Stories by Chineme Okafor in Abuja
The Petroleum Products Pricing Regulatory Agency (PPPRA) has said that expects oil marketers in Nigeria to resume the importation of petrol into the country following its recent announcement of the abolishment of pump price cap.
It said that the government’s decision to abolish the price cap practice followed developments in the global oil market wherein prices of crude oil have slumped, subsequently impacting the landing cost of refined petroleum products especially petrol which is subsidised by the government.
For years, Nigeria had subsidised petrol consumption, paying huge sums of monies to select private oil marketers who imported the product through import permits issued by the PPPRA.
In 2016, the government backed down on meeting the financial obligations associated with the subsidy payments through the introduction of a ‘price modulation’ mechanism. This had forced the private oil marketers to back out, leaving the business of petrol import for the NNPC alone.
The NNPC in meeting this responsibility also incurred cost it termed under-recovery. It however used crude-for-product swap deals to fulfil this role.
However, the PPPRA announced recently that the recent plunge in the price of crude oil and petroleum products occasioned by the outbreak of the COVID-19 pandemic and slowing global oil demand resulted in the decline of the Expected Open Market Price (EOMP) of petrol below the government approved pump price cap of N145per litre.
The PPPRA explained that the decline was over 30 per cent below the official pump price, and this meant that the country ought to adjust the official pump price of petrol based on the 2016 approved price cap.
“In exercising one of its key statutory mandates to determine the pricing policy of petroleum products as enshrined in the PPPRA Act No.8 of May 2003, the agency hereby announces a new price regime of Premium Motor Spirit (PMS) and other petroleum products as approved by the government,” it said in a statement, adding that a price of N125 per litre would be used in the country for the rest of the month of March 2020 after which prevailing market fundamentals will be used to determine future pump prices.
According to the agency: “Going forward, PPPRA will continue to monitor trends in market fundamentals and announce a monthly guiding/expected open market price at the beginning of every month, effective 1st April 2020.”
On its expectations that oil marketers would resume importation of petrol into the country, the PPPRA stated: “It is expected that the new price regime will emplace a more transparent pricing model, stimulate investment growth in the downstream sector and encourage resumption of products importation by Oil Marketing Companies (OMCs), translating to more job creation as many depots and facilities that are presently dormant will now become active.”
The Minister of State for Petroleum, Chief Timipre Sylva, had stated that the federal government had directed the National Petroleum Corporation (NNPC) to reduce “Ex-coastal and ex-depot prices of PMS to reflect current market realities.” Sylva, who said the reduction would rejuvenate the economy and bring relief to Nigerians, added that the PPPRA would also provide a framework for a sustainable fuel supply.
He added that the Petroleum Ministry would continue to encourage the use of natural gas as an alternative to fuel consumption.
The statement said: “The drop in crude oil prices has lowered the expected open market price of imported petrol below the official pump price of N145 per liter.
“Therefore, Mr. President has approved that Nigerians should benefit from the reduction in the price of PMS, which is a direct effect 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 Nigerian National Petroleum Corporation (NNPC), to reduce the ex-coastal and ex-depot prices of PMS to reflect current market realities.