Confusion as FG announces reduction of pump price of petrol
•As crude oil crashes further to $27/b
There are indications that reduction of the pump price of Premium Motor Spirit (PMS) otherwise called petrol has resulted in confusion in the downstream industry because the federal government directed a downward review without proposing a specific pump price for petrol.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, had on Wednesday, directed the Nigerian National Petroleum Corporation (NNPC) to reduce the Ex-Coastal and Ex-depot prices to reflect the current market realities.
According to him, “the drop in crude oil prices has lowered the expected open market price of imported petrol below the official pump price of N145 per litre. Therefore, President Muhammadu Buhari has approved that Nigerians benefit from the reduction in the price of petrol which is a direct effect t of the crash in global crude oil prices.
“In view of this situation, based on the price modulation template approved in 2015, the federal government is directing the NNPC to reduce the ex-coastal and ex-depot prices of petrol to reflect the current market realities. Also, PPPRA (Petroleum Products Pricing Regulatory Agency) shall subsequently issue a monthly guide to NNPC and marketer on the appropriate pricing template.
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“The agency is further directed to modulate pricing in accordance with prevailing market dynamics and respond appropriately to any further oil market development. It is believed that this measure will have a salutary effect on the economy, provide relief to Nigerians and would provide a framework for sustainable supply of PMS to our country.”
Although the Minister did not specify whether it is deregulating the entire downstream industry or not, industry stakeholders said the directive to the PPPRA to issue a monthly guide on appropriate pricing template means the industry has now been deregulated fully.
Reacting to the development, the Chairman of Major Oil Marketers Association of Nigeria (MOMAN), Mr. Tunji Oyebanji, told Tribune Online that MOMAN is in support of the federal government’s policy that will provide succor to Nigerians and will do everything to see that the government’s policy succeeds.
According to him, “We are in support of federal government’s policy that will provide succor to Nigerians especially during these hard times of coronavirus pandemic and declining crude oil prices. We will do everything to see that the government succeeds.
“However, we are waiting for the directives by the federal government on the pump price of petrol. We are also hoping that such policy initiatives will include actions that will lead to long term sustainability of the downstream and make it more resilient and grow in the future.”
When asked if the market has been deregulated, he stated that “we are waiting for the directive from the government. I heard it just like you heard it today (Wednesday). You will agree with me that some trucks just loaded today, some are already on their way outside Lagos.
So, when we see the directive from the government, it will state the details because there will definitely be some reconciliation to be made and how much it will be sold.”
Meanwhile, crude oil prices continued to move south on Wednesday as was selling at $26.75 per barrel as at 6.45 pm on Wednesday while Bonny Light was selling at $28.68 per barrel at the same time on Wednesday.
With crude oil selling below $30 per barrel, industry experts are predicting a pump price of petrol between N120-N130 per litre.
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Besides, the former Executive Secretary, MOMAN, Femi Olawore, said the government made a smart decision by asking the PPPRA to review the pricing template and advice accordingly but the government has not deregulated and urged the government to use the opportunity to deregulate.
According to him, “the market is not fully deregulated as it is. Why I said so is this, the simple and straight forward statement should be ‘the downstream sector is hereby deregulated. Price reduction is not deregulation. Also, the price increase is not deregulation.
Deregulation is freeing the market to allow the forces of demand and supply to operate. If you allow the forces of demand and supply to operate, then you will be able to allow the market to determine and dictate the correct price.”
He said this is the best time to deregulate and the government should have nothing to do with price dictation.