Oil marketers are clamoring that market indicators should determine the price movement of Premium Motor Spirit, commonly known as petrol, even if it means the price could potentially reach N700. This comes after a 165 per cent increase in petrol prices to N500 following President Bola Tinubu’s announcement regarding the removal of subsidy for the product.
Oil marketers have insisted that the current prices of petrol in the country were not a true reflection of the market. They were projecting a further price review this month, less than two months after the price of petrol was hiked from N189 per litre to N500.
Their demand was granted when some filling stations operated by the Nigerian National Petroleum Company Limited reviewed their pump price of petrol from N537/litre to N617/litre across the country on Tuesday.
A former Chairman of the Major Oil Marketers Association of Nigeria and Chief Executive Officer, 11 Plc, Tunji Oyebanji, told The PUNCH in a chat that oil prices would reflect current market realities.
According to him, this is what is obtainable in other neighbouring African countries that import petrol.
“If the prices in neighbouring countries reflect true market prices and our own do not, there is still a danger. Until we all import at the new exchange rate and know what the price is and compare it with our neighbours, we won’t know the exact situation. Likely, the differential will not be so much,” Oyebanji claimed.
Checks by The PUNCH revealed that while PMS price per litre sells for around N617 in Nigeria, the product goes for around N1,169 in Mali; Ivory Coast: N986; Cameroon: N986; Ghana: N948, Togo: N945, and Benin: N877.
The National Controller of Operations, Mike Osatuyi, recently told our correspondent that the price of petrol could likely increase to N600/N700 and above starting in July.
“What I am seeing is around N600 and above, depending on the exchange rate, the current crude price at the international price, and landing cost. Those in Lagos will pay around N600, those outside Lagos around N600 plus, while those in the north would be paying anything from N700 and above,” he said.
Oyebanji added that competition was healthy for the downstream sector, as it would allow for fair play.
“The bottom line is that there will be an adjustment in price. Yes, it may go up now. It could also drop depending on the exchange rate. But the good thing is that products would be everywhere, and if you see that yours is more expensive than those of the filling stations around you, you will be forced to bring down prices so that customers can come and buy. There would be healthy competition, which is good for the market,” he continued.
For Osatuyi, the current price of petrol is a “transitional price”. He hinted that marketers were expecting a roadmap from the Federal Government following subsidy removal.
“We are expecting a roadmap from the Federal Government following the meeting with labour. Labour has said they are giving the government two months to come up with the roadmap. We are also expecting the roadmap on how to deepen the use of Compressed Natural Gas.
“Already, three marketers have been confirmed to start bringing in products starting from July. That is when we would know the real price of products because it would definitely increase. This current price is just a transitional price,” he mentioned.
Oyebanji also warned of the return of smuggling if market forces are not allowed to control the market.
“Would we not see tankers being diverted again to our neighbours? The price differential between us and our neighbours, apart from greed, what else could account for this level of disparity in these June figures?” he wondered.
Oyebanji also declared that depot owners were resorting to both local and foreign loans to finance importation.
“It is not like we are just getting importation licenses. We have been licensed, but we stopped importing because it was no longer profitable. Now, everybody is trying to see what we can do. Some people will raise money and borrow from abroad, while others will borrow from local banks. It is not just three companies that would be importing. Many companies are currently running around to start bringing in products. But we won’t be shouting about it on the pages of newspapers,” he said.
Also, a source at a depot in Lagos, who does not want his name in print, hinted that more importers were currently being licensed.
He added that smuggling or diversion of products to neighbouring countries would continue if full deregulation was not allowed to take its course.
“Where do countries like Ghana, Benin, and Cameroun get their products from? Is it not from Nigeria?” he asked.
“The prices of products will depend on market fundamentals. And as we speak, Customs is delaying some AGO (diesel) vessels because of the 7.5 per cent VAT. Any cost incurred by marketers would be added to the landing cost, and then to the pump price. The marketers would also have to add profit because they must make a profit,” he said.
The Chairman of IPMAN Satellite Depot, Akin Akinrinade, told The PUNCH that marketers were still loading products at government-regulated price of N496 per litre.
