Why NNPC ex-depot price cut may not affect petrol

Pump price should not exceed N70, PDP insists

Though the Nigerian National Petroleum Corporation (NNPC) yesterday reduced ex-depot price of petrol from N113.28k per litre to N108.00k per litre across its products loading facilities, the reduction may not be reflected at filling stations.

A letter sent to marketers by the Petroleum Products Pricing Regulatory Agency (PPPRA) dated April 30th had instructed them to sell petrol between N123.50 and N125.00 per litre.

The letter signed by the Executive Secretary of PPPRA, Abdulkadir Saidu and pegged on the new pricing regime introduced by the Federal Government earlier in March said: “The existing guiding pump price band of N123.50 and N125.00 per litre shall remain through the month of May, 2020.”

The Managing Director, Petroleum Products Marketing Company (PPMC), Musa Lawan, said the firm reduced its ex-depot price from N113.28k per litre to N108.00K per litre across all its products loading facilities, a development which is normal under a deregulated market.

According to Lawan, the new ex-depot price of petrol reflects the company’s market strategy to make more sales while complying with the PPPRA price template. Specifically, he said the new price regime would enable the PPMC to boost its sales volumes from the billions of litres of petrol it has in storage while providing affordable price to millions of customers.

He stated that the new price was arrived at after extensive review of market realities by the PPMC internal price review unit.

Lawan noted that the price of the Automotive Gas Oil (AGO), otherwise called diesel, being already deregulated, is determined by market forces.

“On March 18, 2020, the Nigerian National Petroleum Corporation (NNPC) reviewed its PMS ex-coastal, ex-depot and NNPC Retail pump prices.

“Thus, effective 19 March 2020, NNPC ex-coastal price for PMS was reviewed downwards from N117.6/litre to N99.44/litre while ex-depot price was reduced from N133.28/litre to N113.28/litre,” he said.

While PPPRA is charged with the responsibility of setting the price of petroleum products, NNPC remained a marketer retailing and wholesaling the products to other retailers, alongside other importers of the products.Though the current reduction could attract retailers to NNPC, marketers are legally expected to sell between N123.50 and N125.00 per litre

The Executive Secretary and Chief Executive Officer, Major Oil Marketers Association of Nigeria, (MOMAN), Clement Isong, said the landed cost of petrol had increased by almost $80 per ton in the country.

“Today, at the forex of N360, and you know you can’t find N360, whoever is importing will be above N106 per litre. People who bought the product about three weeks ago can sell at N108 per litre. NNPC has moved to compete with that price. But this is a product that was sourced at three weeks ago price.

“Very soon, the pump price will go up. Two variables that affect the pump price are exchange rate and its availability, as well as Platts. As soon as Europe and U.S. opened partially, Platts have already gone up, it means that the landing cost in Nigeria has gone up and it means that the N108 that NNPC came down to will not last more than one or two weeks,” Isong stated.

MOMAN Chairman, Tunji Oyebanji, had earlier raised concern over the current pricing regime of the Federal Government, stating that full deregulation as against price modulation would bring about long-term stability in the downstream sector in the country.

The association had equally insisted that price equalization mechanism managed by the Petroleum Equalisation Fund (PEF) should be discontinued and its law repealed as the cost of administration of equalization has become too high and the unequal application of payments by marketers distorts the market and creates inequities and unfair competition.

Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) had similarly said that the reduction in the ex-depot price by NNPC was commendable and remained an indication that the country was moving towards deregulation of the market.The National President of the group, Dr. Billy Gillis-Harry, however, stated that the pump could increase in the coming week going by market realities.

Gillis-Harry, who had said its members across the country had recorded massive losses due to the recent changes in the price of petrol, called for a level playing field where all marketers would access foreign exchange at the official rate.

Meanwhile, the Peoples Democratic Party (PDP) has rejected the Federal Government’s reduction of ex-depot price of fuel to N108 litre, insisting on a new pricing template that must accommodate a pump price of between N60 and N70 per litre to reflect the crash in the price of crude oil and petroleum products in the international market.

The party described the N108 ex-depot price as fraudulent and a far cry from the appropriate pump price template that should not exceed N70, given the prevailing situation in the international oil market.

The PDP, in a statement by its National Publicity Secretary, Kola Ologbondiyan, noted that the N108 ex-depot price with a projected additional N9 per litre Expected Open Market price was completely unacceptable to Nigerians.

The opposition party condemned the practice of allegedly keeping the indices and parameters used in determining domestic prices of petroleum products in secrecy, pointing out that “such parameters obviously cannot be in tandem with the appropriate situation in the global industry”.

The PDP alleged that the All Progressives Congress (APC)-led Federal Government “has continued to shortchange unsuspecting Nigerians since the beginning of the year by refusing to end its corrupt interferences and allow market forces to determine the pump price of fuel to reflect current global prices.

“Our party insists that the Federal Government has no reason to continue to fleece Nigerians particularly in the face of worsening economic crisis occasioned by the COVID-19 pandemic which it had also failed to effectively handle,” the party stated.

It demands that the APC Federal Government “should immediately reduce both the ex-depot and pump price as well as surrender the billions of naira accruable as overcharge from the inappropriate fuel pricing since the crash in crude oil price and channel the funds as palliatives to Nigerians.”

The party charged the NNPC not to waste further time in addressing Nigerians on oil subsidy regime in the last five years which it claimed included a hazy under-recovery for unnamed West African countries, running into trillions of naira.