Policy somersault? FG finally pegs fuel at N86.50 per litre

By Ali Smart . . .

After what seem to be a back and front movement, and contrary to what Nigerians were initially made to believe, the federal government on Tuesday announced that premium motor spirit (PMS) will start selling for N86.50 from January 1, 2016.

Announcing the new price regime, the Petroleum Products Pricing Regulatory Agency (PPPRA) said the new price would take effect from January 1 to March 31, 2016 under a revised pricing template.

This is however contrary to initial statements made by the Minister of State for Petroleum, Dr. Emmanuel Ibe Kachichwu, who hinted, while speaking with newsmen in Port Harcourt on Christmas eve that petrol would sell for N85 from January. He however reversed himself few days latter on Sunday in Kaduna, when he disclosed that the new pump price will be announced in January, with a caveat that President Muhammadu Buhari favors the retention of the current N87 pump price.

Speaking with newsmen in Abuja, the Executive Secretary of the PPPRA, Farouk Ahmed, also hinted that the NNPC is expected to sell petrol at N86 per litres to customers at its retail outlets, while other operators would sell at N86.50k to their customers.

According to him, the new price regime shows that there is a reduction of N1 and 50k drop from the current official pump price of N87 per litre which will become obsolete on December 31, 2015.

Farouk said that the announcement follows the approval by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, for the implementation of the revised template.

Read also: Fuel scarcity: NNPC makes U-turn on IPMAN

The PPPRA boss also disclosed that the PPPRA has approved for importation of three million metric tonnes of petrol in the Quarter-1 (Q1), 2016 import allocation, out of which the NNPC was granted 78 per cent of the total allocated volume for the period, while the balance of 22 per cent would be supplied by other oil marketing companies.

According to Farouk, a couple of elements that were affected by the price review include traders margin which was revised downwards from N1.47 per litre to zero; lightering expenses, from N4.07/litre to N2.00/litre; charges by the Nigerian Port Authority (NPA), from N0.77/litre to N0.36/litre; jetty throughput charges, from N0.80/litre to N0.40/litre; storage charge, from N3.00/litre to N1.50/litre; bridging fund from N5.85/litre to N4.00/litre and ex-depot price, from N77.66/litre to N77.00/litre.

He stated that other elements such as retailers margin were however reviewed upwards from N4.60/litre to N5.00/litre; transporters, from
N2.99/litre to N3.05/litre; dealers’ margin, from N1.75/litre to N1.95/litre.

“Accordingly, the ex-depot price of PMS shall be N77.00k per litre, while the pump price shall be N86.50k per litre in line with the prevailing
market trend.

“The key thing here is that with the revision, the open market price has come down slightly. The new pump price is N86.50k, down from N87 per litre, effective from January 1, 2016.

“However, for NNPC import, because an element of the template which is the financing cost is not captured in the NNPC template, therefore NNPC import is slightly lower, the NNPC price will be N86 per litre, meaning that if you go to NNPC retail stations, you should buy at N86 per litre and then
N86.50k in other stations,” Ahmed said.

He further explained that the whole idea is to instill competition and stability in the downstream petroleum sector.

“Another important point is that this is not static as there will be a quarterly review of the price template. However if there is a major shift, the minister may call for a review either upwards or downwards depending on the market.

“But for now, at least for the first quarter, this price remain for three months, from January to March,” he added.

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