16 May 2016, Sweetcrude, Lagos — Last week’s 80 percent increase in the pump price of Premium Motor Spirit, PMS also known as petrol from N86.50 per litre to N145 might just be a tip of the worst that awaits the over 180 million Nigerians as there are indications that petrol may sell above N250 per litre in the coming days.
Petroleum Products Pricing Regulatory Agency, PPPRA in a memo titled ‘New Framework for Petroleum Products Supply, Distribution and Pricing – May 2016’ posted on its website on the 11 of May 2016 explained that the estimated “true” cost of PMS was valued at N243.05 per litre.
“This is factoring the estimated average time spent to obtain PMS at the official price, the estimated hourly wage of the average Nigerian, the average price of PMS on the black market and the estimated average volume bought per visit to the filling stations and also factoring in the frequency Nigerians source PMS from the different markets,” the memo stated.
On why Nigerians should not enjoy low petroleum prices as a major oil producer, the memo states that “Crude oil price is an internationally traded commodity, the prices are not set by countries that produce it. Neither do oil producing countries get a discount in the international market for producing this product.
“Furthermore, crude oil price account for about 80 percent of the final cost of fuel. Other costs include depot charges, transportation cost, chemicals, spare parts, raw material etc are related to a host of economic factors. Therefore, at the current crude oil price of $40 per barrels, the finished domestic refined fuel sold to Nigerians cannot be priced lower than the cost of the crude plus other associated costs incurred in converting the crude into PMS and supplying the product to the consumer.”
Another cause for worry is that PPPRA in the same memo stated that the new price regime will allow marketers source their foreign exchange independently of the Central Bank of Nigeria, CBN to import PMS.
This according to financial expert, Mr Johnson Chukwu means that the pump price of petrol will sell far above N145 per litre to enable the marketers to recoup their money.
“When marketers source for foreign exchange independently from CBN, that is from secondary sources (parallel market) which are above CBN rate (N197 to a dollar) pump price of petrol will increase above N145 to a litre,” Mr Chukwu said.
Check by Sweetcrudereports on Monday shows that parallel market price for foreign exchange was at N360 to a dollar, indicating that pump price of petrol should be sold above N250 per litre when marketers exhaust their current stock .
Commenting on this development, a marketer who spoke with our correspondent on the phone in confidence said the Federal Government have taken note of the variables noting that consultations are in advanced stage.