FG Rules Out Fuel Price Reduction, Caps Price Band At N97/Barrel



Fuel Storage Tank Farm

 

FG Rules Out Fuel Price Reduction, Caps Price Band At N97/Barrel

Sopuruchi Onwuka

There will be no fuel price respite for Nigerians in 2016 as federal government yesterday declared that it would not reduce the retail price of petrol in the domestic market despite the 67 percent fall in the international prices of the product.

Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who hosted a media briefing in Abuja to deny fixing petrol price at N97 for 2016 clarified that a new price mechanism would roll into effect in 2016 to keep petrol retail price within a range between the current N87 per liter and N97 per liter.

The clarification came in response to reports attributing Dr. Kachikwu as stating that petrol prices would go up by 2016.

Following the reports players in the country’s domestic fuel market have quickly resorted to hoarding available stock with a target to make huge profits when prices go up in less than three weeks.

The situation has worsened fuel scarcity in the country and sparked off a spate of public outcry from various stakeholders against alleged planned price increase. Both marketing groups and labour leaders faulted the proposal as inconsonant with the prevailing price trends in the global fuel market.

According to USA Today, an American daily newspaper, prices gasoline in the country have slumped by 55 percent following fall in the prices of crude oil from about $120 per barrel last year to about $50 per barrel this month.

A team of analysts from Platts Market Intelligence Group that visited Nigeria recently had pointed out that inability of fuel price to come down from previous levels after crude oil prices plunged by over 60 percent is unusual and unsupported by market fundamentals.

Daily price templates by PPPRA puts expected open market price for petrol at N91 per liter, a figure independent market players dispute as too high.

In his clarification yesterday, Dr. Kachikwu said whereas N87 per liter will be the expected minimum retail price for the product in 2016, marketers will not be allowed to sell beyond N97 per liter.

Dr. Kachikwu who is also the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) noted that the discourse has long left the realm of subsidy removal to a more scientific price modulation approach which entails an elastic price mechanism that would follow international price trend.

According to him, the new price mechanism would be built into a new template to be evolved by the Petroleum Products Pricing and Regulatory Agency (PPPRA) to reflect the prevailing international price of crude.

He explained the new price modulation system would place a N97 per litre cap on the price of fuel to ensure that Nigerians are insulated from the vagaries of the global crude price.

`` I did not say that refined petroleum products will sell for N97 per litre next year. I said that between a band of N87 and N97 we are going to be looking at prices and today the prices are largely close to N87. So, there is no need to change the price.’’

The Minister said PPPRA would undertake quarterly review of the crude market situation.

 “I have not put a static figure. PPPRA will have to do the calculation to be able to announce what price of PMS will sell for in January; but we do not anticipate any major shift because of the price of crude today.’’ 

Meanwhile our survey of the market yesterday showed a very tight supply situation with few retail outlets that opened to customers contending with huge crowds of desperate motorists struggling to buy fuel.

Very few retail stations of both private marketers and NNPC opened for business while sharp market activities ruled transactions.

At places where independent marketers opened to customers, prices ranged from N100 per liter and N150 per liter depending on location. Some of the station managers also introduced different tolls at their forecourts before a customer was allowed in.