Government, in March this year, announced total deregulation of petrol across the country, but Nigerians still pay average of N11.9 billion every month to ensure the uniform price of fuel across the country.
Following forced removal of subsidy in the last four months, a total of N47.7 billion was paid by consumers, in what stakeholders likened to “forcing payment from Nigerians to ensure prices of Coke, Maggi and salt remain the same in all parts of the country.”
The payment was generated through the Petroleum Equalisation Fund (PEF) management board, between March and June this year when the Federal Government announced the deregulation of the downstream sector of the nation’s oil industry.
Minister of State for Petroleum Resources, Timipre Sylva, had insisted that the government would no longer subsidise Premium Motor Spirit (PMS), because the sector had been deregulated.
But against what should obtain under a deregulated regime, the Federal Government charged an average N7.51 on every litre of petrol that citizens buy to keep PEF in operation amid criticisms. But contrary to the purpose of the ‘pump price tax,’ per litre cost of the product failed to become uniform. Nigerians who live between 100km to 450km away from depots pay above pump price due to transport cost.
The Nigerian National Petroleum Corporation (NNPC) had stated that about 52 million litres of petrol was consumed daily in Nigeria, bringing the figure from March to June to about 6.4 billion litres.
So, while the official pump price of petrol was N121.50 per litre in June, data provided by the National Bureau of Statistics (NBS) revealed that the country was unable to keep to uniform price as petrol was sold in Gombe for N139.33; Adamawa, N138.00; and Taraba N135.50.The development defeated the reasons for setting up PEF. NBS disclosed that the products sold lower in states like Kwara (N123.86), Ogun (N124.38) and Oyo (N124.39).
While bridging cost hovers between N6 and N10, the monthly pricing template released by Petroleum Products Pricing Regulatory Agency (PPPRA), dated June 30, showed that Nigerians were charged N7.51 as additional cost from the core variables that determined how much should be paid on a litre of petrol.
CREATED by Decree 9 of 1975 and amended by Decree 32 of 1989, the fund was charged with the primary responsibility of reimbursing petroleum marketing companies for any losses suffered by them, solely and exclusively, as a result of sale of petroleum products at uniform prices throughout the nation.
As justified by the then government, bridging of transportation cost was introduced as a temporary measure, when turnaround maintenance (TAM) of the nation’s refineries was to be conducted. However, the scheme remained for decades as the state of the refineries has worsened.
PEF has stated that, while the initial projection was to have maximum of 10 per cent of total petroleum products bridged, while the remaining portion would be pumped through pipelines, the transportation scheme has consistently increased to about 40 per cent.
Besides, with poor state of refineries and ports in the Southeast and South-south, PEF wrote on its website that products were bridged from Lagos to the areas to address availability problems from the refineries in Port Harcourt and Warri.
Like other obsolete laws in the sector, fresh agitations have greeted the scheme, since government embarked on deregulation as marketers of the product and other stakeholders have insisted that the fund is a drainpipe and not needed in a market expected to survive on realities.
Coming at a time when labour unions are also warming up for showdown should the price of the product continue to increase, some industry players noted that removing the bridging cost would not only reduce the pump but allow investment into the different regions of the country.
A lawyer, Ameh Madaki, who specialises in energy matters, sees the scheme as a wasteful subsidy that achieves absolutely nothing for the downstream sector.
“Whatever informed its setting up originally is no longer relevant to the dictates of today’s economics and it deserves to be scrapped or merged with the Petroleum Products Pricing and Regulatory Agency (PPPRA), which itself needs to be restructured and re-engineered for greater relevance and efficiency,” Madaki said.
He said PEF would remain a corrupt drainpipe with no value to the Nigerian economy, arguing that since nobody paid transporters of food products to bridge the prices of food items for them to remain stable throughout the country, doing such for petrol remained senseless.
Former President, Nigerian Association for Energy Economists (NAEE), Prof. Wunmi Iledare, stated that the country could not pretend to deregulate and set the price at the same time, nor keep an equalisation agency.
“This is what we refer to as transfer payment syndrome. The way out is complex but doable.”Another expert with the Facility for Oil Sector Transparency and Reform (FOSTER), Michael Faniran, says the much-talked about deregulation was not holistic
“We are still operating a semi-deregulated market but even at that, the current banded pricing regime allows marketers to sell at different prices at different geographical areas based on their cost.
