The Petroleum Products Pricing Regulatory Pricing on Thursday removed
the pricing templates of all refined petroleum products from its
website.
The decision was an apparent reaction to the publication of a story
byThe PUNCHthat the Federal Government was still paying a subsidy of
N2.84 for every litre of petrol despite the reduction of the pump
price of the product to N87 on Sunday.
Efforts made by PUNCH correspondents to get explanations from the
agency as to why the templates were removed were not successful as
calls to its spokesperson, Mr. Lanre Oladele, were not answered. A
text message sent to his mobile telephone number was not also
answered.
The PUNCH had on Thursday exclusively reported that despite the recent
reduction in the pump price of petrol from N97 to N87 per litre, the
government claimed it was still paying N2.84 as subsidy on every litre
of the product consumed.
According to the petrol pricing template published on the PPPRA
website on Wednesday, the Expected Open Market Price of Premium Motor
Spirit, otherwise called petrol, is N89.84 per litre, while the
regulated price is N87 per litre.
The PPPRA said the approved prices of petroleum products as reflected
in the templates were from January 16, 2015.
According to the agency, the landing cost of petrol is now N74.35 per
litre, while the ex-depot price is N77.66 per litre.
On January 5, The PUNCH had reported that with the price of the global
benchmark Brent crude closing at $57.94, the Federal Government was
paying 90 kobo as subsidy for a litre of petrol because the PPPRA
pricing template had put the EOMP at N97.90.
The Federal Government on Sunday night announced the reduction in the
pump price of petrol by N10 per litre, attributing this to the decline
in global crude oil prices.
The Minister of Petroleum Resources, Diezani Alison-Madueke, while
explaining the reason for the reduction in fuel price, said, "There
has been a lot of volatility in the oil market in the past few months
and due to this, the importation prices of our petroleum products have
been impacted.
"Therefore, with the approval and directive of Mr. President, and by
virtue of Section 6 clause 1 of the Nigerian Petroleum Act, it is my
responsibility as the Minister of Petroleum Resources to hereby
announce a reduction in the pump price of Petroleum Motor Spirit from
the current N97 per litre to N87 per litre, effective from midnight of
Sunday, January 18, 2015."
Industry analysts have, however, faulted the pricing template released
on Wednesday by the PPPRA, especially the decision to retain subsidy
following the decline in global oil prices.
They said the plunge in oil prices, which necessitated the reduction
in the pump price of petrol, was an opportunity for the country to end
subsidy on the product.
Two days after the reduction in the pump price of petrol from N97 to
N87 per litre, the PPPRA released its template showing that the
landing cost of PMS as of January 16 was N74.35 per litre. With the
addition of the distribution margin of N15.49 to the landing cost, the
total cost stood at N89.84 per litre that day.
Analyst also faulted the fact the agency used the new regulated price
of N87 for the January 16, 2015 template when the pump price of the
product was reduced on Sunday, January 18, 2015.
An energy analyst, who pleaded anonymity, said, "With the low oil
price, we have an opportunity to end PMS subsidy by setting the PMS
price at a level where there will be no more subsidy required.
However, the decision to set prices at levels increasing subsidy from
a mere 90 kobo per litre to almost N3 is not the best for the
government's declining revenue situation.
"I would have asked why we are increasing subsidy from just N0.90k,
while the price was N97 per litre; we now pay N2.84 at N87. This was
an opportunity to avoid subsidy. We could have set the pump price at
N90 per litre instead of N87 and claiming that there is subsidy of
N2.84."
The Director, Centre for Petroleum, Energy Economics and Law, Prof.
Adeola Adenikinju, said, "In my view, this is the time to let the
market be largely driven by market forces."
A former Group Managing Director, Nigerian National Petroleum
Corporation, Mr. Chamberlain Oyibo, told one of our correspondents on
the telephone on Thursday that the best time to completely remove
subsidy on petrol was now given the prevailing market realities.
He said crude oil prices and petrol prices had fallen significantly in
recent times, making it natural for subsidies on petroleum products to
be eroded.
"The government can deregulate the sector now and allow the private
sector to take charge. This is the best time to do it," Oyibo said.
--ThePUNCH
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