FG Backs Down On Increase In Petrol Pump Price
The Federal Government yesterday dismissed a possible hike in the price of petroleum products.
The Group Managing Director (GMD), National Petroleum Corporation (NNPC), Maikanti Kachalla Baru, after a closed-door meeting with President Muhammadu Buhari and the Minister of State for Petroleum Resources, Ibe Kachikwu, yesterday, dismissed the speculation.
He said: “There is nothing like that,” and directed journalists to “go to PPPRA.”
Speculations of another round of fuel price increase became rife when former NNPC GMDs noted: “The PMS price cap of N145/litre is not congruent with the liberalisation policy, especially with the foreign exchange rate and other price determining components, such as crude cost and Nigerian Ports Authority (NPA) charges.”
Ironically, oil marketers, for the first time, are saying pump price increase “doesn’t make sense at this point, as long as it is not open to market fundamentals.”
Making clarification on the Saturday meeting by the former NNPC chief executives, one of the former GMDs, who spoke with The Guardian, said: “At no time did we say there should be price increase. Our business is not to prescribe one.
“What we did was to note that if the Federal Government wanted to deregulate the downstream petroleum sector, it should do so holistically. We noted that if NNPC subsidy had been removed from crude and NNPC is now paying international market rate for crude supplied to it, you couldn’t regulate the pump price.
“Looking at the exchange rate and the cap of N145/litre, NNPC refineries will not be efficient, as they will not be able to generate enough money to fix the refineries, which are in dire need of turnaround maintenance. They won’t be able to recover their costs and operate efficiently.
“Also, government is not supposed to give NNPC money to run its operations. It is supposed to generate such money itself. But NNPC cannot at this time approach any bank for facility, since price is capped, whereas if the market is fully deregulated, NNPC will have a bankable proposal.”
The former NNPC boss also noted that since the last price cap, “domestic demand for PMS has fallen from 40 million to 30 million litres daily, as a lot of cross border trading activities were stopped, since the product was no longer very cheap.”
One of the marketers said marketers’ problem, now, is how to offset $1.2 billion outstanding letters of credit (LCs).
“Even with the partial deregulation, you can see that some filling stations are selling at N143 per litre or less. So, deregulation does not necessarily mean price increase; it means price will find its own level based on the market situation.”