FG Approves New Petrol Prices: NNPC to Sell at N86/litre, Marketers N86.50k

Farouk Ahmed,

• New prices to last from Jan 1 to March 31
• PPPRA reviews pricing template, grants import permits for 3mmt of fuel for Q1
• NLC warns against removal of fuel subsidy under any guise

Chineme Okafor and Paul Obi in Abuja  

The federal government, through the Petroleum Products Pricing Regulatory Agency (PPPRA), on Tuesday approved new pump prices of petrol starting from January 1 to March 31, 2016 under a revised pricing template.

Under the new pricing template, the government approved two pump prices – one for the retail outlets of the Nigerian National Petroleum Corporation (NNPC), which will sell at N86 a litre, and another for retail outlets operated by private business concerns in the downstream petroleum sector, which will dispense at N86.50 a litre.

The Executive Secretary of the PPPRA, Farouk Ahmed, disclosed this to journalists in Abuja. He said NNPC was expected to sell petrol at N86 per litre to customers at its retail outlets, while other operators would sell at N86.50k per litre.

He said both open market prices reflect a drop of N1 and 50k respectively from the current official price of N87 per litre, which will no longer obtain after December 31.

Ahmed added that the announcement followed the approval granted by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, for the implementation of the revised template.

Similarly, he disclosed that PPPRA had approved for importation three million metric tonnes of petrol in the first quarter (Q1) of 2016, of which NNPC was granted 78 per cent of the total allocated volume for the period, while 22 per cent would be supplied by other oil marketing companies.

According to Ahmed, the cost elements that were affected by the review of its pricing template for petrol included the 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 Ports 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 the retailers’ margin were however revised upwards from N4.60/litre to N5.00/litre; transporters’ margin, from N2.99/litre to N3.05/litre; and dealers’ margin, from N1.75/litre to N1.95/litre.

“Accordingly, the ex-depot price of petrol 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 for private marketers is N86.50k, down from N87 per litre, effective January 1, 2016.

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

He noted that the new price regime was being introduced to engender 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 pricing 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 remains for three months, from January to March,” he said.
Ahmed further disclosed that there is supposed to be a pricing advisory committee made up of industry technocrats, which would meet from time to time and advise the PPPRA on price movements.

“But the PPPRA will still sit down and do its work while the committee will advise it on any drastic movement in price,” he said.
He also confirmed Kachikwu’s recent statement that there was no subsidy on petrol under prevailing market trends (the prevailing price of crude oil in the international market).

“The open market price is N86.29k, if you do the calculation, that means there is an element of over-recovery and what we will do now is that we will go back to the marketers and bill them for the recovery.

“With regards to NNPC, their arrival is N85.93k but they are selling at N86, so there will also be an element of over-recovery. However, we are comfortable with the numbers,” he said.

Speaking more on the review, Ahmed said: “In order to encourage investments in retail outlets, we slightly increased the provisions in the retailers, transporters, and dealers’ margins.

“In terms of the distribution margins, we have also revised down the bridging fund and increased the retailers, dealers and transporters’ margins.”

On the first quarter import permits, Ahmed did not disclose the identity of marketers selected for the period but stated that the agency had taken into consideration three key factors in selecting them.

These factors, he said included retail outlets ownership; marketers’ performance in previous quarterly allocations; as well as the challenges in sourcing foreign exchange.

He noted that in allowing NNPC to import 78 per cent of the total allocated volume, the agency envisaged that the corporation would have fewer challenges sourcing for foreign exchange while the Central Bank of Nigeria (CBN) would be able to comfortably take care of the foreign exchange demands of other marketers who would import the remaining 22 per cent.

“This measure is to guarantee uninterrupted fuel supply nationwide. Marketers are required to note that there shall be a mid-quarter review of performance where volumes of non-performing marketers including the NNPC shall be withdrawn and reallocated to performing marketers,” Ahmed explained.

He also stated that the NNPC had in previous allocations done up to 111 per cent in product importation to stabilise supply, adding that future allocations shall be based on 100 per cent performance in the first quarter allocation.

Ahmed equally stated that the revised template was built a little bit above the domestic consumption of 40 million litres per day.
He disclosed that the agency was currently verifying for the months of October, November and December marketers’ subsidy claims, after which the Debt Management Office (DMO) would be advised on further action.

