Petrol Price May Hit N190 As Oil Price Nears $60

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 PUNCH

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