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Petrol Pricing To Be Reviewed Says FG

The Federal Government has said it would
further review its pricing template for petrol with the aim of removing
several multi-layered charges and costs that affect the pump price of
petrol at service stations across the country.
The government also said it would
continue to work with the Central Bank of Nigeria (CBN) to find ways of
providing subsidised foreign exchange interventions for oil marketers in
the country.
The Minister of State for Petroleum
Resources, Dr. Ibe Kachikwu, stated this saturday in a podcast he shared
in his social media accounts. The podcast, obtained by thisday, was
centred on the challenges of the country’s downstream petroleum sector
and the government’s plans to overcome them.
Kachikwu stated in the podcast that, at
the moment, the Nigerian National Petroleum Corporation (NNPC) was
importing almost all the petrol used in the country, a responsibility he
stated the corporation was undertaking at a huge cost.
According to him, marketers in the
country were no longer importing petroleum products because of the
unfavourable business fundamentals which had been influenced by the
rising prices of crude oil.
“Downstream continues to be an area that
has numerous challenges, that is why throwing ideas on them will
continue to be something that any minister or chief executive of NNPC
will continue to focus on,” said Kachikwu.
He further stated: “The environment has
since changed, when we did all these, pricing for crude was more in the
$25 to $30 per barrel, today it is in excess of $54, which is fantastic
because it means that our revenue stream is improving.
“But, it is a twin window, whenever the
price of crude goes up, obviously the price of refined petrol goes up
and we begin to have systemic challenge in terms of the pricing on the
local base, so that gap has begun to return and today what you find is
that the NNPC continues to import massively on behalf of the Federal
Government. It has gone back to about 90-95 per cent for the whole
country and therefore its books are absorbing some of the cost
implications of this.”
According to him: “The second is that
once this happens the marketers begin to shift backwards, participation
by individual marketers to help us continue the normal business and
marketing cycle that should be what you expect is no longer existing.
Most of them are not importing.”

Speaking on plans to stem the development, Kachikwu stated: “One of the things we are doing is that we are looking at our existing templating position, and what
we are doing with that is first addressing some of the soft end of
things that affect pricing.

“We are removing too many multi-layered
charges on importation, we are working with the ministry of transport to
reduce those to what was initially approve by the president, and as
such, we should take away a good chunk of the expenses. We are working
to see how the CBN can provide us with a fairly subsidised FX for
products priced in dollars.”
Though he did not expressly disclose
this, the minister however, hinted that the government might begin to
wind down the operations of the Petroleum Equalisation Fund (PEF) and
transfer its bridging responsibilities to oil marketers.
According to him, “We are trying to see
how over a period of time, marketers will take over the PEF
responsibilities of funding trucking and keeping prices stable across
the country.”
He said in the long run, the NNPC would
have to reduce its presence in the country’s petroleum downstream sector
because of the cost on its books. The corporation, he noted, would have
to begin to operate as a profit entity.
Speaking on product availability in the
country, Kachikwu assured that, “There isn’t fuel scarcity, we are not
short of products, but yet the downstream and midstream sectors continue
to remain challenged. And what we are going to do is to analyse what we
have done so far and begin to throw solutions to some of these
challenges.”
He also explained that since the
introduction of pricing modulation, the country has been able to drop
its daily products consumption from about 50 million litres to 37
million litres.
“We had issues of pricing efficiency and
governance, for at that time the prices we were selling at were so
ridiculously below what the sustainable prices are. And you find a
situation where basically marketers disappeared from the industry. So,
we had massive shortages, queues and everything seem to be breaking
down. We’ve since come out from that.
“First we’ve moved from a fully
subsidy-based sector to a partially liberalised sector. I say partially
because we haven’t quite achieved the template to have a fully
liberalised sector. What that has done for us is that it had reduced
consumption from 50 million litres to 37 million litres a day,” he
stated.
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