PPPRA’s briefing on the new prices of petrol and its revised pricing template came just as the Nigeria Labour Congress (NLC) said it would resist all attempts to remove the subsidy on petrol through the back door.

The body observed that there had been frantic efforts by the All Progressives Congress (APC)-led federal government to hoodwink Nigerians through deception in the planned removal of fuel subsidy.

In a statement released yesterday by the NLC and signed by its General Secretary, Dr. Peter Ozo-Eson, the body maintained that the move by the Muhammadu Buhari-led government to remove fuel subsidy was a replica of the 2012 fuel subsidy crisis, of which many chieftains of APC were the kingpins who led the protest against its removal.

Ozo-Eson said: “In the past few weeks, we have heard discordant tunes from government officials and chieftains of the ruling APC on what the future portends for the price of petroleum products and the management of the subsidy scheme.

“Party chieftains who supported and encouraged the massive protests against subsidy removal in 2012 are now preaching the inevitability of subsidy removal!

“The Minister of State for Petroleum first announced that come next year the price of petrol will revert to N97 per litre and that subsidy will be phased out.

“Two days thereafter, he denied this and stated that what he said was that the price will operate within a band of N87 to N97 and that this did not mean removing the subsidy.

“The same minister now says that the price of petrol will be N86 in January, signifying the deregulation of the sector.
“These vacillations and flip flops are, in our view, designed to confuse Nigerians and pave the way for deregulation of petrol prices through the back door.

“The fact of the matter is that as long as we continue to depend on imported refined products, deregulation and the abandonment of the subsidy scheme will unleash hardship on Nigerians.”

The NLC general-secretary also stressed that the determination of recommended prices of petroleum products was the responsibility of PPPRA.

“By law, the board of PPPRA is made up of stakeholders. None of the contradictory prices the minister is throwing up is a product of the agency.

“Indeed, the board of the PPPRA has not operated for over two years, although we have made repeated demands for the convening of the board.

“We call on the government to be guided by the rule of law, and constitute and convene the board of PPPRA in accordance with the law without further delay.

“This will enable the agency to examine and agree a new pricing template based on the realities of today. Any price unilaterally determined and announced by the minister is in violation of the law.

“In the meantime, we wish to restate our opposition, adopted at our Central Working Committee (CWC) emergency meeting of 22nd December, to any attempt by the government to increase the price of or remove the subsidy on petrol.

“We reiterate our directive to our state councils and industrial unions to commence the process of mobilisation prior to a meeting of the National Executive Committee (NEC) to be convened in the New Year,” he said.

Also speaking to THISDAY on the issue, NLC President, Mr. Ayuba Wabba, expressed great concern over comments credited to an APC chieftain and former governor of Lagos State, Bola Tinubu.

Tinubu had called for the removal of fuel subsidy, a policy he vehemently opposed in 2012 under President Goodluck Jonathan’s administration, ostensibly for political reasons.

Wabba said: “It is a great surprise to hear that Tinubu is calling for the removal of fuel subsidy,” adding that NLC would seriously resist the plan to remove the subsidy.

He held the view that Tinubu’s comments fall flat on the face of the APC campaign, given that the party in different forums had supported the retention of fuel subsidy.

The APC and Tinubu have come under intense criticism over their support for the removal of fuel subsidy, with many describing their new stance as hypocritical, given that Tinubu was believed to be the brain behind the sponsorship of the protests, particularly in Lagos in 2012, against the removal of subsidy.

REVISED PPPRA PRICING TEMPLATE FOR PETROL
COST ELEMENTS       OLD (Per Litre)    NEW (Per Litre)
Traders’ Margin                N1.47                     N0.00
Lightering Expenses           N4.07                    N2.00
NPA Charge                     N0.77                    N0.36
Jetty Throughput               N0.80                     N0.40
Storage Charge                 N3.00                    N1.50
Bridging Fund                   N5.85                    N4.00
Ex-depot Price                 N77.66                  N77.00
Retailers’ Margin              N4.60                    N5.00
Transporters’ Margin        N2.99                    N3.05
Dealers’ Margin                1.75                       N1.95
• This template excludes cost and freight charges for importing petrol into Nigeria