UNDER the new deregulation policy, PPPRA, central bank of Nigeria (CBN), NNPC, Budget Office, Federal Ministries of Petroleum Resources and Finance would determine the prices of petroleum products.
According to a document exclusively obtained in the presidency yesterday, the Federal Government said under the new guidelines for the deregulation of the downstream sector in its bid to incentivize the sector, it has set up a Price Review Committee (PRC), whose duty is to meet once a month to review prevailing price of petrol for each month.
The PRC began work in early April this year after the Federal Government pronounced the commencement of deregulation of the downstream sector on March 19, 2020. Executive Secretary of PPPRA, Abdulkadir Saidu said “the agency no longer fixes prices but rather provides a guiding price band within which the operators are expected to operate. This takes into account prevailing market conditions by monitoring petroleum products prices daily, using the average price of the previous month and other components like foreign exchange rates to determine prices for the following month, while ensuring reasonable returns to Oil Marketing Companies (OMCs).
But the Independent Petroleum Marketers Association of Nigeria (IPMAN), yesterday, said crisis was looming in the sub sector over pressure on government to scrap the PEF.The IPMAN position was contained in a statement issued, in Jos the Pleateu State capital, by its National Secretary Alhaji Danladi Garba Pasali.
The Federal Government through the Petroleum Products Pricing Regulatory Agency has announced a new price band of N140.80 to N143.80 per litre for Premium Motor Spirit, also known as petrol.
The PPPRA, in a circular dated July 1, 2020 to marketers, said, “After a review of the prevailing market fundamentals in the month of June and considering marketers’ realistic operating costs, as much as practicable, we wish to advise a new PMS pump price band of N140.80-N143.80 per litre for the month of July 2020.
“All marketers are advised to operate within the indicative prices as advised by the PPPRA.”
The agency had on May 31, 2020 announced a price band of N121.50 to N123.50 per litre for the product.
Sources at the Abuja headquarters of the agency said the rise in petrol price for July was primarily due to the increase in global crude oil prices, as PMS had been deregulated.
The Independent Petroleum Marketers Association of Nigeria (IPMAN) said they have agreed to sell petrol for N123 in compliance with government directive.
“The National Executive Committee (NEC) of IPMAN once more commends the Federal Government of Nigeria for the further reduction of the pump price of PMS to between N123.50k and N125 per litre,” IPMAN president Sanusi Fari said in a statement.
Two days after the Federal Government announced a downward review of the price of Premium Motor Spirit (PMS) from N145 to N125, marketers in Anambra are yet to adjust to the new price.
NobleReporters gathered that retail outlets in Awka, the state capital were still selling at N145.
A manager of one of the outlets on Enugu-Onitsha expressway said it was not realistic that they would adjust immediately when they still had products procured at the old rate.
The source said the reduction in pump price was good, but marketers should not be made to bear the cost.
“We cannot sell at N125 for now because the product we have came at above N141, let them allow us to sell off what we have now.
“The depot owners have to start loading based on the adjusted price and that will make us sell at the new goverment price,” he said.
Chief Cletus Obi-Okoye, the state Chairman of Petroleum Dealers Association of Nigeria said implementation of the new price regime should start with the depots.
Obi-Okoye said most of his members still have old stock and appealed that the marketers be allowed to exhaust their stock before enforcement commences.
However, the Department of Petroleum Resources (DPR) says it would ensure that marketers adjust to the new price.
Mr Okiemute Akpomudjere, DPR Operations Controller in the state, faulted the marketers for refusing to adjust their meters to reflect the new pump price, saying that the adjustment should be automatic.
“Our people are already in the field because there is an ongoing operation.
“The government pronouncement of reduction in pump price is a policy that has to be implemented.
“DPR will ensure that Nigerians, petrol customers are protected by ensuring immediate adjustment, “ he said.
The Federal Government on March 18 announced a downward review of price of petrol from N145 to N125 per litre in response to falling crude oil prices to less than 30 dollars per barrel
Following global crash in price of crude oil, the federal government has also approved a reduction in the pump price of price of the Premium Motor Spirit (PMS) also known as petrol from N145 to N130.
Sources at the presidential villa said the President Muhammadu Buhari approved the reduction in the pump price of petrol followed a presentation by the Minister of State on Petroleum Resources, Chief Timipre Sylva, to the ongoing Federal Executive Council (FEC) meeting at the Villa.
