The Petroleum Products Pricing Regulatory Agency (PPPRA) will release the new petroleum products pricing template on January 1, 2016, the Executive Secretary of the agency, Ahmed Farouk, has said.
In an interview with The Guardian in Abuja yesterday, Ahmed, who disclosed that Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had approved the template, explained that the list of petroleum marketers that would import products into the country in the first quarter of 2016 would soon be released.
He hinted that the intention of the new template is to eliminate exposure without increasing pump price.
The PPPRA boss added: “To achieve this, the PPPRA will leverage on the current market structure as well as a review of the existing PPPRA pricing template with the objective of making the components dynamic and responsive to the dictates of the international oil market. This will further ensure efficiency of products delivery at realistic costs to the consumer.”
Farouk noted that the last real structural change to the template was done in 2007, which necessitates another review to align it with the current market realities.
He said President Muhammadu Buhari’s directive for review of the pricing template would ensure it is no longer static but dynamic and market-driven. “Government’s intention to review the template is not to discourage investment in the sector, rather, it is meant to increase discipline and efficiency in line with best global practice. Therefore, there will still be incentives to the stakeholders to keep importing, but not to the detriments of the consumer,” he said.
Farouk revealed that the PPPRA would review the landing cost, traders’ margin, and demurrage costs, among others, in the new template, saying “we believe a lot of efficiency can be instilled in there.”
| The PPPRA scribe also said government has approved a downward review of the bridging costs and effected a slight increase in the retailer and dealers margin to encourage investment in the retail sub-sector, adding that the steps would lead to a net reduction in the subsidy level. |
His words: “In the new template, the PPPRA will take practical step to encourage investment in the retail sub-sector.
We will go out to encourage investments by oil majors operating in the retail outlets not just in the major cities, but in the rural areas. The only way to achieve this is to offer incentives.
So, we are looking at retailer margin effect, a slight increase in it so that we can encourage investment in that area. Having private depots alone will not help the system, but investment in the retail outlets will further enhance distribution chain.”
According to him, the resumption of production by the Kaduna and Port Harcourt refineries would reduce the cost of subsidy in the short term. “The coming on stream of both the Kaduna and Port Harcourt refineries will impact positively on availability of fuel and reduce subsidy costs as some components of the pricing template such as freight cost, traders margin, lightering expenses and financing cost are exempted from locally-refined products subsidy claims. Therefore, there is almost N10 difference between the imported fuel and the locally refined product,” he explained.
On his part, the Group General Manager (GGM), Corporate, Planning and Strategy, Bello Rabiu, said the Minister of State for Petroleum Resources was misquoted as saying petrol would be sold at N85 per litre from January 1, 2016.
“As at the time the minister spoke, the open market cost of petrol importation into Nigeria came down to about N85 per litre. The open market price consists three elements namely: the price of bringing the product into Nigeria, ship to ship transfer and storage cost within Nigeria and distribution costs to retailers, transporters and dealers at the filling stations.
The totality of the costs was N85. This means that at that material time, the amount Nigerians should pay at the pump should be N85 per litre. This is exactly what happened. The price of petrol will change based on the price of gasoline in the international market, cost of freight as well as the cost of distribution within the country.”
He further stressed that since government does not control the market, it will strive to boost efficiency of the system that will ultimately result in buying petrol as close to the market price as possible.
He said government intended to access the refineries to see what is needed to improve their capacity. “ This is because we need more energy capacities as a nation. The rehabilitation of the refineries, which would be done in conjunction with the private sector, will result in reducing inefficiency in the system. The Nigerian National Petroleum Corporation (NNPC) will be allowed to work with the private sector to bring the needed efficiency to the refineries. Once this is done, Nigerians will begin to see the refineries working for about 300 days in a year, refineries will be maintained as at when due and competing with other international refineries around the world.”
