Amid threats of protest by labour, the Minister of State for Petroleum
Resources, Ibe Kachiukwu, and the Petroleum Products Pricing Regulatory
Agency (PPPRA) have offered explanations on how the Federal Government
arrived at N145 as the price of a litre of Premium Motor Spirit (PMS)
otherwise known as petrol. They assured that the new price regime would
block the drain through which government loses N16.5 billion monthly.
While
the minister, whose announcement on Wednesday kicked off the new
regime, said the price was based on foreign exchange conversion of naira
to the dollar, the PPPRA put the calculations on its latest pricing
template.
There were indications yesterday that the organised labour movement
and its civil society allies may begin a protest against the new regime .
The National Executive Councils (NECs) of both the Nigeria Labour
Congress (NLC) and Trade Union Congress (TUC) are set to meet today to
deliberate on the outlook of the protest.
Kachiukwu, who spoke on a television programme yesterday, said
government arrived at the new price by “a simple conversion of using
foreign exchange at N285. That N285 is from nowhere; it is basically the
secondary source that people buy foreign exchange from, versus the
N320, which is the black market rate.
“If you convert it and throw it in, you will get about N141, N142 or
N143. So there aren’t much of palliative elements left there for you to
use. It is simply, ‘go out, find your product, your cost is covered,
there is an opportunity for your efficiency to make money, come and
deliver.’”
But according to the PPPRA’s pricing template, the cost elements
include cost/freight, N109.01; lightering expenses, N4.56; Nigerian
Ports Authority (NPA) charges, N0.84; NIMASA charges, N0.22; financing,
N2.51; jetty thru’put charges, N0.60 and storage charge, N2.00, which
brings the landing cost to N119.74.
The
landing cost is added to distribution margins, which are retailers,
N6.00; transporters allowance, N3.36; dealers, N2.36; bridging fund,
N6.20; marine transport average, N0.15; and admin charges, N18.37,
bringing the total distribution charges to N18.37.
According to the PPPRA, the addition of the landing cost of N119.74
to total distribution margins of N18.37 gives a total cost of N138.11
per litre, putting the price at between N135 and N145.
Kachikwu justified the government decision saying, “We want everybody
to be able to bring in the products. We want to achieve what was
achieved in the marketing of diesel so that government will also not
have intervention in petrol. Ultimately, we will let the market dynamics
take place.
“In the past few months, the Nigerian National Petroleum Corporation
(NNPC), imported the products largely subsidised, but the marketers took
advantage and made excess profits. With this new system, they are going
to start bringing in their own products and NNPC can sell its own
products at its own price. So, there are no more opportunities for the
short-term arbitrages unless those benefits in price come from your own
efficiency
“What has happened is that we have provided an opportunity in the
country for people to take advantage of government’s liberalisation
policies and subsidies and make huge sums of money and this can have
positive impact on the common man on the street.
“The reality is that if we let the environment free for people to
operate you will be amazed at what will happen with pricing. I will
almost take a bet with you that in six month’s time when you review this
price, you will be amazed at what will happen to the N145 price.
“We discovered that queues would continue to happen until we address
the issues. We do share sympathy and pains but as a responsible
government, we must take decision to try and solve problems. We have
come to see that if you free Nigerians to find sources of funds, they
will find those secondary funds and import products, the burden on NNPC
will reduce and the country will have peace and the suffering will go
permanently.
“Extra
earnings that NNPC makes through that avenue will be pumped into
refineries, because our refining infrastructure are completely decayed.
We mean well, Nigerians should please trust us. Give us support and you
will be surprised.”
Also dwelling on the benefits of the new regime, the PPPRA said that
government had been able to permanently eliminate subsidy payments,
which was N1 trillion and had been able to save about N16 billion from
April this year to date.
It noted that the current development would ensure 100 per cent FAAC
payment on allocated 445,000 bpd and potential additional revenue
stream, which can be tailored towards palliatives.
The agency said that even with the new price regime, Nigeria would
remain one of the cheapest fuel markets in Africa and could even be
lower, once competition takes effect, stressing, “Likelihood of
smuggling to neighbouring countries will also be significantly reduced
with the new price regime.”
An informed source said last night in Abuja that the need for the
labour movement to firm up mobilisation and contact and also the meeting
of the two NECs were cited as the reasons the strike would not be
called immediately.
Meanwhile, facts are now emerging on factors that influenced government’s decision to jerk up the pump price.
A policy document exclusively obtained in Abuja yesterday revealed
that renewed insurgency and vandalism in the Niger Delta region which
have drastically reduced crude oil production to 1.65 million barrels
per day, reduction of money accruing to the Federation Account as well
as crude volumes for petrol conversion, which is also impacting Federal
Government foreign exchange earnings, were responsible.
The
document read in part: “Renewed insurgency and pipeline vandalism in
the Niger Delta has drastically reduced national crude oil production to
1.65 million barrels per day as at today, against 2.2 million barrels
per day planned in the 2016 budget. Further reduction in income to
Federation Account is also affecting crude volumes for PMS conversion
and impacting foreign exchange earnings.”
The document also stressed that the resultant fuel scarcity created
an abnormal increase in price, resulting in Nigerians paying averages of
N150–N300 per litre as prevalent hoarding, smuggling and diversion of
products, have reduced volumes made available to citizens
Nigerians have begun to adjust to the new realities of petrol price
adjustment with many of the filling stations immediately adjusting their
pump and price display to between N140 and N145 per litre.
Already, the six months old queue has automatically vanished at some
filling stations about 24 hours after the announcement and marketers
have immediately effected new prices and are magically selling from all
pumps, as against the initial method of rationing.
Visits to Mobil, NIPCO, Forte Oil and Conoil filling stations along
Lagos-Abeokuta Expressway showed that all were selling at N145 per
litre, while Danco Oil at Iyana-Ipaja, was selling at N140 per litre.
Other stations visited were MRS, Total, and some NNPC stations, which
were also selling at N145 per litre. All the visited fuel stations are
in Lagos.
adelove