According to the source, who would not want to be named, Sylva had made a request to the FEC for the reduction of pump price of the product, based on the drop in the price of crude oil at the global market.
The implementation of Nigeria’s 2020 budget may suffer setback over the China’s recent outbreak of Coronavirus, forcing oil price to three-month low of $58 per barrel yesterday, from $60 last week
With this development, Nigeria may be losing about $2 per barrel. The Federal Government had in its 2020 budget benchmarked oil price at $60 per barrel, and a daily production of 2.1 million barrels per day (bpd).
Multiple sources familiar with trends in the global oil market are worried that the the disease may see oil price decline further in the weeks ahead.
China, which is a major market for crude oil in the world, appears to have slowed on its demand as major companies in need of fossil fuel are shutting down operations over fears of virus spreading further.
China’s coronavirus outbreak has rattled oil markets, sending prices sharply lower as investors worry that efforts to prevent it spreading will harm the country’s economy and reduce demand for crude.
Brent crude futures traded around 3% lower on Monday at $58.00 a barrel, their lowest level since October. US crude futures were down roughly 3 per cent.
The price of Brent, the global benchmark, has tumbled by about 10% since January 17, when Chinese authorities confirmed the death of a second person infected with the virus. It has spread rapidly since then, leading the Chinese government to impose restrictions on transportation. Full, or partial lockdowns, are in effect in 15 Chinese cities, covering 60 million people.
The death toll now stands at 80, with nearly 3,000 confirmed cases in mainland China and more than 50 in other places including the United States.
“As the human cost continues to rise, investors have become increasingly concerned about the potential economic consequences of the disease,” analysts at Rabobank said in a research note.
The virus could further weaken the Chinese economy, the world’s second biggest, which had already slumped to its slowest pace of growth in nearly three decades in 2019.
Ratings agency S&P Global said last week that China’s economic growth could contract by as much as 1.2 percentage points this year if spending on services such as transport and entertainment fall by 10 per cent.
There are big implications for energy markets. China is the world’s second-largest consumer of oil, according to the International Energy Agency, and reduced economic activity means less demand. Stephen Innes, chief market strategist at AxiCorp, said in a research note that travel restrictions would crimp demand for products made from crude oil, such as jet fuel.
Other economies are unlikely to pick up the slack. The International Monetary Fund last week downgraded its growth forecast for the global economy in 2020 to a tepid 3.3 per cent.
The coronavirus outbreak comes at a particularly bad time for oil prices, which were already under pressure from a global supply glut.
“The virus is fueling fears of cooling of oil demand, which would mean that the global oil market would be oversupplied to an even greater extent,” analysts at Commerzbank said in a research note.
The subsidy on Premium Motor Spirit, popularly known as petrol, has risen to N47.5 per litre as the expected open market price of the commodity hit N180.78 on Monday, latest data from the Petroleum Products Pricing Regulatory Agency showed.
Brent, the international benchmark against which Nigeria’s oil is priced, appreciated on Thursday to $67.86 per barrel, as it increased by $0.66 when compared with the previous day’s price.
Industry data put the cost of the commodity at $67.86 per barrel as of 10.50am Standard Eastern Time, a development that showed further positive movements in global crude prices.
This came as figures obtained from the PPPRA showed that the Nigerian National Petroleum Corporation was currently spending an average of N47.5 as subsidy on every litre of PMS.
Latest data from the PPPRA’s PMS pricing templates for December 12, 16, 17, 18, 19 and 23 put the expected open market prices of petrol per litre at N172.92, N177.33, N177.32, N174.81, N177.92 and N180.78 respectively.
But the ex-depot price for collection of petrol, as captured in the templates, remained at N133.28 per litre, indicating that the NNPC subsidised the commodity by an average of N47.5 per litre during the review period.
The NNPC has been the sole importer of petrol into Nigeria for more than two years, after oil marketers stopped importing the commodity due to crude price fluctuations and the halt in the payment of subsidy to oil dealers by the Federal Government.
Industry operators stated that the appreciation in crude oil prices would always lead to an increase in the amount spent as subsidy on petrol by the NNPC.
They noted that steps taken by the Organisation of Petroleum Exporting Countries had been impacting positively on the cost of crude oil in the international market, adding that the rise in price might be sustained till year end.
The Central Bank of Nigeria, in its economic report for November 2019, for instance, confirmed the appreciation in crude oil price.
