Oil & Gas

Fuel subsidy returns as open market price of petrol hits N183 per litre

•Govt pays N1.1b daily on local consumption

Access Bank

The increment in the price of crude oil at the international market has pushed the price of Premium Motor Spirit (PMS) landing cost to N160 per litre.

The Guardian learnt on Friday in Abuja that the while the landing cost was N160 as at Thursday morning, the open market price has also jumped to N183 per litre.

The open market price is the expected price at the pump stations. The additional N23 is the Petroleum Products Pricing Regulatory Agency (PPPRA) pricing template component.

With payment of additional N23 as contained in the PPPRA pricing template and national consumption figure of about 50 million litres daily, the Federal Government now offsets about N1.1 billion on consumption of petrol in the country daily if the situation remains the same going forward.

Meanwhile, a source in the petroleum industry has called for the establishment of a special account in the Central Bank of Nigeria (CBN) for the importation of petroleum products.

He argued that such a special fund would make foreign exchange readily available to marketers that want to import the product as a smart move of breaking the state monopoly the Nigerian National Petroleum Corporation (NNPC) has assumed.

He said: “The creation of this special fund will ensure that the NNPC is no longer bogged down by importation of petroleum products which is not its core business. There are very serious businesses that the corporation should be engaging in that can benefit Nigeria as a country more than importing products, which the private sector is most suited to do. NNPC engaging in petrol importation is not without some underhand practices that are draining the country.

“The time has come for the NNPC itself to push for its exit from importation of petroleum importation business to boost efficiency in its core business areas. The creation of a special fund will encourage more marketers to come into the fray and that is most likely to lead to reduction in the pump price.”

Indeed, from August 2020, there was a Federal Gazette that forbade the PPPRA from interfering in the prices of petroleum products. However, the gazette stated the role of the PPPRA to include intervention where the agency finds the prices too high and unjustifiable.

This scenario presents where all operators including marketers are able to defend their prices in clear manner to avoid sanctions by the PPPRA.

PPPRA’s PMS pricing is made up of two parts. The first part is the product/importation cost (cost, insurance and freight) and the second aspect is the local distribution margins (cost of distribution and return on investment).

Product cost is the cost of one metric tonne of petroleum product in US Dollars as quoted on Platts (S&P Global Platts). Freight is the average cost of transporting (30kt) cargo from North West Europe (NWE) to West Africa (WAF).

Lightering is the ship-to-ship local freight charge incurred on the trans-shipment of imported petroleum products from the mother vessel into daughter vessel to allow for the onward movement of the vessel into the jetty.

The Nigeria Port Authority (NPA) charges cargo dues (harbor handling charge) for use of its port facilities, while the Nigerian Maritime Administration and Safety Agency (NIMASA) charges for marine pollution prevention and control, and cabotage enforcement.

Jetty Throughput Charge refers to the tariff paid for the use of facilities at the jetty by marketers to move products from the jetties to storage depots. Storage charge is for depot operations covering storage charges and other services rendered by the depot owners.

Financing refers to stock finance (cost of fund) for the imported product. It includes cargo financing based on 25 per cent of landing cost details of the distribution margins on the PPPRA pricing template. These include Transporters Allowance (NTA), which entails the contribution to/reimbursement from the fund to defray the cost of local transportation of petroleum products within the same zone.

Local delivery is based on a transportation differential zone map and retailer is the allowable margin to retailers of petroleum products after considering the overhead cost and other running costs, while wholesale refers to the allowable margin to importers of petroleum products after considering the overhead cost and other running costs and administration charge goes to the PPPRA as payment for its interventions.
 

The Guardian

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