The PPPRA is the
government agency that regulates the prices of petroleum products in the
country and its template has always offered insights into how the pricing of
these products are determined by the regulators.
As of December 28 last
year, the official pricing template for petrol by the PPPRA showed that the
Federal Government subsidised the product by N6.45 per litre. The Expected Open
Market Price at that time was N93.45, which was N6.45 higher than the then
retail price of N87 per litre.
On the revised template,
the Estimated Open Market Price set by the regulator is now N84.78 for NNPC
fuel stations and N85.1 for stations run by other oil marketer companies.
The EOMP is the summation
of the landing cost of petrol and subtotal margins. Such margins include
transporter’s cost, dealer’s charge, bridging fund, administrative charge, etc.
Our correspondent said that the EOMP, therefore, is the true cost of the
product.
Before the release of the
revised template, the EOMP was usually higher than the retail/pump price of
petrol at filling stations. The difference between the retail price and the
EOMP was what the Federal Government paid as subsidy to oil marketers.
However, the new EOMP is
lower than the retail price of N86.5, which was set by the Federal Government
as the amount at which petrol should be sold nationwide. The implication is
that Nigerians are paying an extra N1.4 for the commodity whenever they buy PMS
at non-NNPC run petrol stations and N1.22 extra for every litre of petrol
bought at NNPC-run filling stations.
On the extra amount paid
by consumers for the commodity, the Group General Manager, Corporate Planning
and Strategy, NNPC, Mr. Bello Rabiu, while explaining the template, told our
correspondent that the negative subsidy would be remitted to the Petroleum
Support Fund in line with the PPPRA guidelines.
He said, “The savings
under such a regime could be domiciled in the PSF as a buffer to fund future
subsidy (if any) that may arise during high oil price regime or invested by the
industry in supply and distribution efficiency improvement projects such as
decongestion of Apapa area, Single Point Monitoring in Port Harcourt and Warri,
complimentary rail services, inland waterways, etc.”
The PPPRA, after getting
approval from the Federal Government, had announced last Tuesday that retail
filling stations belonging to the NNPC would from Friday, January 1, 2016 sell
petrol at N86 per litre, while other oil marketers would sell the commodity at
N86.5 per litre.
The Executive Secretary,
PPPRA, Mr. Farouk Ahmed, while announcing the new price of PMS in Abuja, had
told journalists on Tuesday that the reduction in the price of the commodity
was due to the implementation of the revised components of the petroleum
products pricing template for PMS and House Hold Kerosene.
He said the template would
be reviewed on a quarterly basis as it was geared towards ensuring an efficient
and market-driven price that would reflect current realities.
Ahmed had said, “Since
2007, while crude oil price had been moving up and down, the template has
remained the same. This made it necessary for us to introduce a mechanism
whereby the template would be sensitive to the price of crude oil.
“However, the template is
not static, as there would be a quarterly review and if there is any major
shift, the Minister of State for Petroleum Resources would be expected to call
for a review, either upwards or downwards. If there is no major shift, the
price would continue from January to March 2016. In addition, there would be a
Product Pricing Advisory Committee that would be set up to advice the PPPRA
concerning movements in the price of crude oil.”
On why the NNPC sold at a
lower price than other oil marketers, Ahmed explained that it was due to the
fact that it was cheaper for the corporation to import products, compared to
the independent and major oil marketers.
Some oil marketers had
told our correspondent that although it was possible to sell PMS at a “reduced
price”, Nigerians might not be ready to absorb future fluctuations or
modulations in the pump price of petrol.
The Corporate Affairs
Manager, NIPCO PLC, an oil marketing firm, Mr. Lawal Taofeeq, said, “It is
possible, but the issue that government needs to understand is that, should
there be fluctuation in price, are Nigerians ready to absorb it? If the price
of crude oil should go up again, will Nigerians be ready to pay the resultant increased
cost for petrol? Thus, there is need for adequate education in this matter.”
The Minister of State for
Petroleum Resources, Dr. Ibe Kachikwu, on December 27 last year, had told
journalists in Kaduna that the government was currently not paying subsidy on
petrol.
“Today, there is no
subsidy; we are selling the product at N87; in January, we will look at what
the trend is, we will announce (a new) price if that is less than N87; we will
announce it and if it is more than that, we will have to announce it,” the
minister, who also doubles as the Group Managing Director of the Nigerian
National Petroleum Corporation, had said.