The Federal Government has revealed that over 50 percent of filling stations located along the Magama Jibia/Niger border owned by foreigners are set up solely for the purpose of smuggling petroleum products.
The Minister of Information and Culture, Lai Mohammed disclosed this after he led a powerful delegation on an assessment tour to inspect the activities of the joint border patrol at sector 4 of the border drill in Katsina state.
Mr Mohammed added that since the closure of the filling station, the smuggling of petroleum products out of Nigeria has greatly been reduced.
“There are hundreds of filling stations along the border; we counted many as we drove to the border this morning. They were set up purposely for smuggling.
“They don’t sell the fuel consignment they receive to the public, 50 percent of them are owned by foreigners.
“Now that they are closed, we have recorded over 30% in domestic fuel consumption,” he maintained.
He explained that the four sectors where the drill is currently ongoing have recorded highest successes in terms of illegal migration, cattle rustling, kidnapping, banditry, and arms smuggling.
“We have recorded over 30 percent increase in revenue since the drill.
“Gentlemen, before the drill, the borders contributed nothing to the revenue, nothing.
“Customs was recording about N4.5 billion daily, but since the closure, the figure has increased to between N5 and N8 billion daily.
“The North-West sector, of the four sectors affected by the drill, has recorded the highest success in terms of reduction of illegal migration, thanks to the drill.”
The minister also added that the exercise is not targeted at any region in the country, neither is it designed to cripple businesses in any part of the country.
He maintained that since the exercise commenced over a few months ago, local businesses across the country have continued to thrive, as farmers and rice millers, in particular, are now having huge turnover.
Mr Mohammed added that Nigeria will continue to engage with neighbouring countries to ensure that all the concerns that led to exercise swift response are fully addressed.
The Minister of State for Petroleum Resources, Chief Timipre Sylva says Nigeria has met the 100 per cent target agreement entered into by Oragnisation of petroleum Exporting Countries (OPEC) and 10 Non-OPEC Member States.
Sylva said this in a statement issued by his Spokesman, Alhaji Garba Muhammad in Abuja on Sunday.
OPEC and 10 Non-OPEC Member States are also known as the OPEC plus or the Declaration of Cooperation (DoC) Countries.
The minister spoke in a tele-conference with the Chairman of the OPEC-Non-OPEC Joint Ministerial Monitoring Committee (JMMC) and Minister of Energy of the Kingdom of Saudi Arabia, Prince Abdulaziz Bin Salman Bin Abdulaziz Al-Saud and some other DoC Ministers over.
He recalled that at the last meeting of the JMMC held in September, in Abu Dhabi, he assured that Nigeria would within three months be 100 per cent compliant with the Agreement that it had voluntarily entered into.
Sylva said that in fulfillment of that pledge, Nigeria’s compliance level had witnessed tremendous progress month by month since August resulting in 100 per cent compliance in November.
The minister commended member countries of the DoC that had consistently met and even exceeded their targets of production cuts.
He attributed the successes achieved in bringing stability to the oil market to the whole group but especially due to the extra efforts of these countries.
Sylva commended the Kingdom of Saudi Arabia for the extra burden it had taken on its own volition to help stabilise the global oil market.
He thanked Prince Abdulaziz and the Government of the Kingdom for the exemplary leadership role they had been playing in the DoC.
On his part, Prince Abdulaziz commended Nigeria for the efforts it had made since August to ensure compliance, noting that the Agreement came into effect at the same time when Nigeria’s Egina was coming on-stream.
OPEC Ministers are expected to meet in Vienna next week to review developments in the global oil market for the first half of 2020 and take some critical decisions affecting the oil industry and by implication the global economy.
The first decision is on the fate of the current Agreement which expires on March 31, 2020.
The Organisation will decide whether to renew it or not, if it is to be retained, decision has to be taken on the need for modification or allow it to stand as it is.
The second decision is expert to look at the outlook for the oil market in the first and second quarters of 2020, where demand is forecast to dampen while production from non-DoC members is forecast to rise.
Experts believe that the DoC Countries need to make deeper cuts to sustain the stability that they have been able to bring to the market.
The JMMC is expected to meet in Vienna on Dec. 5 and the OPEC Ministerial Conference same day, while the OPEC and NON-OPEC Ministerial Meeting is expected to take place on December 6 in Vienna.