“There are currently products in the country and we are loading at a government price of N496.50 per litre. But because of the new forex policy of the central bank, naira has shot up to around N765/ $1. Until new products start coming in, we won’t know the exact extent to which the new policy would affect our business,” he said.
A recent report by Reuters stated since Nigeria scrapped fuel subsidy, black market fuel vendors and commercial drivers in Cameroon, Benin and Togo had seen their businesses collapse due to low supplies and high prices.
“In Cotonou, the commercial capital of Benin, which is about 60 km from Nigeria, queues have been building up at official petrol stations and some have been unable to meet the sudden surge in demand, especially from “zemidjan”, the local word for motorcycle-taxis.
“Before, we were selling about 2,000 litres per day, but now we’re selling up to 7,000 litres per day,” said a worker at the JNP fuel station, who gave his first name as Janvier. He had just turned away four customers because supplies had run out,” Reuters reported.
“The zemidjan-men are even fighting to get served,” said Janvier.
According to the report, in Benin and Togo, small nations to the west of Nigeria, contraband fuel vendors have lost both supplies and customers while formerly sleepy official petrol stations are suddenly busy.
“At Hilacondji, a border crossing between Togo and Benin, some black market fuel stalls were shut, while at others vendors waited among rows of empty plastic jerrycans for potential deliveries,” the report added.
It quoted one Ayi Hilla who had been making a living from selling contraband fuel for 10 years as saying that many black marketers had gone into fishing or other small businesses.
According to the data, global oil prices upon which local petrol is priced have come under pressure, and would mean a reduction in price in July.
Petrol is showing an over-recovery of between 11 and 19 cents per litre, while diesel is showing the opposite in a range of 14 to 19 cents per litre. The price of motor spirit will decrease by 19 cents from $2.80 to cost $2.61 per litre.
According to Bloomberg analysis, oil has dropped around 13 per cent this year, partly due to Russia’s robust exports but also reflecting monetary tightening in the US and a lacklustre economic recovery in China.
“China’s economy continues to show signs of losing momentum as recent data showed slowed spending on everything from holiday travel to cars and homes,” it said.
However, while countries with stronger currencies would see local petrol prices drop, Nigeria on the other hand would not, as it recently devalued the naira.
Nigeria’s central bank allowed the local currency to drop as much as 39 per cent at the official market days after President Bola Tinubu suspended the Central Bank Governor, Godwin Emefiele, who oversaw the much-criticised multiple exchange rates.
Multiple exchange rates under Emefiele were introduced to tackle the country’s foreign currency shortages, but it made an insignificant impact.
The dollar shortage affected the cost of importation, petrol inclusive.
Traders said the central bank had removed trading restrictions on the official market, which has driven the naira to almost 800/$ at the official market.
An energy expert, Bala Zaka, criticised the Federal Government for deregulating the downstream sector.
“When I was explaining what deregulation means right before May 29, many people didn’t understand. Nigeria’s economy is too weak for deregulation. Where is the Dangote refinery? Has it started refining since it was commissioned? Just look at what has happened to the naira. It has been devalued and approaching N900 on the black market.
“Very soon, we won’t be able to afford the basic things of life because even before you drive from your house to Kara on the Lagos/Ibadan Expressway, your tank would have drained to half already. Now, if you try to challenge oil marketers, they can sue you.
“The likes of IPMAN, MOMAN are after profit maximaisation and not after the well-being of the masses. But if people like us talk; it would seem we are kicking against the government. The minimum wage can’t even buy a bag of rice. I have never been in support of full deregulation,” he argued.
An academic economist and professor of Economics at the Olabisi Onabanjo University, Tella Sheriffdeen, advised the government to activate local refining.
“Actually, since the exchange rate is now determined by market forces, depreciation of naira will make oil prices go up. Government has to be hard on oil importers to make sure they are not colluding with economic parasites who will want to jack up prices to force the government to bring back subsidies.
“Secondly, the government must insist on domestic productivity by the refineries and Dangote. It is just that the government should have plan B to make fuel available by all means,” he noted.