- It’s market forces at play – NNPCL
Nigerians woke up on Tuesday morning to see fuel stations adjusting their meters to a new petrol pump price of N617 per litre.
Specifically, the pump price of Premium Motor Spirit, popularly called petrol, was raised from N537 to N617 per litre at some filling stations operated by the Nigerian National Petroleum Company Limited in Abuja on Tuesday.
Independent oil marketers confirmed the increase in the cost of the commodity, as they stated that any shift in price by NNPCL stations was an indication of a rise in the pump price of PMS.
According to the Secretary of the Independent Petroleum Marketers Association of Nigeria, IPMAN, Abuja-Suleja, Mohammed Shuaibu: “This is because NNPCL is still the major importer of petrol into Nigeria currently, though other marketers are gradually importing the commodity. The price this (Tuesday) morning at some NNPCL stations is N617 per litre.”
President Bola Tinubu had during his inaugural address on May 29, announced that subsidy on petrol had ended, a development that led to the jump in the price of the commodity from N198 to over N500 per litre on May 30, 2023.
Since the withdrawal of subsidy on petrol and the floating of the naira against the dollar, marketers had continued to explain that the cost of PMS could rise to as high as N700 per litre.
Similarly, the rise in the cost of crude oil in the international market has also triggered further hikes in petrol prices, as crude is the product from which PMS and other refined petroleum products are produced.
In Abuja, on Tuesday morning, motorists besieged the filling stations that were still dispensing at N540 per litre, but as the news of the hike in price by NNPCL stations filtered in, many independent outlets had to lock their stations.
Others immediately commenced the adjustment of their pumps to reflect the new price. The NNPCL and the downstream oil sector regulator had yet to make any statement on the development.
Meanwhile, in its reaction to the sudden increase from N540 to N617 per litre, the Nigeria National Petroleum Corporation Limited (NNPCL), described the development as “market forces at play.”
The Group Chief Executive Officer of NNPCL, Mele Kyari offered the explanation after he met with the Vice President, Kashim Shettima at the Presidential Villa, Abuja.
According to Kyari, the problem is not a shortage of supply of products, rather the forces of demand and supply in the marketing value chain were simply taking effect.
He said importers of fuel products were gaining confidence in the system, noting that prices were bound to go up or down from time to time.
Kyari who had a brief chat with State House Correspondents, said, “I don’t have the details at this moment. But we have the marketing wing of our company. They adjust prices depending on the market realities.
“This is really what is happening; this is the meaning of making sure that the market regulates itself so that prices will go up and sometimes they will come down. This is what we have seen and in reality, this is how the market works.”
Asked if there was a shortage of the product in the market to have warranted the increase, he responded saying, “No, there is no supply issue completely.
“When you go to the market, you buy the product; you come to the market you sell it at the prevailing market prices. Nothing to do with supply shortage, we don’t have supply issues. There is a robust supply. We have over 32 days of supply in the country.
“Yes, what I know is that the market forces will regulate the market. Prices will go down sometimes; sometimes it will go up. But there will be stability of supply and I am also assuring Nigerians that this is the best way to go forward so that we can adjust prices when market forces come to play.
“I don’t have the details at this moment, but I know that our marketing wing acts just like every other company in this business. I know that a number of companies have imported petroleum products today. So, many of them are online. I’m sure my colleague would confirm this.
“Market forces have started to play; people have started having confidence in the market. Private sector people are importing products, but there is no way they can recover their cost if they cannot take market reflective cost.”
Corroborating the NNPCL Chief Executive, Farouk Ahmed, CEO of Nigerian Mainstream and Downstream Petroleum Regulatory Authority (NMDPRA) debunked insinuations that the new price adjustment was set by the NNPCL.
According to The Guardian, he said, “As a regulator, I told you back in May that we are not going to be setting the price. The market will determine itself and as you saw back in early June when prices came out, it was based on the cost of importation plus other logistics of distribution and of course the profit margin by the importer. This market is deregulated; it is open to all participants.
“As I mentioned yesterday when I was in Lagos, we have about 56 marketing companies that applied and obtained licenses to import. Out of those, 10 of them have indicated to supply within the third quarter, which is July, August, and September.
“Already, we received some cargo from these marketers: Prudent Energy, AYM Shafa, and Emadeb. Emadeb Cargo is arriving tomorrow. So, this is just an encouragement to see that the market is liberated and everyone is free to import so long as you are working within the framework, especially in terms of quality.
“But on pricing, as a regulator, we are not going to put a cap on the price because we are not part of those importing. We are not a marketing company; we are just a regulator.
“So, when you say market forces are working, basically, what it is that you buy; you consider the price of crude going up. A couple of weeks ago, the price of crude was hovering around $70/barrel.
“Now it’s hovering around $80/barrel. So, the crude price also drives the product price. You know, because the importers are importing, they are basing it on the cost of importation plus the freight and other cost elements in terms of local distribution.”
