The Federal Government on Sunday announced a reduction in the pump price of petrol by N10 from N97 to N87 per litre.
The Minister of Petroleum Resources,
Mrs. Diezani Alison-Madueke, announced the reduction while briefing
State House correspondents at the Presidential Villa, Abuja.
Alison-Madueke said the reduction, which
took immediate effect, was because of the recent drastic fall in the
prices of crude oil in the international market.
The minister further directed the
Petroleum Products Pricing Regulatory Agency and the Directorate of
Petroleum Resources to immediately effect the change.
Alison-Madueke said, “As you may be
aware, there has been a lot of volatility in the price of petroleum
products, particularly crude oil, over the last few months. Invariably,
this has meant that the price of the product in Nigeria has also been
greatly impacted.
“It is as a result of this, under the
approval and directive of Mr. President and in line with Section 6
Clause 1 of the Petroleum Act, that it is my responsibility as the
minister of Petroleum to announce that there will be a reduction in the
pump price of petrol (Premium Motor Spirit) by N10.
“Therefore, the reduction will be from N97 per litre to N87 per litre effective as from midnight, Sunday January 18, 2015.
“In line with this, I have directed the
Petroleum Product Pricing Regulatory Agency and the Directorate of
Petroleum Resources to ensure that there is strict adherence to this new
pricing regime as soon as it takes effect from midnight Sunday, January
18, 2015.
“I do hope the entire country will benefit immensely from this reduction in the pump price of petrol.”
The minister said the Federal Government
had been watching events carefully in the last two weeks to ensure that
volatility did not destabilise the reduction in price.
She said the government had found it safe to implement the reduction at this time.
Following prolonged street
demonstrations against the decision of the government to remove subsidy
on the product per litre as announced on January 1, 2012, it was forced
to cut the pump price from N141 to N97.
The Federal Government, through the
PPPRA, had before now maintained the N97 fixed in 2012 after wide
protests against the decision of the government to withdraw subsidy on
the product.
A banker and energy analyst who handles
transactions for fuel importers in Nigeria calculated that the product
ought not to sell for more than N84 at filling stations across the
country, thereby automatically wiping off the government’s subsidy on
petrol.
His position was complimented by a website, globalpetrolprices.com,
which claims to be providing the most wide-ranging and reliable data on
retail fuel prices around the world, which put the price at which fuel
ought to be sold in Nigeria at N87.39 per litre.
The website says its data are collected
on a weekly basis using information from government institutions,
regulatory agencies, major media sources and oil companies.
Using the spot price of gasoline in the
Amsterdam-Rotterdam-Antwerp refining hub in Northwest Europe, where most
of the country’s fuel import comes from, the Nigerian banker said on
Friday that the product cost and freight component of petrol pricing was
$511 per metric tonne or N63.10 per litre, using the PPPRA exchange
rate of N171.36 to a dollar. The spot price for ARA gasoline 10ppm was
$461 per metric tonne and the freight rate was $50 per metric tonne.
The PPPRA said on its website, “Product
cost is the monthly moving average cost of products cost as quoted on
Platts Oil gram. The reference spot market is North West Europe. Freight
is the average clean tanker freight rate as quoted on Platts. It is the
cost of transporting 30,000mt (30kt) of product from NWE to West
Africa.”
The cost and freight of PMS as of
December 29, 2014 was $566.57 per metric tonne or N72.40 per litre,
according to data obtained from the PPPRA website. On that day, the
price of global benchmark Brent crude closed at $57.94 per barrel.
Other items in the PPPRA pricing
template include trader’s margin (N1.28 per litre), lightering expenses
(N3.91 per litre), Nigerian Ports Authority fee (N0.67), financing cost
(N0.35), jetty depot throughput charge (N0.80), and storage charge
(N3.00). The distribution margins comprised retailers (N4.60),
transporters (N2.99), dealers (N1.75), bridging fund (N5.85), marine
transport average (N0.15) and administrative charge (N0.15), which added
up to N25.50.
As of December 29, when the PPPRA last
updated the pricing template, the Expected Open Market Price (retail
price) of petrol was N97.90 per litre (addition of the cost of petrol
and freight at N72.40 and the extra N25.50), with subsidy on the product
dropping to N0.90 per litre, compared to N44.94 on November 3, 2014,.
The banker, however, said, “Crude oil
was $57.98 on December 29. Today (Tuesday), crude is $46.26; that’s a 25
per cent fall in crude oil feedstock price. The naira has stabilised,
hence we should have no exchange rate impact. Although freight rates are
higher due to high demand for vessels to move products (especially
diesel), they are likely to have very little to modest impact on the
eventual import cost.
“We should see at least a 15 to 20 per
cent reduction in fuel price. Thus the price could likely be around N80
to N84 per litre if they are eventually adjusted this week.”
Data obtained from globalpetrolprices.com
on Sunday put the market price of petrol in Nigeria at $0.51 per litre
as of January 12; that is, N87.39, using PPPRA’s exchange rate of
N171.36 to a dollar. On the day the price was calculated, Brent crude,
equivalent of Nigeria’s Bonny Light, sold for around $48 per barrel in
the international market.
However, the price of crude has since fallen further. It was $46.03 on Sunday.
The site explained, “All countries have
access to the same petroleum prices of international markets but then
decide to impose different taxes. As a result, the retail price of
gasoline is different.”
It put the prices of petrol for other
oil-producing countries such as Libya, Saudi Arabia, Algeria, Sudan,
Qatar and Oman at $0.12, $0.16, $0.26, $0.35, $0.27 and $0.31,
respectively.
There have been calls on the Federal
Government to reduce the pump price of petrol because of the sharp
decline in the price of crude oil, which constitutes a major component
in the pricing template.
The Minister of Finance, Dr. Ngozi
Okonjo-Iweala, had in the overview of the 2015 budget proposal dated
December 17, 2014, said preliminary estimates showed that “the
break-even crude oil price at which the landed cost of PMS will equal
our current price of N97 per litre so that there will no longer be
subsidy is about $60 per barrel.
“It is only when the crude oil price
(Bonny Light) falls below this level that the pump price of PMS (which
includes N15.49 per litre distribution and Petroleum Equalisation Fund
costs) can begin to come down. The breakeven price of crude oil would
have been higher were it not for the N15.49 per litre distribution
margin.
“Many Nigerians have rightly asked when
the pump price of Premium Motor Spirit will be reduced, given the
declining price of oil. As you know, the relevant agency of government
responsible for petroleum product pricing matters is the PPPRA. The
information we have is that they are now updating their template based
on recent developments and we hope they can address this issue soon.”
Our correspondents gathered that the
pump price of the product had not changed in filling stations before now
because the Federal Government had made an arrangement with petroleum
product marketers to use the difference between the regulated price of
N97 per litre and the reduced retail price to settle the arrears of
subsidy being owed the importers.
Nigeria, Africa’s top oil producer,
relies on importation for most of its fuel needs as the country’s
refineries are in a poor state. The fall in oil price has triggered the
decline in the landing cost of petrol.
The landing cost of petrol dropped to N82.41 per litre as of December 29, from N127.57 on November 3, according to PPPRA data.
However,
the spokesperson of the PPPRA, Mr. Lanre Oladele, told one of our
correspondents on the telephone that the agency remained committed to
the stand of the Finance minister as regards the pump price of petrol.
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