The latest figures from the official pricing template have indicated that the pump price of locally produced premium motor spirit, PMS, otherwise called petrol, is now being matched with the price of imported products.
But petroleum marketers are hinting that such a match would not be sustainable if exchange rates for both locally produced and imported products are left to market forces.
Vanguard findings from the costing template managed by the Nigerian National Petroleum Company Limited, NNPCL, show the landing cost for imported PMS has been raised by 4 per cent to N956.13 per litre in October 2024, from N919.55 in September 2024.
The increase is mainly driven by the differential in the value of the Naira to the United States of American dollar, where N1, 625/$ was used for September while N1, 645/$ was used for October.
An updated transactional analysis of the pricing template obtained by Vanguard, yesterday, put the total direct cost, including product cost at N887.45 per litre, Freight (Lome-Lagos) N10.37, port charges N7.37, Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA Levy N4.47, storage cost N2.58 to arrive at N913.12 per litre for total direct cost.
The total direct cost was added to the finance cost, including a letter of credit (N16.53) and total interest (N43.01) which raised the landing cost of the product to N956.13 per litre.
In addition to this haulage cost and marketers’ margin along with other unspecified costs have pushed the average pump price to be around N1,000 per litre.
Consequently, while the average pump price in NNPCL petrol stations and major marketers is around N1,000 per litre, most independent marketers in the Lagos area sell between N1,005 and N1,020 per litre, contrary to the officially recommended pump price of N998/litre.
However, many marketers who spoke to Vanguard believe that the existing price differences are not too wide.
But they also hinted that a significant change in the exchange rate would upset the balance significantly.
They also called for more openness and competitiveness in the market across all segments of the operators to create an even playing field.
We expect competition in the domestic market — operators
With the downstream sector’s deregulation, marketers said they look forward to healthy competition in Nigeria’s domestic market.
In an interview with Vanguard, yesterday, the Chairman of the Lagos State chapter of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Mr. Joseph Ehimen, said: “The next step now is to allow others to compete in the open market, bring in the products (local or international), and entrepreneurs can build more modular refineries.
“If the government likes, let them put for sell the nation’s four refineries or make them functional to compete with Dangote Petroleum Refinery.”
Similarly, the Independent Petroleum Marketers Association of Nigeria, IPMAN, said, with the deregulation of the downstream sector, its members can now buy petrol from both domestic and international markets.
The Public Relations Officer, IPMAN, Chief Chinedu Ukadike said marketers would source their products from ‘wherever they feel is cheaper and will make them competitive’.
Marketers are now free to buy from Dangote — Edun
Meanwhile, the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, said all marketers can now buy products directly from the Dangote Refinery in Lagos.
This ends the arrangement in which the Nigerian National Petroleum Company Limited (NNPCL) was acting as sole off-taker of the Dangote Refinery products.
In a statement yesterday, Edun said, “Following the directive of the Federal Executive Council (FEC) and the implementation of the new Naira-based sales mechanism, the Implementation Committee on the Sales of Crude Oil and Refined Products in Naira, chaired by the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun held its second review meeting on Wednesday, October 10, 2024.
“The meeting focused on assessing the transition towards a deregulated market structure for Premium Motor Spirit (PMS) and addressing the change in the purchasing model for petroleum product marketers.
“New Direct Purchase Model: The most significant change under the new regime is that petroleum product marketers can now purchase PMS directly from local refineries. This marks a departure from the previous arrangement where the Nigerian National Petroleum Corporation (NNPCL) served as the sole purchaser and distributor of PMS from the refineries.
“This direct purchasing mechanism allows marketers to negotiate commercial terms directly with the refineries, fostering a more competitive market environment and enabling a smoother supply chain for petroleum products.
“Local Production of PMS: With the commencement of local PMS production, the market is better equipped to support these direct transactions. This transition is expected to enhance efficiency in product availability and stabilize market conditions for the benefit of all Nigerians.
“The Committee recognizes that there are questions and discussions regarding this change in the market structure. We are committed to providing clarity on this development and will continue to engage with stakeholders to ensure a seamless transition process.”
He described the direct purchase of PMS by petroleum product marketers as a new era of growth and development for Nigeria’s petroleum industry.
Reacting to this statement, the Managing Director, 11 Plc (formerly Mobil Oil Nigeria Plc), Mr Adetunji Oyebanji, said: “The price of PMS has finally been deregulated, and subsidy has finally been eliminated. Henceforth, the price of PMS will be determined by market dynamics. This is inevitable as the government could no longer bear the burden of the subsidy.
“A good measure the government has taken to address the development is selling crude oil to local refineries in Naira at a fixed exchange rate. This will protect consumers from the negative impact of the fluctuations in exchange rates.
‘‘The fact that the crude will be refined in local refineries will also save the cost of transporting crude to offshore refineries and transporting refined products back to Nigeria.
“Without these two factors, prices would have been higher. Another thing will be that the incentive to smuggle petrol from Nigeria to our neighbouring countries will be greatly reduced’’.
However, he added, ‘‘Henceforth, prices can change at any time, depending on market dynamics.
