petol, like diesel

It’s not only petrol that is in this high price debacle, the average price paid by consumers for Automotive Gas Oil (AGO) or diesel also increased by 3.68 per cent month-on-month and 68.74 per cent year-on-year to N249.38 last February from N240.52 in January. The highest average price for diesel were, N280 in Adamawa; Ebonyi, N272.5 and Cross River and Borno, 271, while those with the lowest were Oyo, N226.67; Bauchi, N226 and Osun, N220.

January price hike

Petrol price began its upward movement last January, when the price suffered 36 per cent increase. The price increased by 35.7 per cent year-on-year in January, the NBS data entitled: “Premium Motor Spirit (Petrol) Price Watch for January,” showed.

The report stated that petrol increased by 35.7 per cent year-on-year and 1.35 per cent month-on-month to N148.7 in January 2017, from N146.7 in December 2016. It noted that states with the highest average price of petrol were Borno, which sold the product for N164.09, Oyo; N161.00 and Ebonyi N156.47. It said: “States with the lowest average price of petrol were Kogi, which sold at N144.67, Ekiti and Imo, N144.64 and Abuja, which sold at N144.20.’’

The states with lowest average price sold the product below the recommended price of N145. Fuel prices are collected across all the nation’s 774 local governments and the FCT from over 10,000 respondents and locations. The report reflected prices households actually bought fuels together with the prices reportedly sold by the fuel suppliers.

Conclusion

Price disparity is hallmark of full deregulation. The Federal Government, therefore, needs to fully deregulate the product’s market to encourage more participation from the private marketers and end the losses by NNPC.

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